UTXO (unspent transaction output)

Unspent transaction output: a "coin" your wallet can spend. Your balance is the sum of your UTXOs.

A transaction lists inputs, each pointing to an earlier unspent output, and creates new outputs, each with an amount and a locking script (usually an address). Inputs are spent in full: paying 0.3 BTC from a 1 BTC output creates a 0.3 BTC output for the recipient and about 0.7 BTC of change, minus the fee.

The fee is simply inputs minus outputs. Every node keeps the set of all unspent outputs (the UTXO set) to check that nothing is spent twice.

Fees depend on transaction size, and size grows with the number of inputs: many tiny UTXOs are expensive to spend when fees are high. Combining UTXOs also links them publicly, which is why privacy-minded users practise coin control.