UTXO

A bitcoin UTXO (unspent transaction output) is like a unique bill in a piggy bank, representing unspent bitcoin from a transaction. Each deposit into a wallet creates a new UTXO; one deposit of 0.9 BTC creates one 0.9 BTC UTXO, while nine 0.1 BTC deposits create nine UTXOs. Managing UTXOs affects privacy and transaction fees; fewer, larger UTXOs reduce fees but can expose wallet balance, while many small UTXOs enhance privacy but increase costs. Self-custody requires active UTXO management.