Explain the Difference between a ‘UTXO’ and an ‘Account-Based’ Model.
Bitcoin uses the Unspent Transaction Output (UTXO) model, where a user's balance is the sum of all unspent transaction outputs associated with their addresses. Transactions consume old UTXOs and create new ones.
Ethereum uses an account-based model, similar to a traditional bank, where the state maintains a global ledger of all accounts and their current balances. The UTXO model offers better privacy and parallel processing, while the account model is simpler for smart contract execution.
