Author: Adaverse Asia

Comparison of UTXO and Account Models

In the UTXO model, the movement of assets is recorded in the form of a directed acyclic graph composed of transaction outputs, with each additional block adding new outputs.

In the account model, balances are stored as a global state of the account, with each node maintaining this state and updating it in real-time with each block. This model is similar to a database, where balances, contracts, nonce, and other information are stored under the account, leading to the core bottleneck — the state explosion problem:

The total size of the Bitcoin network's entire history (the size of all blocks combined) grew to 229GB in 10 years, while the Ethereum network grew to 262 GB (Geth) / 180 GB in just 4 years. Thus, the larger the transaction scale in the account model, the heavier the burden on users and wallets.

In short, the UTXO model can provide storage advantages because the state and transaction scale of accounts are smaller; however, the account model is more efficient in simplifying scaling solutions (such as state and payment channel construction) and sharding.

To give a simple analogy, it's like building a tall building:

• The advantage of UTXO is that it can save labor and materials as much as possible while ensuring security — the same building materials in the account model might only allow for one floor, which is very costly, while UTXO can build three floors at the same cost; but the problem is that the optimization space after construction is limited, making future renovations and expansions difficult;
• The advantage of the account model is that it reserves enough space for future renovations and expansions, even if it starts as a minimalist style building, it can be upgraded to a high-end apartment through continuous renovations; but similarly, it is very cost-intensive and resource-consuming.

Both have their advantages, so can they complement each other for integration?

EUTXO's Complementary Advantages

From this perspective, Cardano's EUTXO (Extended UTXO) inherits the low resource consumption advantage of Bitcoin's UTXO model at the consensus layer, while considering the implementation needs of smart contracts in its state selection, drawing on Ethereum's design ideas and integrating an improved account model.

In summary, EUTXO is a combination that further enhances the security of Bitcoin and the programmability of Ethereum, making this model significantly superior to the account models used by other blockchains. It ensures several key features:

• Better security: Each transaction uses a different address, making it impossible for others to track addresses or find the overall balance of users;
• Scalability: The UTXO ledger allows for parallel transactions, significantly alleviating on-chain congestion;
• Interoperability: With the implementation of off-chain and sidechain protocols, EUTXO makes it easier for Cardano to establish interoperability between different blockchains;

In Cardano, EUTXO inherits the security and simplicity of UTXO while enhancing interoperability and scalability through optimizations of the account model, maximizing throughput and breaking performance bottlenecks for future commercial applications.

Directly, developers from Ethereum and other EVM-compatible chains can leverage EUTXO's interoperability, saving on the re-education threshold for developers, opening up opportunities in a shorter time, and facilitating rapid project migration.

Developer-Friendly Plutus Architecture

• Functional languages, such as Haskell, are more compatible with EUTXO;
• Object-oriented programming languages, such as Solidity, are more compatible with the account model;

As the underlying custom language for Cardano's smart contract programming language Plutus, Haskell can be said to be designed specifically for DApps, focusing on the keywords "lightweight" and "secure":

• Based on the predictability of Haskell, bugs in smart contracts are easily identifiable. In contrast, Solidity smart contracts require developers to have a very deep understanding of Solidity, such as reentrancy attacks and many similar issues;
• When Haskell is compiled into Plutus, functions will only return two outputs, True/False. This means there will be no unpredictable state changes — outputs completely depend on inputs, and if the inputs are the same, the same output will be obtained regardless of how many times the function is called. Moreover, these functions are usually easier to debug because there is no need to consider every possible state of the variables;

From this perspective, Haskell is indeed an opportunity worth focusing on for developers, providing them with a handy set of tools (refer to the NFT marketplace DEMO codebase developed by Adaverse based on this).

This allows any aspiring entrepreneur or developer to unleash their creativity, building their own unique DApp world like constructing with Lego blocks by providing a powerful yet relatively secure and lightweight editor.

The New Public Chain Myth

The dramatic developments in the industry over the past year have led people to re-examine the myth of new public chains, especially those once hailed as "Ethereum killers," like Solana, which have now fallen from grace. The seemingly large ecosystems of those times have crumbled under the avalanche of lost confidence and evaporated market value.

After the passion for new public chains has faded, it seems that only Bitcoin and Ethereum remain resilient, worthy of attention and expectation.

However, at the same time, with Bitcoin and Ethereum's positions solidified, it has become increasingly difficult for developers or project teams (especially startups) to carve out a niche in any saturated market.

People often find themselves in the predicament of ignoring the "elephant in the room" — established public chain projects like Cardano have also experienced several cycles of bull and bear markets in the crypto industry, maintaining a stable market value and a community tested by time and market.

All that has happened is merely a prologue. In 2018 and 2021, we witnessed the grand "public chain boom," but only a few could emerge successfully, and the industry will provide the most suitable answers.

Cardano is often the "elephant in the room" that gets overlooked; for example, on September 22, the successful activation of the Cardano mainnet Vasil hard fork upgrade has received little attention regarding its significance in bringing Cardano into the era of smart contracts, and only the astute will remain highly sensitive to the potential investment opportunities during this period.

However, competition among public chains has always been brutal. Cardano, which has just entered the era of smart contracts, is currently in a very early stage. It is expected that as more DApps are launched on Cardano, the richness and liquidity of DApps will see a significant increase.

As Cardano deeply advances into the era of smart contracts, in this visible trend, Adaverse, as a global incubation investment fund for Cardano, relies on the backing of the official Cardano team to focus on incubating and investing in projects across the entire Cardano ecosystem, bringing more developers into the Web3 ecosystem, thereby building a wide-ranging Web3 DApp ecosystem based on Cardano's blockchain infrastructure.

At the same time, Ken Kodama, CEO of EMURGO, a commercial incubation company and venture capital institution under Cardano, also stated that Emurgo will invest over $200 million to support the growth of the Cardano ecosystem over the next three years, with funds coming from Emurgo's own capital, which will be directly used for Cardano projects and other networks' projects that will integrate with the Cardano network.

The winds rise at the end of the green rush. If before 2022, Cardano still had the attributes of an established public chain, after 2022, relying on the positioning of "smart contract public chain," it undoubtedly presents both challenges and imaginative possibilities. As for what attempts can ultimately be made in this direction, we will wait and see.