What does UTXO stand for?

UTXO stands for Unspent Transaction Output. It represents a discrete unit of Bitcoin that can be used as an input for a future transaction.

How is a UTXO like physical cash?

Just like a $100 bill cannot be torn in half, a UTXO must be spent in full. If you spend $75, the $100 UTXO is destroyed, and two new ones are created: $75 for the merchant and $25 back to you as 'change'.

Why do many small UTXOs lead to higher transaction fees?

Bitcoin transaction fees are based on data size, not dollar value. A transaction that pulls from many small UTXOs (inputs) contains more data, making it more expensive to process than one large UTXO.

What is UTXO consolidation?

Consolidation is the process of sending many small UTXOs to your own address to combine them into a single larger UTXO, reducing the cost of future transactions.

When is the best time to consolidate UTXOs?

The best time to consolidate is when network fees (sats/vB) are at their lowest. This ensures you pay the minimum amount possible to clean up your wallet's 'loose change'.

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What is a UTXO? (VIDEO)

Published: 9/10/2024