There’s a Bitcoin feature almost everyone gets wrong. Most people - including long-time Bitcoiners - still think of Bitcoin as if it works like a bank account. You open your wallet, you see a number, and you assume that’s your balance. Familiar. Simple. But completely wrong. And that misunderstanding can cost you money, hurt your privacy, and warp your entire mental model of how Bitcoin actually works. Here’s the truth: 👉 You don’t own “1 BTC” or “0.01BTC.” You own a collection of UTXOs - unspent transaction outputs - that happen to add up to your BTC amount. Once you understand that, Bitcoin stops looking like a checking account and starts looking a lot more like digital cash. Think of UTXOs as the bills in your wallet. If someone says you have $100, that might mean a $50, a $20, three $10s, and a couple of singles. Bitcoin works the same way. Your “balance” is really a pile of discrete pieces - and each piece can only be spent whole. When you send Bitcoin, you’re not slicing off a portion. You’re spending entire UTXOs and receiving the leftover as change, which becomes a brand-new UTXO. Once a UTXO is spent, it’s gone forever. The network creates new ones instantly. Every transaction breaks Bitcoin apart and reassembles it. Wallets hide this from you - until they can’t. And that’s where the problems start: - Fees: If your wallet has dozens of tiny UTXOs, spending during a busy mempool is like paying for lunch with a bag of coins. Technically fine. Practically expensive. - Privacy: Combine UTXOs in a single transaction, and you’re publicly announcing: “Yes, all these belong to me.” - Self-custody: That “change output” or unexpectedly large transaction? It’s not a glitch - it’s your wallet selecting which UTXOs to spend. Once you understand UTXOs, Bitcoin feels far more intuitive. Without that understanding, it feels like your wallet is doing weird things behind the scenes. Bitcoin isn’t alone. Litecoin, BCH, Dash, and privacy coins all use UTXOs too. But most modern chains don’t. Ethereum, Solana, and nearly every newer L1 use an account-based model - just numbers going up or down in a digital spreadsheet. It’s simpler, more flexible, more developer-friendly… but lacking the cash-like privacy and spend structure that make Bitcoin unique. Two different models. Two different philosophies. Here’s why this distinction matters: - Exchanges are consolidating UTXOs at a massive scale. - Millions of people are trying self-custody for the first time. - Wallets, exchanges, and custodians are handling UTXOs behind the scenes for users who don’t even know these structures exist. Yet most still think in “bank account” terms - a habit inherited from traditional finance, not Bitcoin. Bitcoin is not an account. It’s a network made of discrete chunks of value that move, combine, and regenerate with every transaction. Once you truly understand that, you never look at your “1 BTC” the same way again.