Understanding UTxO

An unspent transaction output (UTxO) is an amount of cryptocurrency left over after a transaction. It is similar to the change you receive after purchasing a product, but with the distinction of a transaction output in the database that the network generates to enable non-exact change transactions.

For instance, imagine that 100 Litecoin (LTC) is a bucket of coins, each representing a UTxO. If you buy something for 50 LTC, the network will give the seller the whole bucket and send back the 50 LTC they owe you in “change.” You now possess a UTxO worth 50 LTC that you cannot divide into smaller amounts.

Almost all transactions create UTxOs because the network must gather unspent outputs and transfer them to the recipient. Users rarely have the exact UTxO amount required. Cryptocurrencies like Litecoin, Bitcoin, and Bitcoin Cash use this model because it enables users to track the ownership of all portions of their assets.

UTxOs are linked to the public addresses visible across the network. While user identity is not directly identifiable based on ownership due to the model’s nature, it allows transparency through these addresses.

Cardano’s Extended UTxO

Recently, US President Donald Trump announced plans to form a federal cryptocurrency reserve that will include Bitcoin, Ethereum, XRP, Solana, and Cardano. Although people are less familiar with Cardano compared to the others, accumulating ADA appears sensible for various reasons.

Cardano employs a peer-reviewed research approach and is developing a sustainable and scalable blockchain platform capable of supporting real-world applications in governance, finance, and other sectors. Its proof-of-stake consensus mechanism relies on a unique architecture that facilitates fast and affordable transactions.

The Extended UTxO (EUTxO) model enhances traditional UTxO by achieving energy efficiency gains, reducing complexity, and improving security. It introduces smart contract capabilities that offer more expressive smart contracts than Bitcoin. Cardano becomes more secure through well-defined transaction execution paths, making smart contract execution predictable and avoiding issues like gas fee spikes experienced in Ethereum.

Unlike Ethereum, where execution depends on the global state, Cardano’s EUTxO model allows for parallel transaction processing, enhancing scalability and efficiency since transactions do not compete for the same state.

Bridging Cardano with Ethereum

As a multi-asset blockchain, Cardano supports various digital assets, including those from other blockchains. It is home to Apex Fusion, an interoperability-focused platform critical in bridging Cardano with Ethereum, the largest blockchain.

Apex Fusion was developed by veterans who significantly contributed to Cardano, Ethereum, and Polygon’s development. They integrated the best features of the UTxO and EVM models, moving beyond debates on superiority to create a cohesive ecosystem that enhances real-world adoption.

Blockchains often operate in silos, and the rise in Layer 2 solutions on Ethereum has intensified fragmentation, with blockchains competing rather than collaborating. Currently, at least 1,000 blockchains exist, with most failing to innovate, replicating only a few successful use cases. This limits user access to the ecosystem’s entirety.

The founders of Apex Fusion aim to counter the tribalism dividing the blockchain space by focusing on adoption, blending EVM’s flexible smart contract functionality with UTxO’s security and scalability. They launched the Apex Fusion blockchain ecosystem, beginning with the PRIME chain, which establishes a robust staking and security model. Over 130 stake pool operators (SPOs) secured PRIME upon launch, confirming its foundational role within Apex Fusion. The platform has also announced exchange listings for its AP3X token.

Christopher Greenwood, Program Director of the Apex Fusion Foundation, elaborates on their staking approach:
> Apex Fusion utilizes the Ouroboros Proof-of-Stake protocol to secure and decentralize our Layer 1 network. It’s crucial for the community to hold and stake the AP3X token. We set optimal staking parameters to ensure rewards are fair for all participants, including SPOs and individual stakers without lockups.

Aleksandar Veljkovic, Head of Research at Hal8, estimates pool rewards will reach approximately 10% in the first year, based on protocol parameters and the number of staking pools.

Non-competing Layer 1 with Native Liquid Staking

Apex Fusion founders opted for best practices and pragmatism based on their experiences with Cardano. They offer a non-competing Layer 1 blockchain with native liquid staking and EVM compatibility, allowing businesses to create decentralized applications without sacrificing security or scalability.

The staking layer is central to Apex Fusion, involving APEX token delegation to bolster network operations on PRIME. Key components include rewards and delegation, with APEX token stakers earning rewards for participating in network maintenance and supporting community-centric projects.

Transitioning to Collaboration and Compliance

Apex Fusion enables the shift from fragmentation to collaboration through its Reputation System, fostering transparency and trust by quantifying and validating contributions, leading to “trust through reputation.”

The launches of PRIME and AP3X represent effective measures to unify blockchain ecosystems, facilitating harmonious Web3 network operation. Apex supports Cardano in becoming the most compliant blockchain, anticipating that a US crypto reserve will motivate traditional finance institutions to explore cryptocurrencies, necessitating compliant integrations with fiat.

Apex Fusion’s status with FINMA (Swiss Financial Market Supervisory Authority) grants its cross-chain interoperability mechanisms legal compliance, enhancing Cardano’s attractiveness from a regulatory standpoint.

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