What are UTXOs?

UTXO stands for "Unspent Transaction Output". Think of them as individual coins in your wallet. Unlike a bank account with a single balance, Bitcoin tracks individual chunks of bitcoin from previous transactions.

Somewhat confusingly the unspent outputs of previous transactions become inputs for the transaction you're building. This transaction then creates new outputs which can later be used as inputs in other transactions.

Selection Strategies

• Optimal: Minimizes change to reduce transaction size
• FIFO: Uses oldest coins first for better privacy
• Largest First: Reduces UTXO count in your wallet