The UTXO model, or Unspent Transaction Output model, is an accounting system used by some blockchains, most notably Bitcoin, to track ownership of digital currency. Instead of maintaining account balances, this model treats each transaction’s output as a distinct, indivisible unit of value that can be spent. When a user sends cryptocurrency, they are essentially consuming existing UTXOs and creating new ones. This method offers a degree of privacy and security by not directly linking transaction history to specific entities.
Context
Discussions surrounding the UTXO model in cryptocurrency news often pertain to its implications for privacy, scalability, and the development of smart contract functionalities. While Bitcoin’s UTXO model is well-established, other blockchains have adopted account-based models, leading to comparisons of their respective strengths and weaknesses. Developers are exploring ways to enhance smart contract capabilities within UTXO-based systems, which can present unique technical challenges compared to account-based architectures. Future developments may involve innovations that improve the fungibility and programmability of UTXOs.
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