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The UTXO is exactly what you receive whenever someone pays you some Bitcoin. The output of the deal may be the cash they paid to you. And it is, obviously, unspent whilst it sits in your wallet. Thus transaction output that isunspent.

In order to think about the present state of this Bitcoin system to be a large pool of UTXOs: all of the payments that have now been received by Bitcoin users that they have never yet invested:

Every re payment which have maybe maybe not it self been invested is modeled into the Bitcoin system as a unspent transaction output. As a whole, each UTXO can only just be invested because of the master associated with the address to which it absolutely was delivered (not at all times, and this may be the point; see later). And every UTXO posseses xmeets legit an identifier (the transaction it starred in as well as its place into the directory of outputs of the deal) and a value: just just how bitcoins that are many represented by that UTXO.

But just what individuals frequently skip is that these UTXOs are in reality small small computer programs that go on the ledger, control use of bitcoins and operate in response to specific incoming events. Smart Contracts, in the event that you shall. Therefore the only method you can invest the cash managed by that agreement is that it returns if you can provide some input data that allows every node on the system to execute the program and check TRUE

If you’re able to result in the system return TRUE, you can say what are the results towards the funds. Then you dont if you cant.

Therefore, when you need to expend your hard earned money, right right heres everything you do:

Your wallet computer pc software writes only a little computer system for your needs after which delivers it to the bitcoin system. It efficiently claims to your system: Please run this little system Ive simply provided you. Then please locate a scheduled program(smart contract?) on the working platform with this particular ID for me. Once youve done that, feed the production from my system into system you just located. Which means this is a two action procedure: you offer your own personal little system plus the production of the is given into the UTXO program you want to spend.

How you spend cash in Bitcoin would be to ask the platform to operate a tiny computer system that you provide and feed the production of the system towards the smart contract that is saving the funds you wish to spend. You get to spend the money if you can make this second program run successfully. The program you provide is scriptSig and the UTXO program is scriptPubKey in Bitcoin terminology. Your ultimate goal would be to offer a scriptSig whose production is fed into scriptPubKey to really make it get back TRUE

What exactly are these programs that are little? Theyre really simple in the common case. The UTXO program just claims: provide me personally by having a digital signature that demonstrates you own the key from the following Bitcoin target (and please additionally illustrate that you understand the general general general public key that corresponds to your bitcoin target). Thats why it is called the scriptPubKey.

As well as the system you offer is simply ways to make sure the bitcoin system delivers this evidence in to the scriptPubKey system when you look at the way that is right. Its an easy method of providing a signature that is digital. Ergo its called the scriptSig

Then you cant generate the right signature and so you cant create the input necessary to get the smart contract (scriptPubKey) to run successfully and you dont get to spend the funds if you dont know the private key. And this, seemingly complex model, is merely a method to make sure that the actual only real individual who can spend cash at address 1abcde may be the one who understands the personal key just as we might desire.

Exactly why is it this complex?