Bitcoin Transactions, Inputs and Outputs

Coins are outputs

Bitcoin accounting uses unspent transaction outputs, or UTXOs. Spending consumes one or more outputs and creates new ones. A wallet adds them up to present a familiar balance.

Change is normal

If selected inputs exceed the payment plus fee, the wallet creates a change output back to a fresh address it controls. Misunderstanding change can lead explorers to display misleading apparent payment amounts.

Name the layer and the actor. Wallets create transactions, nodes check rules, miners propose blocks, and Lightning peers manage channels.

Fees depend on data

Fees are based primarily on transaction weight, not the dollar value sent. Consolidating many small inputs can cost more than spending one large input because it uses more block space.

Inputs, outputs and change

A transaction has no balance field. It lists inputs — references to earlier outputs you control, each with a signature that unlocks it — and outputs, each with an amount and a locking script, usually an address.

Inputs must be spent whole, so paying 0.1 BTC from a 0.5 BTC output creates two outputs: 0.1 to the recipient and a little under 0.4 back to a fresh change address you own. The gap between inputs and outputs is the fee; a transaction never states it explicitly.

Wallets hide all of this, which is convenient until a fee looks wrong or a coin control question arises.

Size, weight and why fees are per byte

Miners are paid per block, and a block has limited space, so what they sell is bytes. A transaction with many inputs is large; one with a single input and two outputs is small.

Since Segregated Witness, signature data is discounted: size is measured in weight units, four per byte of ordinary data and one per byte of witness data, and fees are quoted per virtual byte, which is weight divided by four. Native SegWit and Taproot inputs are therefore cheaper to spend than legacy ones.

The UTXO planner on this site estimates the virtual size of a transaction before you build it.

Confirmation, replacement and finality

Broadcast puts a transaction in mempools; inclusion in a block gives it one confirmation. Until then it can be replaced: a sender can rebroadcast with a higher fee, and most nodes now accept replacements whether or not the original signalled it. A recipient who wants a stuck payment mined can spend its output with a high fee so miners take both.

After confirmation, reversal would require reorganising the chain, and the probability of that falls sharply with each block. Exchanges typically credit deposits after two to six confirmations; nothing in the protocol makes six special, it is simply where the residual risk becomes negligible.

Trace the rule through the network

Follow one transaction from wallet signing to node validation, mempool relay, block inclusion, and confirmations. That sequence shows which facts come from consensus and which depend on local policy.