I guess this is called Circular spending.
Why is it required in the bitcoin protocol?
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Because on the lowest level of bitcoin protocol there is no accounts. There are scripts inside transaction. The most common script says: show me public key, I will compute Hash160 of it, compare with given Hash160, and if they are equal, I will check signature.
Let imagine, transaction contains single output with 1 bitcoin. Script contains Hash160 (which we treat as account). There is no way to spent part of bitcoin. We have to spent entire output, which is equal to 1 BTC in our case. Transactions, like blocks, form some kind of chain.
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thanks for the answer! if you can share any documentation about this, that wud b very helpful – Lakshay Aug 17 '17 at 10:42
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You can use official wiki: en.bitcoin.it/wiki/… en.bitcoin.it/wiki/Script – Zergatul Aug 17 '17 at 11:29
