Final answer:
Bitcoin uses UTXO for managing transactions, ensuring security against double spends by tracking outputs from previous transactions. Ethereum uses an account balance model, which simplifies transactions by keeping a direct record of each user's Ether balance, making it similar to a traditional banking system.
Step-by-step explanation:
Bitcoin uses a transactional system known as UTXO (Unspent Transaction Outputs), whereas Ethereum uses an account balance model. Here's a brief explanation of both:
- UTXO: This model, used by Bitcoin, treats each transaction as an output from a previous transaction. These outputs carry an associated bitcoin amount and can be thought of as individual bills or coins. Users have a collection of UTXOs that make up their total bitcoin balance. When making a transaction, the UTXO system verifies that you are spending unspent outputs, so it inherently protects against double spending.
- Account balance: Ethereum, on the other hand, functions more like a traditional bank account. Each user has a single balance in Ether (the cryptocurrency of Ethereum), making it easier to understand for many users. Transactions directly alter this balance, and the system keeps track of these changes in state. It eliminates the need to deal with multiple inputs and outputs as transactions are simpler, and the final state is what matters.
In summary, Bitcoin and Ethereum employ different systems to handle transactions and maintain security. Bitcoin’s UTXO is efficient for ensuring transactions cannot be duplicated, while Ethereum’s account balance model provides a more straightforward approach to managing and understanding transactions and account states.