Popular Science | Understand UTXO concepts and operations in one article

Original title: "Not enough UTXO to trade? Understand the concept and operation of UTXO in one article [BTC Ecology]"

Original author: Nan Zhi, Odaily Planet Daily

Recently, Rune has once again ignited the heat of the Bitcoin network ecology, but many new wallets often have sufficient balances when performing on-chain operations, but prompt that UTXO is insufficient. Odaily Planet Daily will analyze what UTXO is, why UTXO is insufficient, why to split, how to split UTXO, etc. in this article.

What is UTXO?

From a more standard definition, UTXO (unused transaction output) is one of the core concepts of Bitcoin. UTXO is a way to record the status of transaction output. It tracks each unused transaction output to determine which bitcoins belong to which address.

To put it simply, each UTXO is like a banknote that has a specific face value (amount of bitcoins) and a lock attached that can only be opened by a private key. When you want to send bitcoins, you need to select some banknotes, merge them into a new banknote, and re-lock it with the recipient's lock.

For example: if you have two UTXOs, one worth 10 bitcoins and the other worth 20 bitcoins, you can merge them into a new UTXO with a total value of 30 bitcoins and re-lock it with the recipient's address. In this way, you have completed a transaction, sending 10 bitcoins and 30 bitcoins to the recipient, and generating a new UTXO at the same time.

For example, Cathy in the figure below has obtained a UTXO of 10 BTC from Bob and a UTXO of 30 BTC from Alice. Her "balance" can be understood as 30 BTC, and Cathy can disassemble, combine and send these UTXOs to the outside.

Why do we need to split UTXO?

Using the above figure as an example, BOB has a UTXO with 20 BTC written on it, and Cathy has two UTXOs with 10 and 20 BTC written on them respectively.

Platforms such as Magic Eden prohibit the use of UTXOs that have not been confirmed by the Bitcoin network for transactions. Therefore, no matter how much money your UTXO contains, once it has been used and not confirmed, no other operations can be performed. This is why users often encounter situations where their wallets have sufficient balances but are prompted that UTXOs are insufficient.

For example, Cathy and Bob both have Ordi and neither has confirmed it. Since Bob has no other UTXO, he cannot proceed further, while Cathy can use another UTXO to initiate a transaction.

So is it better to have more UTXO? The answer is no. When UTXO is too scattered and the individual amount is too small, a large amount of payment needs to be merged, which will cause the handling fee to rise. In addition, the current high transaction fee rate of the Bitcoin network will further increase the transaction cost.

How to split UTXO?

Currently, the most commonly used tool for splitting and merging UTXO is Wizz.Cash .

After entering the website, users can link their wallets in the upper right corner;

Click "Add Amount And Recipient" to increase the number of rows. Each additional row means adding a new UTXO;

In the Amount, fill in the amount of each UTXO, and in the Recipient, fill in the address that receives the UTXO.

Generally speaking, UTXO will continue to increase with the transaction use of the wallet, but the funds just withdrawn from the exchange are often a single large UTXO. If the user has a large number of etched runes/engraved inscriptions, they can prepare for splitting in advance.

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