Bitcoin’s UTxO vs. Cardano’s Extended UTxO: A Comparative Study
Bitcoin uses the UTxO accounting model. For the IOG team, this model was not sufficient for the Cardano mission, so they extended it. Cardano uses the Extended UTxO model. In this article, we will explain the meaning of ‘Extended’.
More than payments
The Bitcoin network is designed for payments. The UTxO model of Bitcoin has a limited expressiveness of programmability. Cardano is a smart contract platform allowing developers a wider range of operations related to value, i.e. working with UTxOs.
The extension of the UTxO model concerns the following properties:
- Ability to maintain contract state.
- Ability to reuse a contract code for a sequence of transactions. The team calls it continuity.
- Ability to support multi-assets.
- Ability to support higher expressiveness and programmability of smart contracts (scripts).
Bitcoin cannot provide these properties, or only to a very limited extent. Bitcoin is designed as a transaction network that essentially just validates keys to verify spending conditions. Bitcoin is not suitable for more complex financial operations, i.e. for the execution of smart contracts.
