On the 31st of October, 2022 Ergo announced their extended unspent transaction output (UTXO) model can make payments from one user to many.
https://twitter.com/Ergo_Platform/status/1586960232340606978
Ergo was able to make a token distribution to 53k addresses, with only 3 transactions and the cost of these transactions was approximately $10.
So what is the Ergo unspent transaction output (UTXO)?
It’s a means of making transactions less costly and more efficient by utilizing the unspent part of each transaction. In a crypto transaction, it is rare for users to transfer every cent of assets in their possession. It’s also rare for users to send units of major crypto assets like Bitcoin and Ethereum. Thus, if a holder of 0.7 BTC was to send half of the amount to another user that is 0.35 BTC the remaining 0.35 BTC is the unspent parts of the transaction.
Since most of these activities take place in the backend, breaking up a unit of a currency isn’t such a simple process. though it will lead to added fees. With the UTXO model, each transaction would require the deletion and creation of data, and any unspent assets are recorded and linked with the sender. The recorded data is then used as new input in the next transaction.
One of the most important use cases for the UTXO model is security and verification. Since there has to be verified before a transaction is executed there is less possibility of losing one’s assets to scams.
This also prevents double spending and reduces the amount that could be lost to fraud. It doesn’t reveal the data of the users, instead, it creates a list of public keys that can be used to provide clarity in situations of dispute.
The UTXO model also allows users to create pieces of Bitcoin that they can use to Transit without having to interact with mining entities for fractions of the coin. This method is completely different from the accounting method used in traditional systems.
Yet unlike the account model, the UTXO model requires little storage demands and takes more time before it can verify and complete the transaction. It is also more secure and cost-effective.
