Definition
An unspent transaction output (UTXO) represents an available output in systems such as Bitcoin. Instead of updating one account balance directly, a transaction spends existing outputs and creates new ones. Wallets calculate spendable funds from the outputs they can unlock.
How It Works
An input references a previous output and supplies the data needed to satisfy its spending conditions. That output is consumed as a whole; any remainder can be returned through a new change output. For example, spending a larger output for a smaller payment commonly creates both a recipient output and change, with the difference between input and output totals covering the fee.
Key Considerations
Having many small UTXOs can increase transaction size and fees when several must be combined. Combining outputs can also reveal relationships between previously separate addresses. An unspent output is not necessarily immediately spendable by a particular user: time locks, multisignature requirements or other conditions may apply. UTXOs are accounting objects, not individually numbered coins with permanent identities.