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Say Alice buys 1 BTC and Bob 100 BTC. Nakamoto defined coin(BTC) as a "chain of digital signatures", so Alice bought 1 such chain, and Bob 100 chains. That makes no sense to me, so could you please explain?

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The Bitcoin system enables its participants to collaboratively maintain a ledger of balances, the Unspent Transaction Output (UTXO) set. Satoshi referred to what we today call “UTXOs” as “coins” in his writing. The rules of the system ensure that new funds are only created per a limited reward for extending the blockchain. Hence, the amount of bitcoin tracked in the shared ledger is strictly capped and predictable. Due to the system's global reach, reliability, scarcity, utility, and transparency, bitcoin represents a verifiable record used among bitcoiners as payment for goods and services or repayment of debt.

UTXOs are uniquely identifiable and hold a discrete amount of bitcoin. To transfer funds, a sender submits a transaction to the network which can be understood as an announcement declaring some specific UTXOs to be expended and some new UTXOs to be issued. The sender proves ownership of the claimed UTXOs by providing cryptographic signatures satisfying the spending conditions encoded in each of the UTXO when they were created.

Since each UTXO results from a pedigree of preceding transactions, it could be poetically described as stemming from “a chain of digital signatures”.


If you are looking for a more philosophical treatise of what Bitcoin is, you may find Craig Warmke's “What is bitcoin? [PDF]” interesting. He's a Professor of Philosophy at Northern Illinois University and provides a metaphysical model for how to think about Bitcoin in the linked ~43 page work.

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  • So, what does it mean when Alice bought 1 "Unspent Transaction Output" and when Bob bought 100 "Unspent Transaction Outputs"? I don't get it? Where is that 100 times bigger amount of "Unspent Transaction Outputs" keep for Bob and what Bob can do with that property?
    – niwrad
    Aug 25 at 15:46
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    @niwrad think UTXOs has physical coins and bills, with different denominations. For example, Alice has $1, in one bill of $1. Bob has $100, but it could be 1 $100 bill, or 2 $50 bills or 10 $10 bills, etc. Bills = UTXOs, UTXOs != BTC. What we call now UTXO it was Satoshi called Coin.
    – bordalix
    Aug 26 at 5:33
  • The transaction output specifies the amount of bitcoin that is assigned to the receiver. It can be any amount from 0 to all bitcoins. However, a sender cannot assign more to a receiver than they spent.
    – Murch
    Aug 26 at 11:59
  • @bordalix Having $100 bill means owning 100 debt units created in the US banking system. $=debt/loans. So, a dollar bill is just a way to tell people that they own debt. Likewise, bitcoin wallet tells Bob to own 100 BTC, that is coins. Checking the definition of a coin, we see "chain of digital signatures". That chain is recorded on blockchain. So, it follows that the wallet tells Bob to own 100 units of blockchain. And the blockchain is only one. And it is free for everyone to download. Now this has even less sense.
    – niwrad
    Aug 28 at 7:41
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    @niwrad maybe my analogy with bills is not the best one. Maybe it would be better to imagine UTXOs as bank checks, because UTXOs can have any denomination. For example, Bob owns 100 BTC, by having one UTXO of 42.42 BTC and another of 57.58. When Bob pays 1.23 BTC to Alice, he uses the 42.42 UTXO to generate a UTXO of 1.23 BTC for Alice, and a new UTXO of 41.19 for himself (his change). He can also aggregate UTXOS, i.e. send his UTXOs to himself to get one single UTXO with the total. The sum of all UTXOs is equal to the available BTC (~19 millions)
    – bordalix
    Aug 29 at 5:55

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