UTXOma: UTXO with Multi-asset Support

A prominent use case of Ethereum smart contracts is the creation of a wide range of user-defined tokens or assets by way of smart contracts. User-defined assets are non-native on Ethereum; i.e., they are not directly supported by the ledger, but require repetitive custom code. This makes them unnecessarily inefficient, expensive, and complex. It also makes them insecure as numerous incidents on Ethereum have demonstrated. Even without stateful smart contracts, the lack of perfect fungibility of Bitcoin assets allows for implementing user-defined tokens as layer-two solutions, which also adds an additional layer of complexity. In this paper, we explore an alternative design based on Bitcoin-style UTXO ledgers. Instead of introducing general scripting capabilities together with the associated security risks, we propose an extension of the UTXO model, where we replace the accounting structure of a single cryptocurrency with a new structure that manages an unbounded number of user-defined, native tokens, which we call token bundles. Token creation is controlled by forging policy scripts that, just like Bitcoin validator scripts, use a small domain-specific language with bounded computational expressiveness, thus favouring Bitcoin's security and computational austerity. The resulting approach is lightweight, i.e., custom asset creation and transfer is cheap, and it avoids use of any global state in the form of an asset registry or similar. The proposed UTXOma model and the semantics of the scripting language have been formalised in the Agda proof assistant.