A transaction- UTXO’s, new output(s), input(s) and previous output(s).
A transaction locks value (bitcoin) to an address or a script. It does this by creating new output(s) (also referred to as (UTXO’s, Unspent Transaction Outputs), by creating input(s) onto the respective receiving address.
- An address “locks” value (bitcoin) to be spent.
Say, a given address receives five deposits which consist of: 0.1, 0.2, 0.3, 0.4 and 0.5 BTC, respectively.
The address now holds a combined value of 1.5 BTC consisting of the five individual deposits. These individual deposits are UTXO’s, or new outputs, which means that the owner of the address in question now has five new outputs at his disposal.
New outputs are Bitcoin’s version of deposits available to be spent.
The owner of the address above now decides to deposit his bitcoin onto another address, thus creating a new output through an input onto the respective receiving address, but what is, or does, an input do?
An input refers to the process of creating a new output, that includes specifying which of the available UTXO’s are to be spent on new outputs, creating a chain-of-ownership, and authorizing the transaction with the owner’s digital signature, thus providing proof-of-ownership as well as signing the new output(s) with the input’s specific script signature, thereby ensuring that the new output(s) can’t be changed on a later stage.
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Each transaction is signed by the owner through a digital signature, which is achieved by applying the private key to the transaction data, which produces a numerical signature; this numerical signature is referred to as a “digital signature”.
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UTXO’s are able to be poured into new UTXO’s with bigger or smaller values, for example: two UTXO’s of 0.1 and 0.2 BTC respectively, are poured together into one UTXO of 0.3 BTC.
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Each UTXO requires its own signature.
The UTXO’s spent in the above transaction are now referred to as previous outputs, since they don’t hold any spendable value anymore.
Transactions also receive an identification number, referred to as a TXID (Transaction ID), which is created through hashing a transaction’s transaction data (the respective inputs and outputs) twice through the SHA256-function.
I've been getting positive feedback, but I'm not exactly sure... What do y'all think, and how could I define- and streamline it further?