When the Qtum team set out to build a new blockchain, they faced a strategic decision that would impact everything from security protocols to scalability and application support.
They weighed factors like long-term viability and user needs and had to understand the UTXO and Accounts models to achieve their vision.
Thanks to their hard work and careful planning, they revolutionized digital transactions and decentralized applications with a powerful and flexible blockchain.
The UTXO Model
The UTXO model is the foundational architecture behind the Bitcoin blockchain. Transactions are viewed as outputs from previous transactions that have not been spent.
These outputs are indivisible, meaning they are either spent in their entirety or not at all.
The UTXO model’s binary nature significantly impacts blockchain security and integrity. Once a transaction is confirmed and added to the blockchain, it becomes part of the immutable ledger.
This immutability is crucial for ensuring trust in the system because it makes altering past transactions nearly impossible.
To illustrate the UTXO model, consider this example: Alice buys a laptop from Bob for 1 Bitcoin. Alice has an unspent transaction output of 25 Bitcoins, which she uses to initiate a transaction.
This transaction creates two outputs — one for 1 Bitcoin to Bob and another for the remaining 24 Bitcoins, back to Alice as ‘change.’ Once validated and added to a new block, this transaction becomes a permanent part of the blockchain.
The UTXO model enables traceability and accountability by allowing each transaction output to be traced back to its originating transaction.
This makes it possible to audit the entire history of a particular set of coins, which is crucial for regulatory compliance and forensic accounting.
The UTXO model provides a secure, traceable, and immutable blockchain architecture, which is why the Qtum team chose it as the foundational element of their new platform.
The Coinbase Transaction
The UTXO model has a unique feature called the Coinbase transaction. The system generates this transaction to mint new coins as a reward for miners or validators who add a new block to the blockchain.
Unlike other transactions in the UTXO model, the Coinbase transaction lacks traceability to its original issuance. It has no parent transaction and is created anew by the system.
Despite its apparent insignificance, this detail has significant implications for the UTXO model’s architecture and comprehension.
It serves as a reminder that the UTXO model is highly secure and traceable while being flexible enough to accommodate the essential system-level operations necessary for blockchain functionality.
The Coinstake transaction
In Qtum, the “coinstake” transaction pays newly minted QTUM block rewards to the successful staker and/or to the super staker and their delegated address.
Qtum leaves the coinbase transaction intact but with zero block reward payments.
The coinbase traction was kept for compatibility with Bitcoin, and the first 5,000 blocks on Qtum (the Genesis blocks) were PoW using the coinbase transaction.
Qtum block 5,001 switched the blockchain to Proof of Stake.
The Accounts Model
Moving away from the UTXO model, the Ethereum blockchain uses the Accounts model. Unlike the UTXO model, which treats each transaction as an individual ‘output,’ the Accounts model tracks the entire blockchain’s state, including account balances and smart contract data.
The Accounts model supports complex data structures and general computing capabilities, enabling various applications beyond value transfers. Smart contracts, decentralized applications, and even decentralized autonomous organizations (DAOs) can be built on blockchains using this model.
However, the Accounts model, which offers greater functionality, has not undergone the same rigorous testing and scrutiny as the longer-standing UTXO model.
The Accounts model offers flexibility but requires a different security approach than the UTXO model. Choosing between the two was pivotal for the Qtum team’s platform capabilities, security, and viability.
UTXO vs. Accounts
When choosing the foundational architecture for Qtum, the team faced two options: the UTXO model, which offered a secure framework proven in the Bitcoin blockchain, and the Accounts model, which allowed for complex data structures and a range of applications.
After careful consideration, the Qtum team decided to prioritize security. They believed that a blockchain platform must guarantee the security of transactions and data to gain trust and adoption.
However, they also recognized the importance of the platform’s ability to host various applications and functionalities.
The Solution: Account Abstraction Layer (AAL)
Qtum’s “Accounts Abstraction Layer” (AAL) bridges the gap between security and functionality by serving as a translator between the UTXO and Accounts models.
With AAL, Qtum offers an interface fully compatible with the Ethereum Virtual Machine (EVM), allowing developers to build on Qtum’s rich set of features for smart contracts and decentralized applications on top of the secure foundation provided by the UTXO model.
The AAL is an innovative solution that allows Qtum to blend security and versatility. By using the UTXO model and layering the AAL on top, Qtum has differentiated itself in the blockchain landscape. It offers the security of the UTXO model while allowing diverse applications.
In essence, the AAL enables Qtum to provide a secure and versatile blockchain platform for financial transactions and decentralized apps, making it an attractive option for developers and users and a leading platform in the blockchain ecosystem.
The Proof-of-Stake Algorithm in Qtum’s Architecture
Another crucial element that influenced Qtum’s decision to opt for the UTXO model was its adoption of a modified version of the Blackcoin Proof-of-Stake (PoS) algorithm.
The reason behind this adoption is that PoS offers a more energy-efficient and democratic way of achieving consensus on the blockchain.
This approach makes it more accessible for validation and enhances the decentralized nature of the network.
By adopting this algorithm, Qtum promotes inclusivity and decentralization, making the network more robust and resilient.
The UTXO model is compatible with the Blackcoin PoS algorithm, which adds to its effectiveness.
The Calculated Brilliance Behind Qtum’s Choice
In opting for the UTXO rather than the Accounts model, Qtum sought to leverage the strengths of Bitcoin and Ethereum’s underlying architectures.
By incorporating an Accounts Abstraction Layer into the UTXO model, Qtum has created a secure and versatile platform, allowing for a wide range of applications to be built on top of it.
This approach enables developers to take advantage of the unique features of both Bitcoin and Ethereum while also providing a foundation for new and innovative blockchain-based solutions.
