Glossary
UTXO
Unspent Transaction Output — the unit of value Bitcoin tracks. A wallet 'balance' is just the sum of UTXOs it can spend.
A UTXO (Unspent Transaction Output) is a chunk of bitcoin sitting at a specific address, created by a previous transaction and not yet spent. Bitcoin doesn't track account balances the way a bank does — it tracks UTXOs. Your "balance" is the sum of every UTXO controlled by your wallet's keys.
When you send bitcoin, your wallet picks one or more UTXOs whose combined value is at least the amount you're sending, then constructs a transaction that consumes them and creates two new UTXOs: one for the recipient and one for the change back to yourself. This is why a wallet that "has 1 BTC" can send a transaction with a 0.4 BTC output and a 0.6 BTC change output — the original UTXO is destroyed in the process.
Ethereum, by contrast, uses an account model: balances are mutable numbers stored against an address. Both designs have trade-offs. UTXO is harder to think about but simpler to parallelize and audit; accounts feel natural but require global state synchronization on every transaction.