From UTXO to Ethereum's Approach
Bitcoin utilizes a UTXO (Unspent Transaction Output) model to track balances:
- Each UTXO represents a "coin" with an owner and value
- Transactions consume inputs (existing UTXOs) and create new outputs
- User balance = sum of all UTXOs they control
Etheream innovates with an account-based system:
- The entire state consists of all accounts and their balances
Each account contains:
- Ether balance
- Optional contract code and storage
- Transactions directly modify account balances
Key Advantages Compared
Bitcoin UTXO Model Benefits
✔ Enhanced privacy through address rotation
✔ Theoretical scalability advantages
✔ Isolated state validation
Ethereum Account Model Benefits
✔ Space efficiency (consolidated balances)
✔ Better fungibility of assets
✔ Simpler smart contract programming
✔ Easier light client maintenance
Ethereum Account Types
| Account Type | Characteristics |
|---|---|
| EOA (Externally Owned) | • User-controlled via private keys • Can initiate transactions • No associated code |
| Contract Account | • Code-controlled • Contains executable logic • Has persistent storage • Responds to message calls |
Transactions vs Messages
Transactions:
- Signed external operations
- Recorded on-chain
Contains:
- Recipient address
- Value transfer
- Optional data payload
- Gas parameters
Messages:
- Internal contract-to-contract communications
- Not directly recorded on-chain
- Function call analogies within EVM
Smart Contract Fundamentals
Ethereum contracts can:
- Maintain persistent storage (key-value database)
- Send messages to other contracts
- Execute complex logic until gas exhaustion
- Terminate after completing all sub-executions
👉 Explore Ethereum developer tools for hands-on contract examples.
Practical Contract Applications
Token Systems
- Maintain ledger of balances
- Implement transfer logic
Advanced Wallet Contracts
- Multi-signature authorization
- Conditional forwarding logic
Decentralized Agreements
- Financial instruments
- Escrow services
- Insurance protocols
FAQ: Ethereum Accounts Explained
Q: Can contract accounts initiate transactions?
A: No, only EOAs can initiate transactions. Contracts can only respond to incoming calls.
Q: Why does Ethereum use accounts instead of UTXOs?
A: Accounts simplify state management for complex smart contracts while reducing blockchain bloat.
Q: How are smart contracts created?
A: Contracts are deployed through special transactions containing their compiled bytecode.
Q: Can Ethereum accounts hold multiple token types?
A: Yes, through secondary tracking systems like ERC-20 standards maintained in contract storage.
Q: What happens if a contract runs out of gas?
A: All state changes from that execution are reverted, except for the gas spent.
👉 Learn advanced contract development techniques to build sophisticated dApps.
Comparative Analysis: Bitcoin vs Ethereum
While Bitcoin excels as digital gold with its UTXO model, Ethereum's account system enables:
- Richer state representation
- More efficient complex interactions
- Simplified developer experience
- Better support for persistent dApp state
This fundamental difference allows Ethereum to support smart contracts and decentralized applications that would be impractical under Bitcoin's UTXO model.