UTXO is an acronym for ‘Unspent Transaction Output’.
UTXOs are components in a blockchain transaction – the parts that will be used. They’re like stores of value or outputs waiting to be assigned.
In a transaction, instead of breaking down a set value (for example, 5 BTC) into smaller amounts (e.g. sending 3 BTC to Person A and keeping 2 BTC in a wallet), UTXOs treat each component as a separate output. Each is recorded as a separate ledger entry. They exist independently of each other. There’s no partial deduction.
Looking at UTXOs from another angle, they function like metadata. They hold information about each transaction: where it’s from, what’s in it, when it was created, etc.