UTXO vs Account

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The blockchain can be considered a state machine independently of the accounting scheme used. In both cases, transactions trigger state transitions in batches - with each new block added to the blockchain.

Below, we will compare the strengths and weaknesses of the UTXO and account model. We will start by comparing them at a high-level computational view, and then move onto scalability, privacy, smart contract capabilities, and more.

In General

The UTXO model is a verification model.

This means users submit transactions that specify the results of the state transition, defined as new transaction outputs spendable by the receiver(s). Nodes then verify if the consumed inputs are unspent and if the signature(s) satisfy the spending conditions.

The account model, on the other hand, is a computational model.

In this model, users submit transactions instructing nodes on what state transitions should look like. The network then computes the new state based on the instructions. This method comes with specific implications regarding second layer scalability solutions like state channels and sharding.

Comparasion

Features	UTXO Model	Account Model
Conceptual	Complicated	Intuitive
Parrallization	Yes	No
Scability	enables parallel transactions and encourages scalability innovation	No
Memory Usage	More effecient	less effecient
Privacy	Higher level of privacy, harder to link transactions	Lower level of privacy
Sharding	Aggregating spendable transaction outputs and defining the outputs happens on the client-side, reducing the stress on the overall system	every node has to localize the sender’s and receiver’s account across different shards and edit both
Smart Contract Capabilities	hard to build	easy to build

References

Comparing the UTXO and Account Model

Cryptoeconomics - 1.4 - UTXO Model

Transactions and the UTXO model