UTXO Model (Unspent Transaction Output)

Used to keep track of the Transactions in Bitcoin

Understand it with simple example

let's say your money comes in puzzle pieces. Each piece represents a certain amount of money, like $1, $5, or $10.

Now, let's talk about UTXO-L, which stands for "Unspent Transaction Output Label." In simple terms, it's like putting labels on these puzzle pieces to know if they've been used or not.

1. Puzzle piece 1: $5

2. Puzzle piece 2: $10

Now, you want to buy a toy that costs $12. Here's how the transaction would work in the UTXO model:

1. You use both puzzle pieces to make up the required amount. So, you use Puzzle piece 1 ($5) and Puzzle piece 2 ($10), totaling $15.

2. You give both puzzle pieces to the store to pay for the toy.

3. The store takes these puzzle pieces and creates a new puzzle piece (UTXO) worth $3 as change and hands it back to you.

4. After the transaction, you have one new puzzle piece (UTXO) of $3.

In summary:

• UTXO model deals with discrete, indivisible units of cryptocurrency (like physical coins).