Dev Release 12

Dear BlockDAG community,

This week, we've been intensely scrutinizing the intricacies of UTXO (Unspent Transaction Output) implementation for our BlockDAG project. As seasoned developers, we understand the criticality of selecting the optimal data management approach for building a secure and efficient application on a DAG-based blockchain.

Please note this is our first ever dev releases being released, they will become more comprehensive and in detail over the coming days and weeks! Bear with us!

The core of the UTXO model is the UTXO struct, a compact data object encapsulating:
 

• Value: The amount of digital assets associated with the UTXO (typically a native token or cryptocurrency unit), represented as a uint64 for efficient handling of large values.
• Locking Script: A byte array containing the cryptographic script encoded in a language like Bitcoin Script. This script defines the spending conditions, often involving public key cryptography for authorization.
• Transaction ID (TxID): A cryptographic hash (e.g., SHA-256) referencing the transaction that created the UTXO, enabling lineage tracking within the DAG. We can use a [32]byte array to store the TxID.

Example UTXO Structure:

UTXO Transactions: Spend-and-Create Operations
Transactions in UTXO-based systems revolve around two key functionalities:
 

1. Spending UTXOs: Transactions reference existing UTXOs as inputs for spending. Validation involves verifying cryptographic proofs (often signatures) that satisfy the locking scripts of the referenced UTXOs. Think of it as using a private key to cryptographically "unlock" the UTXO.
2. Creating New UTXOs: Transactions also create new UTXOs as outputs. These outputs represent the distribution of the spent UTXO's value:

• One output typically goes to the recipient, containing the intended transfer amount.
• Another output, often referred to as "change output," might be sent back to the sender's wallet, representing any remaining balance from the spent UTXO.

Transaction Structure:

Determining an address's balance requires iterating through all UTXOs associated with that address and summing their values. This can become computationally expensive, especially for large UTXO sets, potentially affecting scalability. Our team is actively evaluating optimization techniques:
 

• UTXO Pruning: Periodically removing spent UTXOs from the active set while maintaining sufficient information for lineage tracking. We're considering techniques like Simplified Payment Verification (SPV) or accumulating Merkle proofs to achieve efficient pruning within BlockDAG.
• UTXO Indexing: Utilizing data structures like Merkle trees or hash tables to efficiently locate UTXOs associated with specific addresses. We'll assess the trade-offs between storage overhead and query performance for BlockDAG's specific needs.
  
  UTXO Lineage Tracking: Power and Challenges in DAGs
  UTXOs offer the advantage of tracking the lineage of digital assets within the DAG. Each UTXO holds a reference to its originating transaction, allowing us to reconstruct the complete history of a specific UTXO – from its creation to its final spending. However, in the context of DAGs, complexities arise in managing references and ensuring consistency across the network. We're exploring efficient algorithms for lineage tracking while considering techniques like vector clocks or causal ordering to maintain data integrity.

The choice between UTXO and account-based models hinges on our project's specific requirements. Scalability, transaction throughput, and desired privacy features will all play a role in our final decision. Stay tuned for the next update, where we'll delve into account-based models and the factors influencing our ultimate choice.