#1 Findora Academy 💟: What’s the Difference? UTXO vs Account Model for Blockchains

#1 Findora Academy 💟: What’s the Difference? UTXO vs Account Model for Blockchains

Findora is a leading privacy-focused blockchain that combines an innovative hybrid of UTXO and Ethereum Virtual Machine (EVM) blockchain technologies to enable programmable privacy. This Findora Academy article will discuss the key concepts and technical details behind both the UTXO and account-based blockchain architectures that power the Findora blockchain architecture.

What is a UTXO Blockchain Model?

UTXO stands for unspent transaction output. A UTXO model functions much like cash does in two respects:

  1. all data necessary for the transaction are contained in the transaction itself
  2. UTXO amounts cannot be changed

For example, if you owed a store $22 but only had a $20 dollar bill and a $5 dollar bill, you’d need to give both bills to the store to pay for the transaction. Then, you’d then receive $3 back from the store as the spare change. In this example, the $20 bill and the $5 bill act like UTXO amounts.

In a UTXO model, that $3 would become a new UTXO amount — i.e. unspent transaction output. Just as you can’t make bills smaller, you can’t make UTXOs smaller. New coins can come from mining or from the “leftovers” (i.e. spare change) from a transaction.

In over-simplified bitcoin-centric terms, you might have a 3 BTC UTXO and a 5 BTC UTXO. In that case, if you wanted to buy something that cost 7 BTC, you’d have to give both the 5 BTC UTXO and the 3 BTC UTXO. In return, you would get a new UTXO of 1 BTC back.

UTXO model blockchains, like Bitcoin and ZCash, work similarly. All transaction data is contained within the transaction including who is sending and receiving, and how much is spent. A UTXO model is considered stateless because the system does not remember, record, or store preceding events. You can’t spend the same BTC twice because you can’t break a UTXO unit into smaller portions without submitting a transaction that gets mined. Once a particular state change (Spending of UTXO ) is added to the blockchain, it negates any other transactions using the same UTXO ( The base check for UTXO being unspent would fail )

What is an Account-Based Blockchain Model?

An account model, however, operates like a debit card. Account-based blockchains like Ethereum keep an account for every user, and when you conduct a transaction on Ethereum, your account in the global state is adjusted. This is known as statefulness, or state, because the network remembers, records, and stores preceding events. So if you had 30 ETH and you spent 23.5 on an NFT, your account in the global state would be updated to show you only had 6.5 ETH remaining.

Account state data functions like a bank account when you use your debit card. Essentially, the merchant processor checks the bank to make sure the funds are available. If the funds are available, then the receiving account is credited with the funds sent, and the sender account is debited the same amount.

Account models rely on global state to store the data necessary for a transaction, which allows for more complicated transactions and business logic via smart contracts. However, these transactions tend to be slower and harder to scale because all transactions have to happen in the correct order and the amount of state data that must be consulted is always growing.