UTXO

A UTXO — short for unspent transaction output — is a discrete chunk of cryptocurrency that someone has received and not yet spent. Instead of keeping a running balance for each user the way a bank account does, blockchains like Bitcoin track money as a great pile of these individual chunks, each one stamped with the condition needed to unlock it. Your wallet's balance is not a single number stored somewhere; it is simply the sum of all the unspent chunks you currently control.

The clearest way to picture a UTXO is as a physical banknote. You cannot tear a twenty-dollar bill in half to pay fifteen dollars; you hand over the whole bill and receive five dollars in change. A blockchain transaction works the same way: it consumes one or more whole UTXOs as inputs, and produces new UTXOs as outputs — one going to the recipient and, usually, one of change coming back to you. The old chunks are marked spent and the freshly minted ones become the new spendable money.

This design has real advantages. Because each chunk is either fully unspent or fully spent, the network can check for double-spending with a simple lookup, and many transactions can be verified independently and in parallel. The trade-off is that thinking in whole-bill chunks is less intuitive than a plain balance, which is why some other blockchains chose the account model instead. Both ultimately answer the same question — who owns what — by very different bookkeeping.