Understanding Crypto Exchange Rates and Changes

Change is a concept related to cryptocurrencies using the UTXO model – it is the amount of coins sent back to the user after he used his unspent outputs to initiate a transaction.

What is change?

Bitcoin (BTC) and many other cryptocurrencies are based on the so-called unspent transactional output (UTXO) model.

According to the UTXO model, transactions consist of inputs and outputs: if a user wants to send coins to someone, he submits inputs to the network. After the transaction is processed, the network produces outputs, which can then be used as inputs for new transactions.

The balance of a Bitcoin address is not a certain number of coins stored on it, but rather a collection of unspent outputs from previous transactions. When sending Bitcoin, only the whole output can be sent, and the rest is sent back as change.

As an example: user A has a Bitcoin address with one unspent output of 0.5 BTC and wants to send 0.3 BTC to user B. He cannot split his UTXO of 0.5 coins; instead, he must send the entire amount to the network as the sole input of a new transaction.

Subsequently, the network will destroy that input and create three new outputs that equal the same amount: 0.3 BTC to send to user B, a certain small fee to send to the miner who helps process the transaction, and 0.2 BTC, minus the miner fee, to send back to user A. In this example, the last output ~0.2 BTC is the change that user A receives as a new UTXO, which can later be used as input to initiate a new transaction.

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