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Satoshi Ep6: Transaction Structure
This podcast episode discusses the transaction structure of Bitcoin, focusing on the UTXO model and how it differs from traditional payment systems.
Key Topics:
Summary:
Bitcoin's transaction model is fundamentally different from conventional payment systems that rely on account balances. Instead, Bitcoin uses the UTXO (Unspent Transaction Output) model. The UTXO model tracks individual coins, or UTXOs, which are essentially outputs from previous transactions that have not yet been spent. Each UTXO is like a specific bill in your wallet and can only be spent once in its entirety. This timestamp server proves that the data must have existed at the time in order to get into the hash.
A Bitcoin transaction involves inputs and outputs. Inputs reference the UTXOs being spent, while outputs create new UTXOs that can be claimed by the owner of the corresponding private key. Because UTXOs must be spent entirely, transactions often include a change output, which returns any excess funds to the sender. For example, if you have a 1 BTC UTXO and want to send 0.3 BTC, the transaction would create two outputs: 0.3 BTC to the recipient and 0.7 BTC back to yourself as a new UTXO.
Ownership in Bitcoin is established through digital signatures. When sending Bitcoin, you are essentially signing a message that authorizes the transfer of a specific UTXO to the owner of a particular public key. This creates a chain of signatures that traces every coin back to its creation. The payee can then verify these signatures to confirm the chain of ownership.
Bitcoin also employs a simple programming language to define spending conditions. Locking scripts set the rules for spending a UTXO, while unlocking scripts prove that you meet those rules. For a transaction to be valid, the locking and unlocking scripts must evaluate to true together.
Transaction fees are calculated as the difference between the total value of the inputs and the total value of the outputs in a transaction. Any unassigned Bitcoin from this difference goes to the miner who includes the transaction in a block. As Satoshi wrote, once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation-free.
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By Brian HIrschfield and Rob HamiltonThis podcast episode discusses the transaction structure of Bitcoin, focusing on the UTXO model and how it differs from traditional payment systems.
Key Topics:
Summary:
Bitcoin's transaction model is fundamentally different from conventional payment systems that rely on account balances. Instead, Bitcoin uses the UTXO (Unspent Transaction Output) model. The UTXO model tracks individual coins, or UTXOs, which are essentially outputs from previous transactions that have not yet been spent. Each UTXO is like a specific bill in your wallet and can only be spent once in its entirety. This timestamp server proves that the data must have existed at the time in order to get into the hash.
A Bitcoin transaction involves inputs and outputs. Inputs reference the UTXOs being spent, while outputs create new UTXOs that can be claimed by the owner of the corresponding private key. Because UTXOs must be spent entirely, transactions often include a change output, which returns any excess funds to the sender. For example, if you have a 1 BTC UTXO and want to send 0.3 BTC, the transaction would create two outputs: 0.3 BTC to the recipient and 0.7 BTC back to yourself as a new UTXO.
Ownership in Bitcoin is established through digital signatures. When sending Bitcoin, you are essentially signing a message that authorizes the transfer of a specific UTXO to the owner of a particular public key. This creates a chain of signatures that traces every coin back to its creation. The payee can then verify these signatures to confirm the chain of ownership.
Bitcoin also employs a simple programming language to define spending conditions. Locking scripts set the rules for spending a UTXO, while unlocking scripts prove that you meet those rules. For a transaction to be valid, the locking and unlocking scripts must evaluate to true together.
Transaction fees are calculated as the difference between the total value of the inputs and the total value of the outputs in a transaction. Any unassigned Bitcoin from this difference goes to the miner who includes the transaction in a block. As Satoshi wrote, once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation-free.