Glossary

UTXO Set

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The UTXO set is the comprehensive set of all UTXOs existing at a given point in time. The sum of the amounts of each UTXO in this set is the total supply of existing bitcoin at that point of time.

Bitcoin is special as a money in that anyone can verify the total supply at any time in a trustless manner. All nodes maintain identical copies of the UTXO set. When a new block is created, the UTXO set is updated as some UTXOs were spent and new ones were created.

The UTXO set is also important because it allows all nodes in the Bitcoin network to detect and reject attempted double spends, wherein someone attempts to spend the same bitcoin twice. Nodes must store the entire UTXO at all times in order to determine which bitcoin exist, and thus can be spent, at any given point in time.

Related Terms
Unspent Transaction Output (UTXO)
A UTXO is a discrete piece of bitcoin. Bitcoin does not use accounts and balances. Instead, individual pieces of bitcoin are owned by individuals, analogous to physical coins or cash.
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Hard Cap
Bitcoin total supply will never exceed 21 million bitcoin. This policy gives Bitcoin its absolute scarcity.
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Satoshi
A satoshi, or sat, is the atomic unit of Bitcoin. One bitcoin is divisible into 100,000,000 sats. The existence of satoshis make Bitcoin divisible, a necessary trait for deflationary money.
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Double Spend
A double spend occurs when someone is able to spend the same money twice, fooling one or both parties into believing they have been paid. Bitcoin solves the double spend problem through the use of a decentralized ledger and a timestamped blockchain.
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21 Million
There will never be more than 21 million bitcoin in existence. This limit is defined by an algorithm in Bitcoin’s code and is strictly enforced by each node in the Bitcoin network.
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