Bitcoin has no account balances — it has unspent 'coins'

When you check a Bitcoin wallet, it shows a balance — but that number doesn't exist anywhere on the blockchain. Unlike a bank, Bitcoin stores no account with a running total. Instead it tracks a giant set of UTXOs (Unspent Transaction Outputs): discrete chunks of coin, each locked to an owner, like physical bills in a wallet. Your "balance" is just software adding up every UTXO you can currently unlock.

Here's the twist: a UTXO must be spent whole. If you hold one 1 BTC output and want to send 0.3, your transaction consumes the entire 1 BTC as input, creates a 0.3 output for the recipient, and sends 0.7 back to yourself as a new change output. This is exactly like paying for a $3 coffee with a $10 bill and getting $7 back — the original bill is gone, replaced by change.

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This design has real advantages. Each UTXO can be validated independently, so nodes can check transactions in parallel, and there's no shared balance to lock. It also improves privacy, since wallets spread funds across many outputs. The tradeoff: it's clumsy for complex logic, which is why Ethereum chose the opposite account model — simple running balances that update in place, better suited to smart contracts.