Digital money would be useless if there was no way to transfer it. Fortunately, there is not just one way to transfer cryptocurrencies but many more advanced techniques that allow a transfer of value with different properties. In order to understand those other transaction mechanisms we examine the two most common accounting techniques used in blockchains: the UTXO and account model. Afterward, we look at two special types of transactions: using cross-chain transactions between different interoperable blockchains and state- and payment channels to transact almost entirely off-chain.
UTXO vs. Account Model
In order to have users transfer money, they need some concept of an "account balance" in the first place. We compare two different accounting methods, the UTXO and the account model in the first article of this chapter. Both models have merits and depending on the use case one or the other might be better suited.
The second article explains Cross-Chain Transactions. There are different ways to make blockchains interoperable. The Horizen protocol allows the deployment of sidechains, domain-specific blockchains that can interact with the main blockchain. To transfer assets from the mainchain to a sidechain, a special type of transaction is introduced - the cross-chain transaction.
State- and Payment Channels
Blockchains are highly secure, but not very efficient. In order to facilitate widespread adoption of cryptocurrencies as a payment method, different scaling solutions are being worked on. A promising approach is posed by second-layer solutions using state- and payment channels. We take a look at how they work in this article.