User's Analogy from Reddit for Understanding UTXOs

"It's actually easy to understand if you make an analogy to physical wallet and cash.

Bitcoin wallet is like a your leather wallet, each compartment is an address except that Bitcoin wallet has very large number of compartments. And these are automatically managed so you don't have to remember them.

Each compartment can have multiple bills or coins, just like each address can have multiple UTXOs (unspent output aka note).

If you buy something worth $10 using $50 bill, you got $40 back as change which can go into same previous compartment or new one. For privacy reason, bitcoin wallet usually never reuse old address as change address (compartment) unless you specifically tell it to. That $40 goes into entirely new address and the process continue if you spend that $40.

If you put an address in block explorer you only watch a compartment not your entire wallet. A block explorer can't know all addresses belonging to same wallet."

#Bitcoin

#UTXO