The UTXO Model Explained

What you’ll learn

• •Bitcoin tracks a large collection of discrete unspent 'coin fragments' (UTXOs), not a single running balance per address.
• •Your wallet's displayed balance is simply the sum of every UTXO your keys can spend, much like the total of notes and coins in a pocket.
• •Sending BTC consumes selected UTXOs entirely as inputs and creates new UTXOs as outputs, including a 'change' output back to the sender.
• •The UTXO model enables independent, parallel transaction verification and avoids certain accounting ambiguities.
• •Ethereum uses a different, account-based running-balance model instead of UTXOs — a genuinely different design trade-off.
• •Your wallet handles UTXO selection automatically; you never need to manage it manually as a user.
• •'Dust' refers to UTXOs so small that spending them can cost more in fees than they're actually worth.