Bitcoin Rune Protocol Goes Live and Ignites the Market. This article will analyze the detailed concept of UTXO and its execution method for splitting.
(Previous Summary:
Countdown to the launch of Bitcoin Rune Protocol, how to prepare wallets, UTXO, and money-saving tips?
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(Background:
Seizing the Opportunity: Countdown to the Launch of Rune Protocol – Comprehensive Guide to Participation, Wallet Registration, and UTXO Splitting
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Table of Contents:
What is UTXO?
Why is UTXO Splitting Needed?
How to Split UTXO?
The recent launch of the Rune Protocol has once again ignited the enthusiasm of the Bitcoin network ecosystem. However, many new wallets often encounter situations where the balance is sufficient but there is a shortage of UTXO. This article will analyze what UTXO is, why there may be a shortage of UTXO, and why UTXO needs to be split, as well as how to split UTXO.
From a more standard definition, UTXO (Unspent Transaction Output) is one of the core concepts of Bitcoin. UTXO is a way to record the state of transaction outputs. It tracks each unspent transaction output to determine which bitcoins belong to which addresses.
Analogously, each UTXO is like a banknote, with a specific face value (amount of bitcoins) and attached with a lock that can only be opened by a private key. When you want to send bitcoins, you need to select some banknotes, combine them into a new banknote, and lock it with the recipient’s lock.
For example, if you have two UTXOs, one worth 10 bitcoins and the other worth 20 bitcoins, you can combine them into a new UTXO with a total value of 30 bitcoins, and then lock it with the recipient’s address. In this way, you have completed a transaction, sending 10 bitcoins and 30 bitcoins to the recipient, while generating a new UTXO.
For example, in the figure below, Cathy receives a UTXO of 10 BTC from Bob and a UTXO of 20 BTC from Alice. The “balance” of Cathy can be understood as 30 BTC, and Cathy can split, combine, and send these UTXOs externally.
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Using the example in the figure, Bob has a UTXO with 20 BTC written on it, while Cathy has two UTXOs with 10 BTC and 20 BTC respectively.
Platforms like Magic Eden prohibit the use of unconfirmed UTXOs for transactions. Therefore, regardless of the amount contained in a UTXO, once it has been used and is unconfirmed, no further operations can be performed. This is why users often encounter situations where the wallet balance is sufficient but there is a shortage of UTXO.
For example, both Cathy and Bob have engraved Ordi and are unconfirmed. Since Bob does not have any other UTXOs, he cannot proceed with further operations, while Cathy can use another UTXO to initiate a transaction.
So, is it better to have more UTXOs? The answer is also negative. When UTXOs are too scattered and the individual amounts are too small, when making a large payment, it requires combining many UTXOs, which will increase transaction fees. Currently, Bitcoin network transaction fees are high, further increasing transaction costs.
The most commonly used tool for splitting and combining UTXOs is Wizz.Cash.
Users can link their wallets in the upper right corner after entering the website; click “Add Amount And Recipient” to add rows, where each additional row means adding a UTXO. Fill in the Amount with the quantity of each UTXO and fill in the Recipient with the address that will receive the UTXO.
Normally, UTXOs will continue to increase as the wallet is used for transactions. However, funds just withdrawn from exchanges often consist of a single large UTXO. If users have a large demand for engraved runes and inscriptions, they can prepare for splitting in advance.
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