1
Bitcoin transfers funds using a payment mechanism called pay-to-public-key-hash (P2PKH), which involves issuing transactions with inputs and outputs.
2
UTXO stands for unspent transaction output, which represents where funds are actually held on the Bitcoin blockchain.
3
A transaction output contains a value (amount in Bitcoin, which can be fractional) and an address (the hash of a public key).
4
A transaction input consists of a reference to a previously unspent UTXO and a cryptographic signature proving authorization to spend those funds.
5
Once a UTXO is spent as an input in a new transaction, it becomes a spent output and can never be spent again.
6
Owning an address means holding the secret key required to sign transactions on behalf of that address.
7
The UTXO model is efficient because miners only need to keep the active set of UTXOs in memory to verify that funds are not double-spent, rather than storing the entire blockchain history for validation.