UTXO (Unspent Transaction Output)

Bitcoin has no balance accounts. A wallet's balance is the sum of the UTXOs it can spend, the ones its key controls, and that is the core contrast with Ethereum's account-based model. Each transaction consumes one or more UTXOs as inputs and creates new UTXOs as outputs. A UTXO is spent whole, so if it is worth more than needed the difference is returned as a change UTXO to an address of your own. Each UTXO carries a locking script that defines what is required to spend it, typically a signature.

It is Bitcoin's fundamental accounting model, and understanding it is a prerequisite for wallets, fees, privacy and coin selection. The difference between what goes in and what comes out is the miner's fee. Its advantages are parallel validation, privacy through the use of fresh addresses, and verification without a mutable global state.

The model connects to the rest of the cluster in concrete ways. Runes attaches token balances directly to UTXOs in a UTXO-native design, while Ordinals, the basis of BRC-20, numbers satoshis inside outputs. The fees paid when spending UTXOs are the other component of the miner's income, alongside the subsidy that each halving trims.