UTXO

Bitcoin does not use accounts or balances. Instead, the network tracks value through a model called Unspent Transaction Outputs, or UTXOs. Every confirmed transaction creates one or more outputs, each of which assigns a specific amount to a specific address. An output remains a UTXO as long as it has not been referenced as an input in a subsequent transaction. The total value a wallet controls is simply the sum of all UTXOs associated with its addresses.

Spending a UTXO means referencing it as the input to a new transaction. Once referenced, the UTXO is consumed and destroyed. The new transaction creates fresh outputs, which become new UTXOs. If you own a UTXO worth 1 bitcoin and send 0.3 to someone, the transaction will consume the entire 1 bitcoin UTXO, create an output of 0.3 for the recipient, and create a change output returning the remaining amount minus fees to an address you control. You never partially spend a UTXO; you always consume it fully and receive change.

The UTXO model has meaningful implications for privacy and security. Because each UTXO is a distinct, independently tracked piece of value, it is harder to link transactions into a single spending history compared to account-based systems. From a security standpoint, an attacker who compromises one private key only gains access to the UTXOs associated with that key. Understanding UTXOs is also important for estimating transaction fees, since fees are based partly on the number of inputs a transaction consumes.