Multi-stage Contracts in the UTXO Model

Abstract

Smart contract platforms such as Bitcoin and Ethereum allow writing programs that run on a decentralized computer. Bitcoin uses short-lived immutable data structures called UTXOs for data manipulation. Ethereum, on the other hand uses, long-lived mutable data structures called accounts. UTXOs are easier to handle, less error prone and scale better because the only operation we can do with them is to create or destroy (i.e., spend) them. The code inside a UTXO is executed only once, when it is spent. Additionally, this code refers to only local context (i.e., it is stateless). In Ethereum’s account based system, there is a shared global context which each account can access and modify, thereby causing side affects. However, the benefit of persistent storage offered by accounts makes up for these drawbacks. In this work, we describe how to emulate persistent storage in UTXO based systems using a technique called transaction trees. This allows us to emulate the functionality of account-based systems such as Ethereum without the overhead of accounts. We demonstrate this via several examples which include contracts for a Rock-Paper-Scissors game, crowdfunding and an initial coin offering (ICO). The contracts are created in a UTXO based smart contract platform called Ergo that supports transaction trees.