Imagine:
You’re at a suya spot buying suya for ₦3,000, but pay with a ₦15,000 note. The mai suya dashes you change—₦12,000. That’s exactly what UTXO is for Bitcoin for Naija people. Simply put, an Unspent Transaction Output (UTXO) be your digital “change” from any crypto transaction wey never spend yet, dey wait inside your wallet for im time.
Honestly? When I first see “UTXO,” my reaction be: “Abeg, another confusing acronym…” But after I understand am, I realise—na de bedrock of Bitcoin transparency and security. Today, I go explain for plain English wey you go understand how e dey work, why e matter, and how to read blockchain with UTXO glasses. Make we dive in!
Wetin Be UTXO? Simpler Pass Garri (Seriously!)
Forget “bank-account-style” balances. Your Bitcoin wallet no be single account. Think am as digital wallet wey hold different bills (UTXOs) of different denominations.
- You get 10 BTC for your wallet?
- Dat NO mean say you get one 10-BTC coin.
- E likely mean say you get plenty “digital bills” (UTXOs), like:
- 1 UTXO = 3.5 BTC
- 1 UTXO = 2.5 BTC
- 1 UTXO = 2.25 BTC
- 1 UTXO = 1.75 BTC
- Dem sum join give your balance (10 BTC).
Each “bill” come from past transaction—either as full amount wey you collect or as change from your previous spending.
Why You No Fit “Break” Part of UTXO? (How Transactions Work)
Na here de magic (and small wahala) start. UTXO na indivisible “bill.” You no fit spend part of am—only de full amount. Wetin happen if wetin you want buy small pass your UTXO?
Real-Life 2025 Example: Buying Laptop for Jumia with Bitcoin (Dem dey accept BTC since 2024!):
- Laptop price: 0.25 BTC
- Your UTXOs: You only get “bills” of 1.75 BTC, 0.5 BTC, and 0.1 BTC. No exact 0.25 BTC UTXO.
- Wetin your wallet do (with sense): E go pick one suitable “bill” (usually de smallest one to minimise fees). Make we say e pick de 0.5 BTC UTXO.
- “Payment”: Your wallet send full 0.5 BTC UTXO go Bitcoin network.
- Creating NEW UTXOs:
- 0.25 BTC go Jumia address (dem spent output).
- ~0.2495 BTC return come back to YOU for new address inside your wallet (your NEW UTXO or “change”). Why e no reach 0.25 BTC? Read about fees below!
Where Network Fees Dey Go? (De “Disappearing Change” Secret)
Ah yes, fees! New people dey miss dis one. Transaction fees dem dey deduct FROM YOUR “CHANGE.” Use our example:
- You send 0.5 BTC UTXO.
- Jumia collect 0.25 BTC.
- Your ideal change: 0.25 BTC.
- BUT: Network charge fee, make we say 0.0005 BTC.
- Your actual new UTXO (“change”): 0.25 BTC – 0.0005 BTC = 0.2495 BTC.
Important! Dis “change” (0.2495 BTC) go to NEW ADDRESS wey your wallet create automatic, wey dem call am Change Address. No panic if you see new address after transaction—na normal thing and e dey help your privacy! (Thank modern HD wallets wey dey handle dis).
How to See UTXOs Yourself? (Step-by-Step Guide)
To understand UTXOs turn you from ordinary user to blockchain detective! You need Block Explorer—search engine for transactions. Popular options as of 26 June 2025: Blockchain.com, Blockstream.info, Mempool.space.
How e dey work (with real transaction example):
- Find your Transaction ID (TxID) for your wallet history.
- Enter de TxID inside block explorer.
- Check “Inputs” and “Outputs” sections:
- Inputs: Spent UTXOs from your wallet (or sender own). Like bills wey you give cashier.
- Outputs:
- First output: Receiver address (e.g., Jumia) and amount wey dem collect (0.25 BTC)—receiver future UTXO.
- Second output (Change Output): YOUR new address and your change minus fees (0.2495 BTC)—your new UTXO!
- (Sometimes more outputs dey if dem combine multiple UTXOs).
- Fee (Network Cost): Dem calculate am as
Total Inputs - Total Outputs. For our example: 0.5 BTC – (0.25 BTC + 0.2495 BTC) = 0.0005 BTC.
Simplified Block Explorer Example:
| Direction | Address | Amount (BTC) | Status |
|---|---|---|---|
| Input | (Your old Address A) | 0.50000000 | Spent |
| Output 1 | Jumia Address | 0.25000000 | Recipient’s New UTXO |
| Output 2 | Your NEW Address B (Change) | 0.24950000 | Your NEW UTXO! |
| Fee | (Network) | 0.00050000 | Miner fee |
Why UTXO Wahala Dey? (E No Be For Nothing!)
- Prevent Double-Spending: Each UTXO fit spend ONLY ONE TIME. Nodes (computers wey dey secure Bitcoin) dey track all UTXOs as e dey happen. If transaction try to spend UTXO wey no exist, nodes go reject am sharp sharp.
- Make Verification Simple: Nodes no need full blockchain history to confirm transactions—just de current UTXO database.
- Transparency: Anybody fit trace any bitcoin origin by following UTXO chain go back to where dem create am (mining block).
Wahala and Future: When “Bills” Pile Up
UTXO growth na real challenge:
- Problem: UTXO databases need expensive RAM. More UTXOs = costlier full nodes → threaten decentralization.
- Why UTXOs Dey Grow: Every transaction create new UTXOs (receiver + change). Wallet privacy features make am worse. As of June 2025, Bitcoin UTXO set don pass 150 million.
- Solutions:
- Smarter Wallets: Optimize coin selection to pack small-small UTXOs together.
- Taproot (dem activate 2021): Make things better with Schnorr signatures, reduce new UTXO creation.
- Storage Tech: Hybrid RAM/SSD database optimizations.
- User Awareness: Manually pack “dust UTXOs” (send small-small amounts to yourself).
UTXO vs. Account Model (Ethereum & Others)
Bitcoin dey use UTXO. Others like Ethereum dey use Account Model:
- How Account Model Work: Like bank account—one address, one balance. To send ETH, e go reduce from your balance add to receiver own. No “change” mata.
- Account Model Pros:
- Easier for beginners (no need calculate change like Lagos danfo fare)
- Better for complex smart contracts
- Account Model Cons:
- Harder to process many things at once
- Less natural privacy
- Wahala to prevent double-spend
Conclusion: UTXO Na Your Power
To understand UTXOs allow you:
- Truly know how your bitcoin dey move under de hood.
- Check transactions yourself with block explorers.
- Save money on fees (packing UTXOs together save cash!).
- See difference between Bitcoin and other blockchains.
Even if e no simple like “balance wey dey one place,” UTXOs provide strong security and decentralized checking wey make Bitcoin revolutionary. Na Satoshi Nakamoto genius solution for trust among thousands of nodes.
Next time you see your wallet balance, remember: e no be one big chunk—na collection of “digital bills” (your UTXOs) ready for action. Now you know how dem dey work!
P.S. Check your UTXOs now! Open your Bitcoin wallet, find recent transaction wey you send, copy im TxID, paste am for Blockchain.com or Mempool.space. You fit see de Inputs, Outputs, and Change Address? Welcome to blockchain detective club!
Naija Crypto Resources
For more crypto knowledge for Nigeria, check these useful links:
- Nairametrics – Crypto news and market analysis
- TechCabal – Tech news with crypto coverage
- CryptoTVPlus – Nigerian crypto education hub
- Bundle Africa – Social payments with crypto
- Paga – Local crypto on/off ramps
