diff --git a/lib/service.js b/lib/service.js
index 59a36d13..1ca4bcba 100644
--- a/lib/service.js
+++ b/lib/service.js
@@ -91,6 +91,10 @@ Service.prototype._createConcurrencyCache = function(opts) {
   this._concurrencyCache = LRU(opts || 500);
 };
 
+Service.prototype._createCache = function(opts) {
+  this._cache = LRU(opts || 500);
+};
+
 Service.prototype._retrieveCachedItems = function(key, valueItem, prevKey, fn) {
   var self = this;
 
diff --git a/lib/services/address/encoding.js b/lib/services/address/encoding.js
index b22fcf58..e4a76908 100644
--- a/lib/services/address/encoding.js
+++ b/lib/services/address/encoding.js
@@ -64,40 +64,5 @@ Encoding.prototype.encodeUtxoIndexKey = function(address, txid, outputIndex) {
   return Buffer.concat(buffers);
 };
 
-Encoding.prototype.decodeUtxoIndexKey = function(buffer) {
-  var reader = new BufferReader(buffer);
-  reader.read(3);
-
-  var addressSize = reader.readUInt8();
-  var address = reader.read(addressSize).toString('utf8');
-  var txid = reader.read(32).toString('hex');
-  var outputIndex = reader.readUInt32BE(4);
-
-  return {
-    address: address,
-    txid: txid,
-    outputIndex: outputIndex
-  };
-};
-
-Encoding.prototype.encodeUtxoIndexValue = function(height, satoshis, scriptBuffer) {
-  var heightBuffer = new Buffer(4);
-  heightBuffer.writeUInt32BE(height);
-  var satoshisBuffer = new Buffer(8);
-  satoshisBuffer.writeDoubleBE(satoshis);
-  return Buffer.concat([heightBuffer, satoshisBuffer, scriptBuffer]);
-};
-
-Encoding.prototype.decodeUtxoIndexValue = function(buffer) {
-  var height = buffer.readUInt32BE();
-  var satoshis = buffer.readDoubleBE(4);
-  var scriptBuffer = buffer.slice(12);
-  return {
-    height: height,
-    satoshis: satoshis,
-    script: scriptBuffer
-  };
-};
-
 module.exports = Encoding;
 
diff --git a/lib/services/utxo/encoding.js b/lib/services/utxo/encoding.js
new file mode 100644
index 00000000..d2b418ac
--- /dev/null
+++ b/lib/services/utxo/encoding.js
@@ -0,0 +1,66 @@
+'use strict';
+
+var BufferReader = bitcore.encoding.BufferReader;
+
+function Encoding(servicePrefix) {
+  this.servicePrefix = servicePrefix;
+}
+
+Encoding.prototype.encodeUtxoIndexKey = function(address, txid, outputIndex) {
+  var prefix = new Buffer('01', 'hex');
+  var buffers = [this.servicePrefix, prefix];
+
+  var addressSizeBuffer = new Buffer(1);
+  addressSizeBuffer.writeUInt8(address.length);
+  var addressBuffer = new Buffer(address, 'utf8');
+
+  buffers.push(addressSizeBuffer);
+  buffers.push(addressBuffer);
+
+  var txidBuffer = new Buffer(txid || new Array(65).join('0'), 'hex');
+  buffers.push(txidBuffer);
+
+  var outputIndexBuffer = new Buffer(4);
+  outputIndexBuffer.writeUInt32BE(outputIndex || 0);
+  buffers.push(outputIndexBuffer);
+
+  return Buffer.concat(buffers);
+};
+
+Encoding.prototype.decodeUtxoIndexKey = function(buffer) {
+  var reader = new BufferReader(buffer);
+  reader.read(3);
+
+  var addressSize = reader.readUInt8();
+  var address = reader.read(addressSize).toString('utf8');
+  var txid = reader.read(32).toString('hex');
+  var outputIndex = reader.readUInt32BE(4);
+
+  return {
+    address: address,
+    txid: txid,
+    outputIndex: outputIndex
+  };
+};
+
+Encoding.prototype.encodeUtxoIndexValue = function(height, satoshis, scriptBuffer) {
+  var heightBuffer = new Buffer(4);
+  heightBuffer.writeUInt32BE(height);
+  var satoshisBuffer = new Buffer(8);
+  satoshisBuffer.writeDoubleBE(satoshis);
+  return Buffer.concat([heightBuffer, satoshisBuffer, scriptBuffer]);
+};
+
+Encoding.prototype.decodeUtxoIndexValue = function(buffer) {
+  var height = buffer.readUInt32BE();
+  var satoshis = buffer.readDoubleBE(4);
+  var scriptBuffer = buffer.slice(12);
+  return {
+    height: height,
+    satoshis: satoshis,
+    script: scriptBuffer
+  };
+};
+
+module.exports = Encoding;
+
diff --git a/lib/services/utxo/index.js b/lib/services/utxo/index.js
index 47b24164..d8e66ca0 100644
--- a/lib/services/utxo/index.js
+++ b/lib/services/utxo/index.js
@@ -3,11 +3,11 @@
 var BaseService = require('../../service');
 var inherits = require('util').inherits;
 var Encoding = require('./encoding');
+var LRU = require('lru-cache');
 
 function UtxoService(options) {
   BaseService.call(this, options);
-  this._createConcurrencyCache({ max: 500000, dispose: this._getUtxoOperations.bind(this) });
-  this._operations = [];
+  this._createCache({ max: 500000, dispose: this._getUtxoOperations.bind(this) });
 }
 
 inherits(UtxoService, BaseService);
@@ -35,59 +35,118 @@ UtxoService.prototype.stop = function(callback) {
   }
 };
 
-UtxoService.prototype.concurrencyBlockHandler = function(block, connect, callback) {
+UtxoService.prototype._processInputs = function(inputs, block, connect) {
+
+  var ret = [];
+
+  for(var i = 0; i < inputs.length; i++) {
+    var input = inputs[i];
+
+    var key = input.prevHash + input.outputIndex;
+
+    if (input.prevTxId === tx.hash) {
+      ret.push(i);
+      continue;
+    }
+
+    if (connect) {
+      self._removeSpentOutput(key);
+    } else {
+      self._readdUnspentOutput(key);
+    }
+  }
+
+  return ret;
+};
+
+UtxoService.prototype._processOutputs = function(outputs, exclusions, block, connect) {
+
+  for(var i = 0; i < outputs.length; i++) {
+
+    var output = outputs[i];
+    var key = tx.hash + i;
+
+    if (exclusions.indexOf(i) > -1) {
+      continue;
+    }
+
+    self._setCache(key, block, output);
+
+  }
+
+};
+
+UtxoService.prototype._setCache = function(key, block, output) {
+
+    self._cache.set(key, {
+      output: output,
+      height: block.__height,
+      hash: block.hash,
+    }); // key = 36 bytes, value = (8 + 25ish) + 36 = 69 bytes
+
+};
+
+UtxoService.prototype._removeSpentOutput = function(key) {
+
+  var output = self._cache.peek(key);
+
+  // we don't want nuke out our
+  if (!output) {
+    return { action: 'del', key: key };
+  }
+
+};
+
+UtxoService.prototype._readdSpentOutput = function(key) {
+
+  var output = self._cache.get(key);
+
+  if (!output) {
+  }
+};
+/*
+connect:
+  1. for all txs, for each input in the tx, remove the output that this input is spending
+
+*/
+UtxoService.prototype.blockHandler = function(block, connect) {
 
   var self = this;
-  var reverseAction = connect ? 'del' : 'put';
-  var action = connect ? 'put' : 'del';
+  var operations = [];
 
   for(var i = 0; i < block.transactions.length; i++) {
 
     var tx = block.transactions[i];
     var inputs = tx.inputs;
     var outputs = tx.outputs;
-    var skipOutput = [];
+    var inputOperations = {};
 
-    for(var j = 0; j < inputs.length; j++) {
-      var input = inputs[j];
-
-      if (tx.isCoinbase()) {
-        continue;
-      }
-
-      if (input.prevHash === tx.hash) {
-        skipOutput.push(input.outputIndex);
-        continue;
-      }
-
-      self._concurrencyCache.del(input.prevHash + input.outputTndex);
+    if (!tx.isCoinbase()) {
+      inputOperations = self._processInputs(inputs, block, connect);
     }
 
-    for(var k = 0; k < inputs.length; k++) {
-
-      if (skipOutput.indexOf(k) !== -1) {
-        continue;
-      }
-
-      var output = outputs[k];
-      self._concurrencyCache.set(tx.hash + k, {
-        output: output,
-        height: block.__height,
-        hash: block.hash
-      }); // key = 36 bytes, value = (8 + 25ish) + 36 = 69 bytes
-    }
+    var outputRes = self._processOutputs(outputs, inputRes.exclusions || [], block, connect);
+    operations = operations.concat(inputRes.operations || []).concat(outputRes.operations);
   }
 
-  setImmediate(callback);
-
+  return operations;
 };
 
 UtxoService.prototype._getUtxoOperations = function(key, value) {
   this._operations.push({
     action: 'put',
-    key: this._getKey(key),
-    value: this._getValue(value)
+    key: this._getOperationsKey(key, value),
+    value: this._getOperationsValue(value)
   });
 };
 
+UtxoService.prototype._getOperationsKey = function(key, value) {
+  var address = utils.getAddressFromScript(value.output.script);
+  return self.encoding.encodeUtxoIndexKey(address, key.slice(0, 32), parseInt(key.slice(32)));
+};
+
+UtxoService.prototype._getOperationsValue = function(value) {
+  return self.encoding.encodeUtxoIndexValue(value.height, value.output.satoshis, value.output.script);
+};
+
 module.exports = UtxoService;