UTXOs and transactions

M-Pesa keeps one balance per account. Bitcoin doesn't. Instead, it keeps a set of separate coins, each locked to an owner. Your "balance" is just the sum of the coins your keys can unlock.

Step 1: The UTXO model

Each coin is an unspent transaction output, a UTXO. A transaction:

1. Consumes one or more UTXOs as inputs (they are now spent, gone forever).
2. Creates new outputs, each with an amount and a locking script.
3. Proves, with a signature, that the spender may unlock each input.

Think of notes in a purse. To pay 300 shillings with a 500 note, you hand over the whole note and get 200 back as change. Bitcoin does the same: a payment usually has one output to the receiver and one change output back to you.

The fee is never written down. It is whatever is left over:

fee = sum(inputs) - sum(outputs)

Done when: you can compute the fee for inputs of 0.6 and 0.5 BTC and outputs of 0.3 and 0.79 BTC. (Answer: 0.01 BTC.)

Step 2: Look at your coins

Start your lab from the previous lesson, then:

bitcoin-cli -regtest -rpcwallet=alice listunspent

Each entry is one UTXO with a txid, a vout (output index) and an amount.

Step 3: Pay Bob and decode it

bitcoin-cli -regtest createwallet "bob"
BOB=$(bitcoin-cli -regtest -rpcwallet=bob getnewaddress)
TXID=$(bitcoin-cli -regtest -rpcwallet=alice sendtoaddress "$BOB" 1.5)
bitcoin-cli -regtest getmempoolentry "$TXID"
RAW=$(bitcoin-cli -regtest -rpcwallet=alice gettransaction "$TXID" | jq -r .hex)
bitcoin-cli -regtest decoderawtransaction "$RAW"

In the decoded JSON find vin (the inputs) and vout (the outputs). One output pays Bob 1.5 BTC; the other is Alice's change. The transaction is waiting in the mempool.

Step 4: Confirm it

bitcoin-cli -regtest generatetoaddress 1 "$(bitcoin-cli -regtest -rpcwallet=alice getnewaddress)"
bitcoin-cli -regtest -rpcwallet=bob getbalance

Expected: Bob's balance is 1.50000000. The transaction now has one confirmation.

Done when: you can point to the change output in the decoded transaction and compute its fee.

Lab evidence

• The decoded transaction, with the payment output, the change output and your fee calculation marked.
• Bob's balance before and after mining one block.