Extended Unspent Transaction Output (EUTXO)

An accounting model to support multi-assets and smart contracts.

Cardano uses an innovative Extended Unspent Transaction Output (EUTXO) accounting model to support multi-assets and smart contracts.

Smart contracts are digital agreements, written in code, that can be executed without an intermediary once certain conditions are met. Smart contracts make non-fungible tokens (NFTs) and decentralized finance applications possible.

Building on Bitcoin’s UTXO model, the EUTXO model provides a secure and versatile environment to process multiple operations without system failures. This model offers better scalability and privacy, as well as more simplified transaction logic, as each UTXO can only be consumed once and as a whole, which makes transaction verification much simpler.

EUTXO offers unique advantages over other accounting models. The success or failure of transaction validation depends only on the transaction itself and its inputs, and not on anything else on the blockchain. As a consequence, the validity of a transaction can be checked off-chain, before the transaction is sent to the blockchain. A transaction can still fail if some other transaction concurrently consumes an input that the transaction is expecting, but if all inputs are still present, the transaction is guaranteed to succeed.