What is a UTXO?

UTXO stands for "unspent transaction output." Think of each one as a bill in your wallet: your balance is the total of all your bills.

When you pay, your wallet hands over whole UTXOs and sends the leftover back to you as change, like breaking a $20. Lots of tiny UTXOs can get expensive to spend later because each one adds size to the transaction. Some people combine small ones when fees are low.