• The IOTA Foundation is working on the launch of IOTA 2.0, incorporating a hybrid model that combines the UTXO and Account structures.
• This hybrid approach aims to leverage the strengths of both models, ensuring secure asset management, facilitating parallel transactions, and simplifying conflict identification for enhanced versatility and performance.

With the IOTA Foundation working on the launch of IOTA 2.0, the development team is working on adopting a hybrid model with UTXO and Accounts structure, similar to the one we see in Ethereum and Cardano blockchain networks.

UTXO Model and Account Model

In the UTXO model, transactions generate and consume outputs, and registers of received digital assets. Each output, accessible with the owner’s private key, is replaced during transactions. Nodes maintain a shared list of unspent outputs, facilitating parallel processing and simplified conflict identification. Despite advantages, challenges arise with dynamic resources like Mana or gas, addressed by the Account model. For deeper insights, refer to our Wiki article on Data Structures and a blog post by Vitalik Buterin, Ethereum’s Co-Founder.

The Account model maintains a balance list, updated by transactions or events like block rewards. Although seemingly simpler than the UTXO model, it introduces complexities in conflict resolution, especially with transactions involving multiple tokens. The model requires a more intricate consensus module due to the importance of transaction ordering. Balances form a global ledger state, making any account change challenging and posing difficulties for applications with dynamic value changes. However, this complexity offers advantages, such as issuing multiple transactions without waiting for settlement. Building IOTA 2.0 involves leveraging the strengths of both models.

The IOTA 2.0 Model

IOTA 2.0 introduces an innovative protocol that enhances the flexibility of the UTXO (Unspent Transaction Output) model by extending it to incorporate the Account model. This advancement builds upon the Alias Outputs model introduced in IOTA 1.5, evolving it into what is now termed Account Outputs.

In simple terms, Account Outputs are outputs that inherently carry a state within themselves. Unlike the traditional UTXO model with a single owner, Account Outputs introduce two controlling parties: a “state controller” capable of modifying the contained state and a “governor” who determines the owner without the ability to alter the output’s state. This feature significantly augments the flexibility of the UTXO model, providing added richness to the asset management capabilities of IOTA 2.0.

After efficiently resolving conflicts on the Directed Acyclic Graph (DAG) and committing the resulting state, the state of the Account Output and its associated properties can be stored as an account state. This account state adheres to the Account model, allowing its values to be updated independently of any specific output. This capability expands the range of applications achievable with a UTXO-based system.

IOTA 2.0 leverages the strengths of Account-based models while maintaining a UTXO-based ledger. This approach ensures secure asset management, facilitates parallel transactions, and simplifies conflict identification. By combining the advantages of both models, IOTA 2.0 aims to deliver true versatility and performance, empowering users and advancing the cause of digital autonomy.