What is UTXO
Here we explain what UTXOs are and how to manage it. What are UTXOs
A UTXO is the amount of digital currency remaining after a blockchain transaction is executed.
Transaction Creation: When a transaction is made, it consumes one or more UTXOs as inputs and creates new UTXO**s as outputs
When you send Bitcoin, several steps programmatically take place. One of the earliest steps in the transaction process is for your cryptocurrency wallet to scan the blockchain for the amount of funds you have. These funds are known as unspent transaction outputs (UTXOs).
The funds are considered “unspent” because they are freely available for you to send to someone or move to another wallet.
They are called “transaction outputs” because they were created from previous transactions.
UTXOs are processed continuously and are responsible for beginning and ending each transaction.
When a transaction is completed, any unspent outputs are deposited back into a database as inputs, which can be used at a later date for a new transaction.
Example:
You can think of UTXOs as loose change leftover from previous Bitcoin transactions.
If you spend $12 on lunch using a $20 bill, you’d have $8 leftover. In this example, the leftover $8 would be an unspent transaction output. It would be generated as an entirely new “$8 bill” UTXO and go back to your wallet, ready to be used to buy something else.
Just as you can’t physically give a shopkeeper a $5 bill and then give the same $5 bill to someone else, a Bitcoin user cannot successfully use the same unspent transaction output in two separate blockchain transactions.
In this way Bitcoin solves the double-spending problem. The other widely used concept of wallet balance tracking is called Account/Balance model. It’s being used by EVM chains like Ethereum, EOS, Tezos etc.
Managing UTXOs For some transactions, such as bulk minting Runes or sending multiple transaction in one block, you would need to have your BTC divided in lesser or bigger UTXO pieces. To adjust them to the size needed, you would either have to split or consolidate your UTXOs.
Split:
To split UTXOs you would need to use third-party services. As for now, the best options are:
How many sats per UTXO are optimal for bulk Runes mints? Here you will need to estimate how much a mint will cost. At times of low mempool occupancy, the gas fee rate ranges at about 25-35 sats/vB. Therefore, for optimal speed and in order to not get front ran, you’d like to set the gas fee slightly (~5 sats) above the current average rate. An absolute minimum per UTXO would be 50,000 sats = 0.0005 BTC ($35 if BTC=$70k). This would be enough to cover up to 10 mints per UTXO in separate blocks (at low fee rates). In the best scenario, you’d have a mint strategy that involves different sized UTXOs. If your BTC is split in larger UTXOs, you’ll be able to mint during the high network fees.
BTC=$70k
1,000,000 sats = 0.01 BTC ($700)
500,000 sats = 0.005 BTC ($350)
400,000 sats = 0.004 BTC ($280)
300,000 sats = 0.003 BTC ($210)
200,000 sats = 0.002 BTC ($140)
100,000 sats = 0.001 BTC ($70)
50,000 sats = 0.0005 BTC ($35)
Consolidation:
You can consolidate UTXOs by sending them to the wallet, where you'd like to get 1 consolidated UTXO. You can as well consolidate within the wallet. To do so, just enter the address you're sending from as a receiver address.
