Nervos and Cardano to improve smart contract security by improving UTXO model

Nervos and Cardano launched a research initiative to improve the security of smart contracts by improving the system of unspent transaction outputs (UTXO).

Nervos and the Cardano development team (IOHK), will co-author research papers on how to improve the UTXO model and future open source developments, will explore the possibility of creating a universal UTXO standard. They form an alliance with other blockchains using the UTXO model to help collaborate in the field of research, development and education in the industry.

The UTXO model tracks the unspent output of user transactions at all of its addresses and each transaction. According to Nervos, this is a safer alternative to the account-based accounting method used by blockchains based on smart contracts, for example, Ethereum. The account-based accounting method is more vulnerable to hacking, especially for decentralized finance (DeFi) protocols, because it tracks the overall balance of the user’s account, but not individual transactions.

Nervos and IOHK have adopted modified versions of the UTXO model for their blockchains. The two projects will share confidential information to improve the method.

“UTXO outperforms account-based models in many ways and provides increased security, privacy and scalability, which is critical for DeFi,” said Nervos co-founder Kevin Wang.

According to the CipherTrace report, many projects DeFi rely on unaudited smart contracts with vulnerabilities that attackers can use. Last week, Cardano held a hardfork as part of the transition to the third major development phase, which will focus on the functions of blockchain smart contracts. Nervos recently introduced its new sUDT token standard, which will compete with the Ethereum ERC-20 standard.

Recently it was reported that the CFTC discussed the capabilities of the DeFi industry and its regulation.