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What is 0.5 BTC, in this example? What is it made of, on the blockchain.
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It isn't made of anything. It is merely a number that says 50,000,000 sats with a public and private key associated with it. The blockchain is just the record-keeping and security base layer needed to ensure that those little entries that say 0.5 BTC, 2 BTC, etc. all possess the properties necessary for them to function as money.
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That's a decent model, except that it implies that the merchant has the entire balance before returning the change
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I prefer bank check analogy.
1 UTXO of 0.5 BTC = 1 bank check of 0.5 BTC
If you have to pay 0.1 BTC, you give your bank check of 0.5 to the merchant and he gives you back a bank check of 0.4 BTC