From Ethereum's design rationale:

Potential scalability paradigms: UTXOs are more theoretically compatible with certain kinds of scalability paradigms, as we can rely on only the owner of some coins maintaining a Merkle proof of ownership, and even if everyone including the owner decides to forget that data then only the owner is harmed. In an account paradigm, everyone losing the portion of a Merkle tree corresponding to an account would make it impossible to process messages that affect that account at all in any way, including sending to it. However, non-UTXO-dependent scalability paradigms do exist.

I don't really understand the difference. In Bitcoin's UTXO paradigm, the owner of some coins must hold a private key for the destination address of an UXTO to prove ownership of the coins. If the key is lost, the coins are lost. As I understand, the same would happen in the account paradigm, except the owner would lose an account balance instead of an unspent transaction. What else would be lost in an account paradigm? How is that related to scalability?

Also, I understand what Merkle trees are and how they are used for storing transactions but what is a "Merkle proof of ownership"?

Thanks in advance.

2 Answers 2


A Merkle proof of ownership basically refers to a compact representation of the evidence of ownership of a certain set of coins, using a Merkle tree data structure. In a UTXO-based cryptocurrency, the Merkle proof of ownership would consist of all the transactions that add up to the current unspent transaction output (UTXO) that the owner wants to spend. By having only the owner of the coins maintain this proof of ownership, it allows for more efficient scalability in the sense that not every node in the network has to keep track of every transaction in the network.

In an account-based cryptocurrency, there is usually one balance per account, and every transaction that affects that account requires every node in the network to have the information about all transactions that affect that account. This can result in lower scalability compared to UTXO-based systems. However, some account-based systems have been designed to overcome this scalability challenge by using sharding, or dividing the network into smaller segments to process transactions in parallel, among other solutions.


I know this is a very late reply, but I am currently in the middle of reading this document so I will present my reasoning.

A smart contract can hold ether, tokens and/or other things of value which don't have to necessarily belong to the contract's owner. An escrow is a simple example of such a contract. If the owner loses the ability to manage the contract, then it might happen that all parties using the contract will lose their holdings.

I am not exactly sure what the author meant by "scalability", but one possible reasoning is this: the more people a contract influences, the bigger the damage if the contract becomes unusable. Whereas in a UTXO-based paradigm it's always only the owner of a UTXO that gets harmed.

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