Change
Introduction
When a UTXO is spent, it must be consumed entirely. If the value of the UTXO is greater than the amount being spent, then the difference in the amount must be allocated to a new address that the spender owns; this is a change address.
Example 1
In a standard payment scenario, the sender consumes a single UTXO, paying the spending amount to the receiver's address, then receiving the change into a new address that they control to take advantage of privacy.
In this example, we can see that address 197vdcD73wQF5FviYXXgv6cXJBibc9phdq held a UTXO containing 47,097 Satoshis.
The sender paid 10,000 Satoshis to 1C7UVhVnspkxot82j6ooMxUUFEWy4Pj1tc and received 36,871 Satoshis as change into address 1LNq2ZePCj2mycctrvQqBVnTLeaJeyDeR4.
The difference of 226 Satoshis was paid as Transaction fees to the Miner who found block 605,046.
Example 2
In this example, we can see more clearly that the difference between the input and output is the mining fee.
In this transaction a UTXO held by address 13N2c1uxZee4LYGruhWED6K4P4D8Ncmepq is spent in a transaction that writes a message onto the ledger in an OP_RETURN output, and receives the original amount minus the 276 Satoshi mining fee back into the same address.
Consolidating UTXOs
In some cases, the spender may have many UTXOs that they would like to consolidate. In this situation, the only output is their 'change' address where the total amount, less mining fees is sent.
These 'consolidation transactions' have the added benefit of reducing the size of the UTXO set, shrinking the database that all nodes maintain. While the computation for processing these inputs could be expensive, it is envisaged that the savings in storage will encourage Miners to potentially process these types of transactions for a lower fee.
An example can be found here.
Attribution
This content is based on content sourced from https://en.bitcoin.it/wiki/Change under Creative Commons Attribution 3.0. Although it may have been extensively revised and updated, we acknowledge the original authors.