The UTXO model refers to “Unspent Transaction Outputs” and is a fundamental concept used in certain cryptocurrencies, notably Bitcoin. In this system, every transaction creates outputs that can be spent in future transactions.Each output generated from a transaction is marked as either spent or unspent. When someone wishes to use their coins, they must reference these unspent outputs rather than having a balance like in traditional banking systems. This ensures that all transactions are traceable and that coins cannot be double-spent.When a user makes a new transaction, they specify one or more UTXOs that sum up to the amount they wish to send. The transaction creates new outputs for the recipients while returning any leftover amount to the original sender, often referred to as “change.”This model enhances security and privacy, as each transaction is independent and can be verified. It also allows for more complex transaction structures, such as multi-signature transactions, increasing flexibility in how funds are managed and spent.