Original | Odaily Planet Daily

Author | Nanzhi

Recently, Rune has once again ignited the heat of the Bitcoin network ecosystem, but many new wallets often have sufficient balances but insufficient UTXO when performing on-chain operations. Odaily Planet Daily will analyze what UTXO is, why UTXO is insufficient, why and how to split UTXO, etc. in this article.

What is UTXO?

In terms of a more standard definition, UTXO (unused transaction output) is one of the core concepts of Bitcoin. UTXO is a way to record the status of transaction outputs. It tracks each unused transaction output to determine which bitcoins belong to which address.

To put it simply, each UTXO is like a banknote that has a specific face value (amount of bitcoins) and is attached with a lock that can only be opened by a private key. When you want to send bitcoins, you need to select some banknotes, merge them into a new banknote, and re-lock it with the recipient's lock.

For example: if you have two UTXOs, one worth 10 bitcoins and the other worth 20 bitcoins, you can merge them into a new UTXO with a total value of 30 bitcoins, and then re-lock it with the recipient's address. In this way, you have completed a transaction, sending 10 bitcoins and 30 bitcoins to the recipient, and generating a new UTXO at the same time.

For example, Cathy in the figure below obtained a UTXO of 10 BTC from Bob and a UTXO of 30 BTC from Alice. Her "balance" can be understood as 30 BTC, and Cathy can disassemble, combine and send these UTXOs to the outside.

Why do we need to split UTXO?

Taking the above picture as an example, BOB has a UTXO with 20 BTC written on it, and Cathy has two UTXOs with 10 and 20 BTC written on them respectively.

Platforms such as Magic Eden prohibit the use of UTXOs that have not been confirmed by the Bitcoin network for transactions. Therefore, no matter how much money your UTXO contains, once it has been used and not confirmed, no other operations can be performed. This is why users often encounter situations where their wallets have sufficient balances but are prompted that UTXOs are insufficient.

For example, Cathy and Bob both inscribed Ordi and neither confirmed it. Since Bob has no other UTXO, he cannot proceed further, while Cathy is able to initiate a transaction using another UTXO.

So is it better to have more UTXOs? The answer is no. When UTXOs are too scattered and the individual amounts are too small, a large amount of payment will require the merging of many UTXOs, which will cause an increase in transaction fees. In addition, the current high transaction fee rate of the Bitcoin network will further increase transaction costs.

How to split UTXO?

Currently the most commonly used tool for splitting and merging UTXOs is Wizz.Cash .

• After entering the website, users can link their wallet in the upper right corner;

• Click “Add Amount And Recipient” to add more rows. Each additional row means adding a new UTXO.

• Fill in the amount of each UTXO in Amount and the address that receives the UTXO in Recipient.

Generally speaking, UTXO will continue to increase with the transaction usage of the wallet, but the funds just withdrawn from the exchange are often a single large UTXO. If the user has a large demand for etching runes/engraving inscriptions, they can prepare for splitting in advance.