One of the foundational concepts of Bitcoin is the Unspent Transaction Output, or UTXO. Every Bitcoin transaction results in the creation of these UTXOs, which represent a piece of Bitcoin that can be spent in future transactions. When you send or receive Bitcoin, you’re essentially working with UTXOs: combining them, splitting them, and creating new ones.
The entire history of Bitcoin transactions is available on the blockchain, and UTXOs provide a clear snapshot of which pieces of Bitcoin are yet to be spent, offering a transparent view of Bitcoin’s liquidity. Analyzing the number and size of UTXOs can offer insights into network activity, congestion, and users’ transactional habits.
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