💸 Transactions & UTXOs
Understanding how Bitcoin actually moves
What is a UTXO?
UTXO stands for Unspent Transaction Output. It's the fundamental unit of Bitcoin ownership.
You don't have a "balance" - you have specific bills (UTXOs). If you have a $20 and a $10, you don't have "30 dollars" - you have two distinct pieces of value.
📊 UTXOs vs Bank Balances
Bank Account
Running balance: $150. Add $50, now $200. Subtract $30, now $170. Just numbers in a database.
Bitcoin UTXOs
Discrete coins: 0.5 BTC + 0.3 BTC + 0.2 BTC. Each is a separate, trackable unit with its own history.
🔄 How Transactions Work
You have a 0.5 BTC UTXO from a previous transaction
0.3 BTC to recipient + 0.199 BTC back to you (change)
0.001 BTC goes to miners (0.5 - 0.3 - 0.199 = 0.001)
💰 Transaction Fees
Fees are paid per byte of data, not per amount sent. A transaction sending $10 costs the same as one sending $10 million.
More inputs = larger transaction = higher fee. Consolidating many small UTXOs costs more than spending one large UTXO.
When fees are low, combine small UTXOs into larger ones. This saves fees on future transactions.
⏳ The Mempool
The mempool is the waiting room for unconfirmed transactions. Miners pick transactions based on fee rate (satoshis per byte).
Low Priority
1-5 sat/vB: May take hours or days
Medium Priority
10-20 sat/vB: Usually next few blocks
High Priority
50+ sat/vB: Next block likely
✅ Confirmations
Each new block adds one confirmation to your transaction. More confirmations = more security.
1 confirmation: Okay for small amounts
3 confirmations: Good for most transactions
6 confirmations: Standard for large amounts (~1 hour)
🏛️ Austrian Economics: Final Settlement
"Bitcoin transactions represent true final settlement - no chargebacks, no reversals, no counterparty risk."
Unlike credit card payments that can be reversed for months, Bitcoin transactions are irreversible by design. This enables trustless commerce - you don't need to trust the buyer won't reverse the payment.
Final settlement eliminates counterparty risk. Once confirmed, no institution can reverse your transaction or freeze your funds.
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