No-Surprises Transaction Validation on Cardano
Cardano evolution. From UTXO to EUTXO
As the Alonzo hard fork brings core Plutus smart contract capability to Cardano, the ledger evolves to meet the growing need for the deployment of decentralized solutions. Cardano ledger design focuses on high assurance, security, and proven formal verification. In alignment with this strategy, it is also important to ensure that transaction processing is deterministic, meaning that a user can predict its impact and outcome before the actual execution.
The ability to guarantee the cost of transaction execution, and how the transaction behaves on the ledger before it is submitted, becomes even more prominent with the introduction of smart contract support. Unspent Transaction Output (UTXO)-based blockchains, like Cardano, provide such capabilities. Account-based blockchains, like Ethereum, are indeterministic, which means that they cannot guarantee the predictability of the transaction’s effect on-chain. This presents risks of monetary loss, unpredictably high fees, and additional opportunities for adversarial behavior.
In this blog post, we take a closer look at the benefits of Cardano’s deterministic design that allows for secure transaction and script evaluation before execution. In the following blog post, coming later this week, we discuss the two phases of transaction validation on Cardano.
Table of contents:
What is Transaction Determinism and Why is it Important?
Addressing the Issue of Indeterminism
How Basic UTXO Model Benefits in Terms of Determinism
Validating Actions With Signatures and Scripts
Plutus Scripts
Transaction Validation in Alonzo
Two-Phase Transaction Validation
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