Change

What Is Change?

Change is a term that is pertinent to cryptocurrencies that use the UTXO model; it is the number of coins that are returned to a user after they use their unclaimed outputs to conduct a transaction. The unspent transaction outputs (UTXO) concept underpins Bitcoin (BTC) and several other cryptocurrencies. 

Transactions in the UTXO paradigm are composed of outputs and inputs: when a user wishes to transmit money to someone, they provide inputs into the network. After processing a transaction, the latter generates outputs that can subsequently be utilized as inputs for future transactions.

Contrary to popular belief, the balance of a Bitcoin address is not the number of coins held on it but instead a collection of yet-unspent outputs from past transactions. Therefore, when you transmit Bitcoin, you can only send it as a whole output; the rest is returned as change.

An Example of a Change 

For instance, suppose user A owns a Bitcoin address with a sole unspent output of 0.5 BTC and wishes to transmit 0.3 BTC to user B. However, they cannot split their 0.5 coin UTXO; instead, they must submit the entire amount to the network as the single input of the transaction made. 

The network then eliminates that input and generates three new outputs totaling the same amount: 0.3 BTC for user B, a modest fee for the miner who assisted in processing the transaction, and 0.2 BTC for user A, less the miner fee. In this example, the final output of 0.2 BTC is the change that user A gets as a new UTXO, which may later be used as an input to launch a new transaction.