As a beginner, I need some help understanding better the concept of Unspent Transaction Output (UTXO).
What does it exactly mean?
21 sats \ 0 replies \ @Enemy_of_the_state 28 Feb
Think of it like a specific bill. A $20 bill with its own serial number. You can have 4x $5 bills that are worth the same amount inside your wallet, but they take up more room. You can have a 5# sack of pennies worth $20, but it is even harder to carry and transact with.
On Bitcoin that is more data, which costs more to transfer over the network.
A UTXO that is a very low amount (<1000 sats) is considered “dust”, because to move it on chain would cost more than it is worth. It can’t pay for its own transaction fee.
A 100,000 sat UTXO might cost 10% of its value to move on chain, but a 0.5 BTC UTXO might only cost <0.1% of its value to move.
1 large UTXO is cheaper to spend than multiple small ones, because more data.
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0 sats \ 0 replies \ @Enemy_of_the_state 28 Feb
UTXOs are also important for privacy and security. You don’t want to spend your non KYC UTXOs in the same transaction as KYC/aml coins. Keep them segregated by labeling them in a wallet like sparrow.
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