So, what does UTXO mean?
UTXO = Unspent Transaction Output
In plain English:
An amount created by an earlier transaction that hasn't been spent yet.
Think of each UTXO as a separate piece of spendable KAS recorded on the network.
What does a wallet balance really look like?
Say Emma opens her wallet and sees:
50 KAS
That might be one UTXO:
UTXO 1 = 50 KAS
Or it could be several:
UTXO 1 = 20 KASUTXO 2 = 10 KASUTXO 3 = 20 KAS
Together: 50 KAS
Emma's wallet finds the UTXOs she can spend, adds them up, and shows one simple balance.
What Emma sees: 50 KASWhat might be behind it: 20 + 10 + 20 KAS
What happens when Emma pays someone?
Emma wants to send Liam:
30 KAS
Let's leave transaction fees out of this example for a moment.
Her wallet can choose these two UTXOs:
20 KAS + 10 KAS = 30 KAS
The transaction spends them and creates a new UTXO that Liam can spend.
Before
Emma: [20] [10] [20] = 50 KAS
Used in the transaction
[20] + [10] = 30 KAS
After
Liam: [30]Emma: [20]
The two UTXOs Emma used are now spent. Her other 20 KAS UTXO wasn't touched.
Real transactions also have a fee, which the wallet takes into account when choosing UTXOs and amounts.
So what actually changed?
A transaction spends existing UTXOs and creates new ones.
Your wallet doesn't store the UTXOs inside it. It finds the UTXOs on the network that your keys let you spend and shows their combined value as your balance.