Comparison of Ledger Models and their Implications on Security and Liquidity Aspects of Blockchains (Ledger-Models)
The goal is to produce a rigorous systematization that investigates the implications of the choice of the ledger model on core economic properties of blockchains. Beyond that, special attention is given to the question about liquid staking and associated security considerations that put Cardano into context with other blockchains.
Description
Bitcoin pioneered the ledger model based on unspent transaction outputs (UTxO), where every coin is locked at a certain address that formalizes the coin’s spending condition. The UTxO model of blockchains is a cornerstone of transparency, a key objective of Bitcoin, because the blockchain itself encodes the entire world state, the ledger. The UTxO has since then been known to admit efficient parallel processing of transactions, detecting conflicting transactions easily, and in recent years, the UTxO model has proven to be extremely suitable to privacy-preserving blockchains. The Cardano blockchain introduced the extended UTxO model (eUTxO) and enabled full-fledged smart contract executions based on the UTxO model, inheriting all features of the UTxO model.
Account-based ledger models have been first developed by the Ethereum blockchain and promote a different model to reflect the ledger state which is called the account model. Thereby, an account is a sticky address that can send and receive coins, and even represent a smart contract, mimicking much more closely traditional programming paradigms in smart contracts. Transactions In this model merely report actions by users (thereby tend to be smaller than transactions in the UTxO model), but not its effects on the ledger state, i.e., the universe of all accounts. Therefore, the actual ledger state is implied by transactions, and not recorded in the blockchain, which has implications on transaction processing, parallelization, and the early detection of transactions that are to fail. A further development coined by Dfinity and Sui is in view of viewing smart contracts through the object-oriented lens where the smart contract itself is seen as an object or canister that are communicating with each other.
The above indicates foundational differences between the two approaches and while the topic has been the topic of various debates, a systematic comparison, which studies both models through the lens of enabling and driving the implementation complexity of defining features of a blockchain, including slashing, locking, or liquid staking, has not been undertaken. This project aims at closing this gap to shed light on the fundamental differences of the Cardano blockchain in comparison to others and investigating the impact of the ledger model with a particular focus on liquid staking and its economic implications.
Key Data
Projectlead
Project team
Project status
ongoing, started 12/2024
Funding partner
Third party