
==== Outputs - The fundamental unit of bitcoin

If we accept that bitcoin transactions don't actually contain "senders" and "recipients", that concepts such as accounts, balances and addresses are not part of the low-level transaction structure, then what are transactions actually... transacting?

The answer is that the fundamental building block "transacted" in bitcoin is an _output_. An output is a discrete and indivisible unit of value. Bitcoin transactions consume previously created outputs and create new outputs. The set of all outputs in the bitcoin system that are spendable and have not yet been spent is called the _Unspent Transaction Output Set_ or UTXO Set. In a sense, the bitcoin system is a system for keeping track of the ownership and state of unspent transaction outputs (UTXO), across a decentralized network.

[TIP]
====
_Outputs_ are the fundamental building blocks of bitcoin. They are indivisible units of value, consumed and created by transactions.
====

Each bitcoin transaction is therefore an _atomic state change_ applied to the UTXO Set. Transactions are _atomic_ meaning they happen in their entirety or not at all.

.Bitcoin is not "transmitted"
****
To make things easier for bitcoin users to understand, we say that someone is "sending" bitcoin. But in practice, bitcoin is not transmitted. Instead, a transaction simultaneously consumes outputs (perhaps those controlled by one user's wallet), while creating outputs (which may be controlled by a different user's wallet). As such, there is no time in which bitcoin is "in transit" between users or accounts. A transaction either happens, instantaneously changing the state of outputs, or it doesn't.
****

==== Balances, Accounts and Outputstcoin ccooiinn  sssystem yysstteemm  iiss  tthis t

Balances and accounts are abstractions created by wallets. A wallet counts all the unspent outputs that are controlled by the keys it contains. That sum of outputs is the "wallet balance". But nowhere in the bitcoin system is there any concept of balance, account, wallet or user.


[TIP]
====
((("accounts")))((("balances")))There are no accounts or balances in bitcoin; there are only _unspent transaction outputs_ (UTXO) scattered in the blockchain.
====



In <<get_utxo>>, we use the blockchain.info API to find the unspent outputs (UTXO) of a specific address.

[[get_utxo]]
.A script that calls the blockchain.info API to find the UTXO related to an address
====
[source, python]
----
include::code/get-utxo.py[]
----
====

Running the script, we see a list of transaction IDs, a colon, the index number of the specific unspent transaction output (UTXO), and the value of that UTXO in satoshis. The locking script is not shown in the output in <<get_utxo_run>>.

[[get_utxo_run]]
.Running the get-utxo.py script
====
[source,bash]
----
$ python get-utxo.py
ebadfaa92f1fd29e2fe296eda702c48bd11ffd52313e986e99ddad9084062167:1 - 8000000 Satoshis
6596fd070679de96e405d52b51b8e1d644029108ec4cbfe451454486796a1ecf:0 - 16050000 Satoshis
74d788804e2aae10891d72753d1520da1206e6f4f20481cc1555b7f2cb44aca0:0 - 5000000 Satoshis
b2affea89ff82557c60d635a2a3137b8f88f12ecec85082f7d0a1f82ee203ac4:0 - 10000000 Satoshis
...
----
====



===== Spending conditions (encumbrances)

((("encumbrance")))((("locking scripts")))Transaction outputs associate a specific amount (in satoshis) to a specific _encumbrance_ or locking script that defines the condition that must be met to spend that amount. In most cases, the locking script will lock the output to a specific bitcoin address, thereby transferring ownership of that amount to the new owner. When Alice paid Bob's Cafe for a cup of coffee, her transaction created a 0.015 bitcoin output _encumbered_ or locked to the cafe's bitcoin address. That 0.015 bitcoin output was recorded on the blockchain and became part of the Unspent Transaction Output set, meaning it showed in Bob's wallet as part of the available balance. When Bob chooses to spend that amount, his transaction will release the encumbrance, unlocking the output by providing an unlocking script containing a signature from Bob's private key.(((range="endofrange", startref="ix_ch06-asciidoc4")))(((range="endofrange", startref="ix_ch06-asciidoc3")))(((range="endofrange", startref="ix_ch06-asciidoc2")))



In <<select_utxo>>, we show the use of a "greedy" algorithm to select from available UTXO in order to make a specific payment amount. In the example, the available UTXO are provided as a constant array, but in reality, the available UTXO would be retrieved with an RPC call to Bitcoin Core, or to a third-party API as shown in <<get_utxo>>.

[[select_utxo]]
====
[source, python]
----
include::code/select-utxo.py[]
----
====

If we run the _select-utxo.py_ script without a parameter, it will attempt to construct a set of UTXO (and change) for a payment of 55,000,000 satoshis (0.55 bitcoin). If you provide a target payment amount as a parameter, the script will select UTXO to make that target payment amount. In <<select_utxo_run>>, we run the script trying to make a payment of 0.5 bitcoin or 50,000,000 satoshis.

[[select_utxo_run]]
.Running the select-utxo.py script
====
----
$ python select-utxo.py 50000000
For transaction amount 50000000 Satoshis (0.500000 bitcoin) use:
([<7dbc497969c7475e45d952c4a872e213fb15d45e5cd3473c386a71a1b0c136a1:0 with 25000000 Satoshis>, <7f42eda67921ee92eae5f79bd37c68c9cb859b899ce70dba68c48338857b7818:0 with 16100000 Satoshis>, <6596fd070679de96e405d52b51b8e1d644029108ec4cbfe451454486796a1ecf:0 with 16050000 Satoshis>], 'Change: 7150000 Satoshis')
----
====


[NOTE]
====
The sequence number is used to override a transaction prior to the expiration of the transaction locktime, which is a feature that is currently disabled in bitcoin. Most transactions set this value to the maximum integer value (0xFFFFFFFF) and it is ignored by the bitcoin network. If the transaction has a nonzero locktime, at least one of its inputs must have a sequence number below 0xFFFFFFFF in order to enable locktime.(((range="endofrange", startref="ix_ch06-asciidoc5")))
====
