Kaspa uses unspent transaction outputs similar to Bitcoin.
Kaspa is a UTXO Chain
A UTXO-based blockchain uses the unspent transaction output method for accounting. This method was first introduced in the Bitcoin whitepaper by Satoshi Nakamoto. Unlike traditional accounting systems, a UTXO-based ledger does not have accounts or wallets at the protocol level. Instead, transactions consist of a combination of inputs and outputs. The coins are recorded as a list of unspent transaction outputs. Though wallets can be built using crypto APIs on UTXO-based blockchains like Bitcoin, these are not part of the chain’s protocol level.
The UTXO and the TX
Transactions (TX) in a UTXO chain are made by utilizing existing unspent transaction outputs (UTXOs) and creating new UTXOs in their place. A UTXO value cannot be split but can be combined with other UTXOs to meet the required transaction amount. Think of UTXOs like cash bills: just as a paper bill cannot be divided, a UTXO value must be used in its entirety.
Let’s say you have a $5, $10, and $20 bill.
To purchase an item that costs $5. You use the $5 bill. This results in one UTXO input of the $5 bill and one UTXO output (the recipient gets a $5 bill).
The item costs $15. You use $5 and $10. Here, you have multiple inputs and just one output, with the recipient getting $15.
The item costs $25. You pay using a $10 and a $20 bill, totaling $30. Therefore, there are multiple inputs (one $10 and one $20 bill) and multiple outputs — $30 received by the recipient and the $5 you were given in change.
The bills you spend and receive back (outputs) will be used to make future payments, becoming inputs. Until then, they are classed as unspent, i.e., Unspent Transaction Outputs (UTXO).
UTXOs on Kaspa
Suppose you want to send someone 200 KAS but only have a UTXO worth 500 KAS in your wallet. You must send the full 500 KAS UTXO to the recipient to complete this transaction. It’s like paying with cash. The protocol handles this process, eliminating the need to trust the recipient with your change. So, when you make this transfer, the recipient will receive their 200 KAS, and the remaining 300 KAS “change” will be sent back to your address as a new, smaller UTXO.
Tip: Currently the TX fee is 0.0001 Kas per UTXO.
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