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I try to understand how Bitcoin handles change or the combination of multiple transactions to provide sufficient funds for a given price.

Bitcoin transactions contain an array for the input transactions and an array for the UTXO outputs (vout).

For example: If I'm Frank and I send Charlie 1 BTC with an input transaction which holds 1.2 BTC, does that mean, that my next TX using the 0.2 BTC and Charlies TX using the 1 BTC form two new TX chains?

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Or would I just reference the latest TX in the chain of transactions, containing both parts of the 1.2 BTC and sometimes the 0.2 BTC is referenced as VIN element and sometimes the 1.0 BTC?

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    Can you clarify what you mean by "same list"? What list are you talking about?
    – Andrew Chow ♦
    Jul 10, 2017 at 5:54
  • @AndrewChow I mean if there spawns a new chain of TXs, one referencing the 0.2 BTC, one referencing the 1.0 BTC or if both are referenced in the same chain of transactions.
    – schlingel
    Jul 10, 2017 at 7:41
  • Possible duplicate of How does change work in a bitcoin transaction?
    – Murch ♦
    Jul 11, 2017 at 4:10

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In your example, there will be two chains of transactions as different transactions are spending the outputs of one transaction. Because there are two distinct transactions spending from those two outputs, there are now two transaction chains coming from one transaction. However this does not mean that the transaction chains won't converge or meet. Calling it a transaction chain or a tree isn't really accurate. It's actually a directed acyclic graph.

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  • You're right. Makes sense!
    – schlingel
    Jul 11, 2017 at 3:27

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