UTXO vs Account Model

Two Ways to Track Ownership

Every blockchain has to answer the same question: who owns what? Bitcoin and Ethereum answer it differently, and the difference shapes how each chain works at a fundamental level. Bitcoin uses an Unspent Transaction Output (UTXO) model. Ethereum uses an account model. Both work; both make trade-offs.

The UTXO Mental Model

Think of Bitcoin like physical cash. When you receive 0.5 BTC, that becomes a discrete 'note' (a UTXO) belonging to your address. When you receive another 0.3 BTC, you have two notes. To spend 0.6 BTC, you combine both notes (totaling 0.8), send 0.6 to the recipient as a new UTXO, and create a 0.2 BTC 'change' UTXO back to yourself. The old notes are 'consumed' (marked spent) and new notes appear. Your wallet balance is just the sum of all your unspent notes.

The Account Mental Model

Ethereum works like a bank account. Your address has a single balance number stored in global state. When you receive ETH, the number goes up. When you send ETH, the number goes down. There are no discrete 'notes' — just a running balance that updates with every transaction. This is more intuitive for people used to bank balances and feels natural for things like ERC-20 tokens that also keep balance mappings per account.

• UTXO model: Bitcoin, Litecoin, Bitcoin Cash, Cardano (extended UTXO), Zcash
• Account model: Ethereum, Solana, BNB Chain, Polygon, every EVM chain
• Both can do the same things — payment, contracts, NFTs — but the implementation differs