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What a single Cardano transaction can do

Published 7.10.2022

The EUTXO model that Cardano uses is fundamentally different from the account-based model that Ethereum uses. In fact, a single Cardano transaction can process hundreds of user requests. In other words, a single transaction can be the equivalent of hundreds of transactions on other networks. Let's explore one transaction together to explain the power of the Cardano platform.

One transaction distributed ADA to 217 addresses

An NFT project Space Pugs Alpha distributed ₳16,164 ($7000) to 217 users in a single transaction. The transaction fee was just ₳0,78 ($0,33). It's important to note that this is not an exceptional transaction. There are many such transactions taking place on the Cardano network every day. This one was lucky to get media attention. Let's explore the transaction through Cexplorer.

As you can see, the transaction has 217 outputs. Each output has been sent by the transaction to a unique address. You may also notice that many users of Cardano use a handle instead of an address.

The transaction was 14 kB in size and took up about 17% of the block size. If there was only one transaction in a block like this and it could fill the entire block, it could process approximately 1300 user requests. However, this block could only be used by a single user, which is not desirable. It is important to process all users' transactions as quickly as possible. The ratio between simple transactions and complex transactions is important. Anyway, if we were to take this case to the extreme and converted such a transaction to the number of transactions per second (TPS), we would arrive at a number of 65.

Complex transactions

In practice, you can see that in a Cardano block there are normally several complex transactions (containing many user requests) like this one and several other simple transactions that have one sender and one receiver. Complex transactions are usually created by DeFi services that employ EUTXO capabilities to combine multiple user requests into a single transaction.

In this context, it is important to mention that the often-used TPS metric does not work very well for Cardano unless you take into account how complex transactions work and the fact that they are heavily used in the Cardano network. If you are wondering how many users were able to use the Cardano network within a block, you need to look at each transaction and count the recipient addresses. A figure like 3 complex transactions and 5 simple transactions can mean that within a block 1000 users receive ADA coins or tokens at their addresses. It would probably be smarter to report the number of EUTXOs per second or the number of recipient addresses per second.

Cardano allows users to create complex transactions without the need to use a smart contract. That's why the transaction is so cheap and secure at the same time. Ethereum is not able to send ETH or tokens to multiple addresses in one simple transaction. If you wanted to do something similar on Ethereum, you would have to use a smart contract and the fee would be significantly higher. The smart contract would have to distribute ETH to multiple addresses one by one so in a serial manner. Cardano allows parallel processing.

Conclusion

The EUTXO model is arguably one of the most efficient, scalable, and parallelizable in the blockchain industry. It is possible to handle many user requests in a single transaction. This feature will be needed with higher adoption.

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