Bitcoin Rune Protocol Goes Live, Igniting the Market
After the launch of the Bitcoin Rune Protocol, the market has been booming. This article will analyze the detailed concept of UTXO and how it is executed.
(Brief Summary:
Countdown to the launch of Bitcoin Rune Protocol: How to prepare wallets, UTXO, and money-saving tips?)
(Background:
Seize the opportunity: Countdown to the launch of Rune Protocol: Comprehensive guide on how to participate, register wallets, and split UTXO)
Table of Contents:
What is UTXO?
Why is UTXO splitting necessary?
How to split UTXO?
Recently, Rune has once again ignited the heat in the Bitcoin network ecosystem. However, many new wallets often encounter situations where the balance is sufficient but prompt a lack of UTXO. This article will analyze what UTXO is, why there is a shortage of UTXO, and why it is necessary to split and how to split UTXO.
From a more standard definition, UTXO (Unspent Transaction Output) is one of the core concepts of Bitcoin. UTXO is a way to record the state of transaction outputs. It tracks each unspent transaction output to determine which Bitcoin belongs to which address.
In simple terms, each UTXO is like a banknote with a specific face value (Bitcoin amount) and is attached to a lock that can only be opened by a private key. When you want to send Bitcoin, you need to choose some banknotes, merge them into a new banknote, and relock it with the recipient’s lock.
For example, if you have two UTXOs, one worth 10 Bitcoin and the other worth 20 Bitcoin, you can merge them into a new UTXO with a total value of 30 Bitcoin and then relock it with the recipient’s address. In this way, you complete a transaction, sending 10 Bitcoin and 30 Bitcoin to the recipient while generating a new UTXO.
In the example below, Cathy receives a UTXO of 10 BTC from Bob and a UTXO of 20 BTC from Alice. The “balance” can be understood as 30 BTC, and Cathy can split, combine, and send these UTXOs externally.
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Still using the example above, Bob has a UTXO with 20 BTC written on it, while Cathy has two UTXOs with 10 BTC and 20 BTC written on them, respectively.
Platforms like Magic Eden prohibit the use of unconfirmed UTXOs for transactions on the Bitcoin network. Therefore, regardless of the amount contained in a UTXO, once it has been used and unconfirmed, no further operations can be performed. This is why users often encounter situations where the wallet balance is sufficient but prompt a lack of UTXO.
For example, both Cathy and Bob have UTXOs engraved with “Ordi” and are unconfirmed. Since Bob does not have any other UTXOs, he cannot proceed with further operations, while Cathy can use another UTXO to initiate a transaction.
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So, is more UTXO better? The answer is also negative. When UTXOs are too fragmented and the individual amounts are too small, merging many UTXOs is required for a large payment, which will increase transaction fees. Currently, the Bitcoin network’s transaction fees are high, further increasing transaction costs.
The most commonly used tool for splitting and merging UTXOs is Wizz.Cash.
After entering the website, users can link their wallets in the upper right corner. Clicking on “Add Amount And Recipient” adds a line, which means adding a UTXO. Then, fill in the amount of each UTXO in the “Amount” field and the address of the recipient in the “Recipient” field.
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Generally, UTXOs will continue to increase as wallets are used for transactions. However, funds withdrawn from exchanges often consist of a single large UTXO. If users have a significant demand for engraved runes or inscriptions, they can prepare for splitting in advance.
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