The UTXO (Unspent Transaction Output) model establishes a chain of ownership by using digital
signatures. In this model, each transaction consists of inputs (from previous UTXOs) and outputs
(new UTXOs), and ownership is transferred by the current owner signing the transaction. This digital
signature is then verified by the recipient, ensuring a secure and traceable chain of ownership.
Key Details:
Functionality of UTXO: UTXO is a fundamental part of Bitcoin’s transaction model. When a
transaction occurs, it consumes previous outputs as inputs, generating new UTXOs. Each UTXO can
only be spent once, and ownership is verified through cryptographic signatures.
Chain of Ownership: The UTXO model inherently creates a clear and verifiable chain of ownership, as
each output is signed by the current owner and used as input for future transactions, maintaining a
continuous and transparent record of asset transfers.
Security through Digital Signatures: UTXO-based transactions rely on digital signatures to
authenticate and authorize asset transfers, ensuring that only the rightful owner can initiate a
transaction.
Thus, D. UTXO is the correct answer, as it accurately describes the model where ownership is
established through a chain of digital signatures.
