Homework on Bitcoin Transactions and UTXO - Questions

  1. UTXO is unspent transaction outputs, basically the fund that your private key can control. Those are balances that your private key can control to create the next transaction.

  2. It can use 2 UTXOs to construct the next transaction’s input and the change can be sent back to an address that your private key can control and be used for other transaction future.

  3. It will be evaluated based on the current fee of the network by looking at the fee from the current block as the miners always looks for the higher fee’s transaction to be used to construct the next block. The wallet is then supposed to propose the fee that can reasonably fast to get your transaction sent.

  4. As there is no concept of account in bitcoin, the UTXO that a private key can controlled is not known to others. Even when transaction happen for the address that your private key controls, you can always send it to another address that your private key control without people realizing it. There is no way to tell whether the bigger amount is actually sent to others or it’s back to the address that you control by just looking at one transaction.

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  1. UXTO’s is bitcoin in your wallet that has not been spent.

  2. The transaction will be rejected.

  3. The fee is generated by subtracting the input from the output.

  4. Generate new outputs and only use them once.

    1. An unspent transaction output is the total amount of currency available in a wallet. When a transaction is sent, the whole amount gets put on the blockchain, and the user is able to send currency back to themselves.
    1. Your wallet will add your other UTXOs until it can cover the transaction. If you do not have enough in total, it will be rejected by the blockchain.
    1. By subtracting the output from the input. The fee is implied. The larger the fee, the higher the chance miners will prioritise it. The fee does not depend on the amount sent, it depends on network conditions at the time and the data size of the transaction. Some wallets use dynamic fees, where the wallet will calculate the appropriate fee for your transaction taking into account work conditions and size and give you options of priority and regular fee.
    1. By creating multiple transactions to the same senders and receivers it is harder to trace who the senders and receivers are as all the public keys are hashed.

1. Describe what Unspent Transaction Outputs (UTXO) are.
These are unspent bitcoins that are controlled by the wallet (private key), ie it’s balance.

2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
The transaction would be unfeasible.

3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
TX fee = inputs - outputs

4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
Due to the encryption, it is impossible to know which transaction went to a third party and which one went back to you.

  1. The amount of bitcoins a particular wallet has available to spend.
  2. Combine multiple UTXOs.
  3. Inputs = Outputs + Fee.
  4. Use different/multiple addresses for outputs.
  1. UTXOs are “coins” that you have received and are now allocated to your wallet. As the name impliese, these are transactions that you haven’t spent yet.

  2. If one UTXO is not enough for a single transaction you want to make, you can send several UTXO that together have at least the same amount you want to send. The wallet will send any leftover UTXOs back to your address or another address that you own.

  3. A wallet will query a node about the recent fees used in transactions and calculate an amount that will get your transaction added to the next block in a reasonable amount of time. With many wallets you can also pick your own fee and prioritize speed or cost. Your output is the same as the recipient’s input plus fees.

  4. Not sure what the question is referring to, but you can use a mixer or simply send your transaction to various addresses.

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  1. UTXOs are transactions not spent by the wallet. The wallet will query the blockchain of any UTXOs that are associated with the wallet’s private key and tally the balance so that the wallet can spend them if wanted.

  2. Normally, the wallet will add every single insufficient UTXOs together in order to pay for the transaction. However, if the wallet does not have total sufficient UTXOs , the transaction will be denied.

  3. Most wallets will have option to specify the transaction fees that we may want to pay. Miners will always select the transaction with the highest fees first. Lower fees mean longer confirmation time.

  4. Use another public key address ? I have come across but dont know how it is used.

  1. Your saldo on the blockchain.

  2. my wallet will use more UTXO’s to cover the amount needed and send the change back.

  3. The fee is not specified . It’s the discrepancy between input and output

  4. “Scrambling” by using many inputs and outputs in one TX.

Describe what Unspent Transaction Outputs (UTXO) are.
Unspent Transactions are funds that have been sent to your Wallet
that you have not used yet, or funds you have sent to someone else
that they have not used yet.

What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
The transaction will not be validated by the network

How would a bitcoin wallet specify the transaction fee when creating a transaction?
The wallet will query the network for a generally agreed upon txn fee to get your
txn processed by the blockchain relatively fast. Then to determine the fee charged you subtract
txn output from txn input.

How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
Generate new addresses for receive transactions and send to a few different output addresses which could all point back to you.

  1. utxo’s are the record of spendable bitcoin you have, the results of previous transactions.
  2. the transaction would be rejected by the network.
  3. by observing previous transaction fees.

1- Are transactions that has been sent to an address and that address didn’t spent it.

2- You wouldn’t be able to make the transaction.

3- By either letting you choose how much you want it to be, or just automatically choosing the best fee that will get your transaction done by an average time.

4- by putting a lot of outputs and inputs to make it very hard to track which one went from or your address.

1.the total amount of inputs in a transaction is your utxo but when u send you have to equal the total amount of inputs as you do for outputs
2. your transaction would get declined
3. the difference of inputs and outputs
4.by generating new addresses so that its hard to tell which output go back to the sender

1. Describe what Unspent Transaction Outputs (UTXO) are.

Unspent transaction outputs (UTXOs) are unspent transactions recorded within the blockchain, but associated to a particular wallet address private key (PK).

2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?

The wallet will search the blockchain for UTXOs associated to your wallet PK and combine sufficient UTXOs together to create the necessary BTC funds to complete the transaction. UTXOs must spend the complete input transaction value with funds which are left over from the transaction returning to the blockchain as UTXOs managed the wallet’s PK.

3. How would a bitcoin wallet specify the transaction fee when creating a transaction?

Miners are rewarded for completing the blockchain transaction via a transaction fee. Miners select UTXOs which provide the highest level of reward (transaction fee). The wallet calculates the associated miner transaction fee based on previous historical confirmed UTXOs managed by the blockchain miners. This is achieve by the wallet automatically checking the UTXO transaction fee associated with similar sized confirmed UTXOs and proposing a transaction fee which rewards the miners for their effort to facilitate access into the blockchain. Else the miner will ignore the transaction.

4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?

By outputting the remaining UTXOs to a new wallet address so there is no association between the input (where the BTC came from) and the associated output addresses. Therefore, how the UTXOs are returned to the original owner is unknown because there is no association between the UTXO input & outputs.

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1 UTXO é o saldo positivo restante de uma carteira, proveniente de uma transação anterior.

2 Caso a soma de todos UTXOs seja menor que o valor da transação, a transação não seria aprovada. A transação somente será aprovado caso a soma de UTXOs da carteira seja maior que o valor da transação e caso exista diferença entre o valor da transação e o(s) UTXO(s) haverá uma transação de retorno, que corresponderia ao troco - taxa.

3 A carteira leva em conta as taxas pagas mais recentemente e calcula qual seria a taxa baseada nisso e na urgência estipulada pelas configurações da carteira. Outra forma seria permitir ao usuário escolher a taxa.

4 Utilizando novos endereços a cada transação. Utilizando Torbrowser para realizar operações, para evitar que serviços de rastreamento associem seu IP a suas chaves públicas. Utilizando serviços de mixer para embaralhar as transações. Tomar cuidado ao receber transações de fontes em que a fonte da transação esteja identificada por KYC.
3

  1. Transactions sent to my wallet that now can be spent.
  2. The transaction wont go through
  3. It will calculate the transaction fee based on the difference betwen the available UTXO and the amount requested to be sent.
  4. I can send transactions to another wallet I own to increase security.,
    .
  1. UTXO are unspent transactions
  2. it would reject the transaction, or use other UTXO to make up thee amount if available.
  3. The difference between input and outputs is what it cost you, the wallet would specify the fee.
  4. Using multiple outputs would lend a degree of privacy as no one knows whose address is who’s.
  1. UTXOs are basically the output amount of a transaction that remains unspent, and, therefore, can be spent by the recipient. If Bob sends 1 BTC to Kath, the UTXO is 1 BTC, which is the amount Kath now can spent for an input in another transaction.

  2. If you don’t have enough UTXO, the transaction will simply be rejected.

  3. It takes a look at the previous transaction fees and suggests a transaction fee based upon that, that’d put your transaction into the blockchain reasonably fast. You can set a transaction fee yourself, but setting it too low will simply make your transaction go into the blockchain slower, since miners take the transactions with the biggest fees first. The rule of supply/demand for the service of the miners.

  4. A transaction can have multiple inputs and outputs. If your balance is 1 BTC, and you want to send .5 BTC to Bob, you’ll basically create a transaction sending 1 BTC (because you have to spend everything you got every time you make a transaction), .5 BTC to Bob and .5 BTC to yourself.

To increase your privacy, you could avoid sending the change (.5 BTC) back to the same address it came from, and send it to a new (or more) address(es), owned by you. This way, it’d look like you sent 1 BTC, split up, to e.g. 4 different people, but in fact you sent .5 BTC to the recipient, and the rest (.5 BTC) is divided and sent to your 3 other BTC wallets.

1.UTXOs are the inputs that are sent to an address. Once they are added up that is the balance of the wallet.
2.As long as the sum of all UTXOs can cover the transaction it will be accepted. If the address does not have enough UTXOs then the transaction will be declined
3.Based on previous transactions.
4. You can send yourself your own bitcoin back to a different address making it very hard to know who has the bitcoin.

  1. Unspent Transaction Outputs (UTXO) are the change that you can send back to yourself during a transaction. The sum of all your UTXOs is the maximum amount you can spend in a future transaction.

  2. If I don’t have any single UTXO that is large enough to cover for my transaction, I will use several UTXOs together as input. If I don’t have enough UTXOs then the transaction cannot be created.

  3. A bitcoin wallet doesn’t specify the transaction fee when creating a transaction, because it is calculated by substracting the output(s) from the input(s).

  4. I can use the notion of transaction inputs and outputs to increase privacy in my transaction, by using a lot of different addresses controlled by myself, as outputs.

  1. Describe what Unspent Transaction Outputs (UTXO) are.

UTXOs are transactions that a user received but has not spent yet.

  1. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?

You will get a transaction back to your account for the same amount of your total UTXOs.

  1. How would a bitcoin wallet specify the transaction fee when creating a transaction?

The wallet would deduct the total amount of your transactions from your UTXOs.

  1. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?

Each transaction has its own unique ID. There is no single account id that holds the details of all transactions.