UTXO, an abbreviation for ‘unspent transaction output’, represents the remaining balance of digital currency following a cryptocurrency transaction. The term is used in blockchain-based systems like Bitcoin.
In a UTXO model, after a transaction, any remaining funds are stored as outputs for future use in subsequent transactions. These outputs function similarly to digital coins and can be spent accordingly. When an output is spent, it becomes a transaction input, and its status changes to ‘spent’. However, if an output is not spent, it remains in the UTXO database as an unspent transaction output.
In contrast to account-based models, where account balances are maintained and updated directly, the UTXO model requires validation of the entire transaction history. This validation ensures that each input spent has not previously been spent, which adds an additional layer of security to the system.
