UTXO - Unspent transaction output
Bitcoin, and many protocols based on it, store data about transactions and user balances in the form of unspent transaction outputs, which are a list of “unspent” Bitcoin amounts that have been sent to a user, but have not yet been sent from him/her. The sum of these outputs is the user’s total balance. On the blockchain, they appear to be a collection of Bitcoin amounts on different addresses, and the role of a wallet is to identify which addresses the user has keys to. Individual Bitcoin are easy to track because they are signed from one person to another. A transaction is valid if one can prove ownership over the actual Bitcoin s/he is trying to send.
The UTXO system is like a digital recreation of a cash economy. For example, Alice gives Bob 1 BTC , and the system now recognizes that there is 1 BTC signed to Bob that he has not yet given to anyone else. If Bob already had 1 BTC, then his balance on the blockchain would be 1 BTC + 1 BTC. Bob’s Bitcoin balance is the sum of all Bitcoin signed to him, similar to how all the fiat cash in Bob’s leather wallet is the sum of all fiat cash given to him. If he wants to combine his two separate BTC, he must do so in another transaction, much like he needs to do if combining two $5 bills into a $10 bill.
Source: Unspent Transaction Outputs (UTXO) - Glossary | Smith + Crown