Recently, several crypto and blockchain-focused projects such as Ergo, Nervos, Topl, and Komodo had established the UTXO alliance in order to increase interoperability, scalability, and programmability features of the UTXO-based blockchain or distributed ledger tech (DLT) platforms. 

Alephium and DigiByte have also decided to join this strategic alliance in order to work on ongoing enhancements to the UTXO accounting model.

Cheng Wang, Alephium Founder and Core Developer stated:

The increasingly high demand for scalable and secure DApps, and more specifically DeFi, is a great opportunity for UTXO blockchains. UTXO-based designs will be the new paradigm for DeFi development. The alliance will play a key role in driving its mass adoption.

Wang added that DigiByte is recognized for being an innovative, open-source, UTXO-based blockchain that is driven by its loyal and dedicated community. It offers progressive solutions to enable effective decentralization, security, speed, and scalability, Wang added. 

He also mentioned that with its secure cryptographic algorithms and fast speed, users are able to mint crypto-assets, issue smart contracts, and build high-performance DApps on the chain.. 

GTO90, core protocol contributor & maintainer of DigiByte stated:

One of the largest challenges DigiByte, and other UTXO projects, have struggled with is developer engagement. The barrier to entry for developers to build solutions on top of UTXO blockchains is high and requires a tremendous amount of domain knowledge and experience. DigiByte core protocol maintainers and contributors have been working on lowering that barrier to entry by building an approachable and easy-to-use developer toolchain & development sandbox.

As mentioned in the announcement, we’re living in an age of transformative change and technological advancements where blockchain or DLT is the technology that promotes greater transparency, trust, and enhanced security. 

The update also noted that the UTXO alliance has been established to encourage projects that are at the forefront of this revolutionary technology to take part in shared efforts and initiatives. Together, as a team, they can further support the development of critical infrastructure required to promote the widespread adoption of blockchain.

As explained in a blog post by IOHK, the advancement of the UTXO accounting model is the main focus area of the alliance. UTXO-enabled blockchains are arguably better than account-based models as they provide improved security.

With the UTXO model, the same address isn’t used each time a transaction is performed, which makes it impossible to accurately track the address or determine the overall balance. As noted in the update, UTXOs are generally more beneficial in terms of addressing privacy leaks.

Other key advantages include scalability, whereby UTXO ledgers enable parallel transaction processing, thus helping to eliminate excessive network congestion and can be ideal for stateless customer solutions.

Furthermore, the UTXO model enables enhanced interoperability, because of the implementation of off-chain and sidechain protocols. It’s also a lot easier to create interoperability between different blockchain or DLT networks by leveraging this innovative model.

In addition to these benefits, determinism is also a key advantage offered with the UTXO ledger, where a user may reliably predict the cost and validity of a particular transfer before it’s processed on-chain. 

Notably, transaction costs are also considerably cheaper with the UTXO model as there aren’t so-called “gas” fees. As explained in IOHK’s blog post, the process of investigating UTXO properties and providing open-source research enable them to improve the characteristics and attributes of different blockchain systems, while facilitating interoperability between different ledgers. 

As stated in the announcement, the alliance will be focused on investigating scalability solutions that will enable addressing important questions about how to properly transfer data between different blockchain or DLT environments (which would include the amount of data being used, overall processing speed, transfer costs, and energy consumption). 

The team is also working cooperatively on programmability, with a special focus on the design of different types of computer programming languages that will provide more diversity in creating and issuing smart contracts and supporting decentralized applications (dApps) via the UTXO-based blockchains.

As confirmed in the update, Alephium is the first operational sharded blockchain that aims to provide enhanced scalability, “Ethereum-inspired” smart contracts, and dApp functionlality to Bitcoin’s (BTC) established core technologies while also ensuring enhanced performance and improved energy efficiency. 

From its advanced technical design to its user-friendly interfaces, Alephium has been developed to resolve the challenges associated with enabling greater accessibility, scalability, and security required by dApps being deployed in an evolving Web 3.0 environment.

As explained in the announcement, the immutability of the UTXO model has been a key pillar for Alephium in order to address the scalability problems inherent in the blockchains of today. 

Notably, the Alephium team has proposed a stateful UTXO model that will aim to provide the benefits of Layer-1 scalability as well as the same level of programmability as the account model. 

Additionally, Alephium provides a purpose-built Virtual Machine (VM) that is based on the UTXO model to tackle DeFi’s security problems and execution challenges.

Romain Pellerin, IOHK CTO, remarked:

We are thrilled to see another two blockchain ecosystems joining us and the UTXO alliance, which brings us to seven founding members already. DigiByte and Alephium bring both experienced and novel lines of thinking to the alliance. This ensures diversity in the way we identify and attempt to solve common challenges. It will help each member to consolidate their state of the art and design new solutions to the latest challenges, as well as enable synergies towards more scalable, programmable, and interoperable blockchain networks.

As noted in the announcement, Input-Output decided to adopt the UTXO model for Cardano since they consider it to be a better approach that provides “superior deterministic design, scalability features, and proven security.”

UTXO alliance members reportedly include some of the sharpest blockchain minds in the industry that are dedicated to advancing this transformative standard.