Cardano’s EUTXO Model
• Cardano proposes to replace Bitcoin’s UTXO model with its more efficient Extended Unspent Transaction Output (EUTXO) accounting model.
• Input Output recently announced that the Cardano blockchain can help in improving the Bitcoin blockchain’s accounting model.
• The Cardano blockchain will combine Bitcoin’s UTXO and the ability to handle smart contracts into an EUTXO accounting model.
Advantages of EUTXO
EUTXO offers greater security, flexibility, scalability, energy efficiency, predictable fees, and smart contract capabilities compared to other blockchain accounting models. The success or failure of transaction validation depends only on the transaction itself and its inputs without affecting anything else on the blockchain. Additionally, it allows a contract to carry some state without changing its code.
Global State Representation
An account-based model has a list of accounts and their balances which constantly updates the global state when transactions or smart contracts are processed. On the other hand, in a EUTXO model there is a list of unspent outputs and their ownership details which remains unchanged while new UTXOs are added over time.
In order for transactions to be valid they must have an address, value and datum associated with them as arguments during validation. This ensures that validity of a transaction can be checked off-chain before it is sent to the blockchain making it more secure and reliable.
The calculation of transaction fees in an account-based model is totally unpredictable whereas in a EUTXO system it is fixed as each output has its own predetermined fee attached to it before being broadcasted onto the network making fees easier to predict for users.