Cardano – before introduction. Is Cardano more similar to Bitcoin or Ethereum? Discover how and why Cardano was designed – one of the top 10 blockchains. Cardano will be the subject of a series of articles exploring its features and functionalities.
Cardano is a third-generation blockchain, a programmable blockchain platform. Cardano is a system similar to Ethereum – a programmable computer. However, the data architecture that forms the Cardano blockchain is similar to Bitcoin. What does this mean?
The data architecture of Cardano is based on EUTXO, which stands for Extended Unspent Transaction Output. To understand UTXO, we need to understand the classic data model in blockchain.
Data in every blockchain is stored in cryptographically secured blocks. Blocks contain transactions, which are descriptions of changes that need to be made to the blockchain. A transaction can be sending cryptocurrency from one address to another, or executing a trade on a decentralized exchange like Uniswap, which triggers a smart contract and records the transaction details on the blockchain. The data within blocks forms the history of changes on the blockchain, and the consensus algorithm and cryptography ensure their security and immutability.
Ethereum, being a programmable blockchain, has a special space in addition to blocks called the “world state.” This data always reflects the current, most up-to-date state of the data. For example, if you send 3 Ether from account A to account B, in the world state, account B will ultimately have 3 Ether, even though there will be 3 separate state-changing transactions recorded in the blocks. The same applies to data updated by smart contracts. This data structure facilitates reading, and access to the data is fast (indexed). Each node in the network has its own independent “world state,” which should be the same after processing all transactions across all nodes.
Cardano – before introduction. To check the balance of Bitcoin held by address X, you need to scan every block and every transaction in the Bitcoin blockchain. Why? Because Bitcoin doesn’t have a world state, just like Cardano. The smallest data structure carrying information in Bitcoin and Cardano is the UTXO. In Bitcoin, the data within a UTXO represents the “amount of Bitcoin” available to spend. If a UTXO with a “1 BTC” record is assigned to an address, then the address controls 1 BTC. In Cardano, EUTXO not only contains information about the amount of cryptocurrency but also includes data and even the logic of smart contracts.
EUTXO makes data operations (and programming in Cardano) a literal iteration, traversing the chain of interconnected UTXOs. UTXOs can be spent, and when spent, they are marked as “spent” and new UTXOs with updated data state are created. The functioning of smart contracts in Cardano involves the process of creating new EUTXOs and marking old ones as spent. I will describe this in subsequent posts.
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I design and build enterprise IT solutions based on blockchain technology.
I am blockchain architect in Trans.eu building ECMR (digital CMR Consignment Note) based on blockchain. I teachabout Bitcoin, blockchain and decentralization via Linkedin and blog: https://mobycrypt.com.
