Change

Change is part of the transaction in Bitcoin. Many cryptocurrencies, including Bitcoin, use the model of unspent transaction outputs, which can be shortened to UTXO. The change term comes from this model. If the user has more coins to the transaction amount, the difference or change is sent to the new address, which is named change address temporarily. After the transaction ends, the sender of the cryptocurrency receives new output from the network as a change.

The Function of Change in Bitcoin Transactions

• In the unspent transaction output model, when you create a transaction to transfer the Bitcoin, you need to use the whole amount in the wallet for this transaction if the input is not precisely calculated.
• The amount must be spent all for feeding the network as an input. The network took your order because you provided the network with the inputs.
• The network creates new outputs as your change back amount and the amount you transferred.
• The change refers to these unspent outputs of coins that are returned to your wallet after the transaction ends.
• This amount of unspent transaction outputs also can be used as inputs for the transactions in the future.

An Example of Change in Bitcoin

When you have 0.8 Bitcoin, you want to send your friend 0.2 BTC. Then, you start the transaction, and you need to send the whole 0.8 BTC to the Bitcoin network as the input of the transaction.

After that, Bitcoin blockchain destroys this input and creates new outputs for you and your friend. Your friend receives 0.2 BTC as new output. However, there is a fee for the miner because of the helping with this transaction which is called miner fee.

In the end, you receive your new output as “change”. It is calculated by the amount you send plus the miner fee deducted from your input.

Therefore, in this situation, you will receive lower than 0.6 BTC back as a new output that can be used from future transactions.