Extended eUTxO Model

The Extended UTxO (eUTxO) Model on Cardano is an advanced version of the Unspent Transaction Output (UTxO) model, which was initially used by Bitcoin. The eUTxO model enhances the original UTxO structure by supporting smart contracts and enabling more complex transactions on the blockchain. It was implemented with the Alonzo upgrade in September 2021, when Cardano introduced smart contract capabilities via its Plutus platform.

Key Features of the eUTxO Model:

1. Enhanced Expressiveness: The traditional UTxO model is more restrictive in terms of programmability, whereas the eUTxO model allows for the addition of custom logic through smart contracts, supporting more complex decentralized applications (dApps) and financial services on Cardano.
2. Determinism: One of the major advantages of the eUTxO model is that the outcome of transactions can be determined ahead of time. This provides greater predictability compared to the account-based model (used by Ethereum), where the outcome of a transaction can depend on external factors, such as the state of the blockchain at the time of execution.
3. Concurrency and Scalability: Each UTxO in the eUTxO model can only be spent once in a single transaction, but Cardano introduced innovations like parallel execution and other scaling solutions to manage transaction throughput and concurrency issues that arise in decentralized systems.
4. Transaction Validation with Plutus Scripts: In the eUTxO model, Plutus scripts are used to define the conditions under which a UTxO can be spent. This allows developers to programmatically define the logic of transactions, making it possible to implement smart contracts.
5. Multiple Assets: With eUTxO, Cardano supports multi-asset transactions, meaning you can send and receive not only ADA but also other native tokens without the need for smart contracts to manage those assets.

Differences Between eUTxO and Traditional UTxO:

• Traditional UTxO (used in Bitcoin) primarily allows for basic transactions like sending and receiving cryptocurrency but lacks the programmability required for more complex decentralized applications (dApps).
• eUTxO introduces the capability for smart contracts and more sophisticated programmable logic, which is crucial for decentralized finance (DeFi), decentralized exchanges (DEXs), and other blockchain-based applications.

The Alonzo upgrade in September 2021 marked the official implementation of this model on Cardano, positioning the blockchain for broader use cases in DeFi, dApps, and beyond.