with what your suggesting, does the UTXO have to be dedicated for the Nostr identity or can it just be a stache of bitcoin that is used for other stuff?

and will the client be able to see the size of the UTXO, and allow users to see the size of the UTXO, or is all that cryptographically hidden somehow.

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I imagine it could be any wallet address, not necessarily one dedicated to a single uxto. Theoretically it could also be a lightning channel if you can find a way to sign a message with the private key.