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Why Is the Bitcoin Transaction Fee So High? / What Is a UTXO?

This article explains why Bitcoin network fees can appear high when sending, introduces the concept of UTXO, and shows how to use the UTXO Consolidation feature in the D'CENT wallet to reduce transaction size and fees.

Bitcoin does not manage your balance as a single amount like Ethereum. 
Instead, it uses multiple small unspent pieces of funds (called UTXOs) from past transactions to build your total balance.

[How Bitcoin Transactions Work]

1. When Receiving Bitcoin

For example, if you receive 0.5 BTC to your D'CENT wallet but in five separate transactions of 0.1 BTC each, your wallet will now have five UTXOs, each worth 0.1 BTC.

These UTXOs are combined to display your total balance of 0.5 BTC.

2. When Sending Bitcoin

For example, if you want to send 0.2 BTC out of the 0.5 BTC in your D’CENT Wallet, the blockchain processes the transaction as follows:

  • Amount to send: 0.2 BTC
  • The blockchain combines five UTXOs of 0.1 BTC to create a total transaction of 0.5 BTC
  • 0.2 BTC is sent to the recipient address (e.g., an exchange or another person’s wallet)
  • The remaining 0.3 BTC is returned to your wallet’s Change Address

※ This entire process is handled automatically, and users only need to enter the amount to send; no additional configuration is required.

[What Is a UTXO?]

  • UTXO (Unspent Transaction Output) refers to a transaction output that has not yet been spent.
  • In other words, it represents an unspent piece of Bitcoin (a balance unit).
  • In simple terms:
    “Your Bitcoin balance = the sum of multiple UTXO pieces.”

[Why Bitcoin Transaction Fees Are High?]

Bitcoin network fees are generally determined not by the amount sent, but by the transaction size (data size).

  • More UTXOs = More inputs = Larger transaction size
  • More inputs and outputs = Higher network fees

※ Therefore, the more fragmented your UTXOs are, the higher the transaction fee can be.

In addition, if UTXOs are highly fragmented, not only can transaction fees become higher, but the actual amount available for transfer may appear lower than the total BTC balance shown in the wallet, and in extreme cases, the transferable amount may appear as 0.

[How to Consolidate UTXOs (UTXO Consolidation)]

To reduce fees, you can merge fragmented UTXOs using the D'CENT wallet’s UTXO Consolidation feature:

  1. Open the D’CENT app → go to the [My Wallet] tab
  2. Select your Bitcoin account
  3. Tap the "UTXO Consolidation" button (top right)
  4. Click the button and follow the instructions by tapping “Proceed” to start the UTXO consolidation process

※ This is an internal reorganization of your BTC, not a transfer to someone else.

※ A small network fee may still apply.

UTXO-eng.png

[Other UTXO-Based Coins]

Besides Bitcoin, the following coins also use the UTXO model:

  • Bitcoin Cash (BCH)
  • Bitcoin Gold (BTG)
  • Dogecoin (DOGE)
  • Litecoin (LTC)
  • Zcash (ZEC)
  • eCash (XEC)
  • Dash (DASH)
  • Horizen (ZEN)
  • DigiByte (DGB)
  • Ravencoin (RVN)