To make a career in the cryptocurrency field, it is much important to stay abreast of live crypto news and grasp as much understanding about the important terminologies related to the field. There are various cryptocurrency terms that you will find while browsing through. Among these terms, there is a term called UTXO. Do you know what is UTXO? If not, then today we will let you know about UTXO.UTXO is defined as Unspent Transaction Output. It is the remaining amount of cryptocurrency change that you get from every transaction.
Importance Of UTXO
An important thing to know about UTXO is that it indicates blockchain’s method of accounting. There is no need to keep an eye on or storing all solo transactions. All it needs is to discover coins that are not being spent, called to be as UTXOs. Note that in the Bitcoin ecosystem, a coin cannot be spent more than once. In the wallet, if all the bitcoins go unspent, then there are two reasons for it. First, bitcoins must have been received as a mining award by the miner or, secondly, during the transaction, each bitcoin must have been minted.
UTXOs play an important role in keeping double-spending attacks at bay. It will also intercept in spending the non-existent coins. The maintenance and recording of the database by network nodes feature all UTXO that are present for spending. If there is an attempt to send a transaction with a coin, not in the database, will be rejected by the nodes.
Problem In Storage
Storage of the UTXO database in RAM is done by nodes. So this becomes important in storing data in a manageable size. With the growth of data, it simultaneously leads to the growth of the full node with it. But when full nodes become too costly, then it is expected to observe centralization in the Bitcoin network amongst the richer some who can operate them. The risk of centralization is the main problem and a barrier to Bitcoin block size increases. This is the major issue about UTXO.
Solution To This Problem
To face the problem of storage, there are solutions also. And one of the best solutions is no compulsion of storing all UTXO database in RAM by the nodes. A part of it for storage can be the best option in much less costly SSD (solid-state disk) or revolving hard disk. Adding on to it, steps are being taken for improving the transaction mechanism by Bitcoin developers regarding optimizing the UTXO database.
So today, you got to know about UTXO and its problem and solution. In short, UTXO is the remaining amount of cryptocurrency change that you get from every transaction. It is implemented by Bitcoin and other cryptocurrencies like Komodo, Bitcoin Cash, Litecoin, and many others. There are other cryptocurrencies like Ethereum that use other accounting mechanisms. Ethereum, as the name mentioned, comprises a transaction model-based on accounts. This mechanism consists of better space and easier code to work with. But the problem you will face is losing a transaction privacy level and operate into scalability issues. To know any updates about Bitcoin, keep following the latest news on Bitcoin.