UTXO or Unspent Transaction Output is one concept which describes the way Bitcoin and other similar cryptocurrencies maintain the records of users’ claims. The blockchain keeps a record of all unspent outputs from past transactions instead of just showing an account balance. Each UTXO represents a specific amount of coin which the owner can still use.
In the instance of a Bitcoin sender, their virtual wallet grabs one or more of these UTXOs that will serve as inputs in the new transaction. When the transaction is confirmed those outputs are first marked as “spent” and the sender is given a new UTXO for any amount that was not utilized in the transaction like getting a change after paying in cash.
It is really hard to imagine UTXOs in any other way than digital coins or bills that are in your wallet. You are using up coins with every payment and getting brand new ones. Not only does this model assure the Bitcoin network of performing easy verifications of transactions, it also becomes the ultimate solution of preventing double-spending, ensuring transparency, and getting rid of a central authority all at once.
The UTXOs are the backbone of the Bitcoin accounting system and are used by other non-cryptocurrency blockchains too, like Litecoin and Cardano. They turn what would have been an inefficient and insecure process of transaction tracking and validation into one that is efficient, secure, and completely decentralized.
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