Cryptoasset Anti-Financial Crime Specialist (CCAS) Certification Practice Test

What is a disadvantage of using an unspent transaction output ledger model for virtual assets?

1. Complexity of computation

2. Privacy of transactions

3. Length of computation

4. Automaticity of swaps

The correct answer is: Complexity of computation

The unspent transaction output (UTXO) ledger model, commonly utilized in cryptocurrencies like Bitcoin, has a significant disadvantage in terms of the complexity of computation. Each transaction in the UTXO model must reference specific inputs (previous unspent outputs), which necessitates a more complex transaction construction process. This complexity arises from the need to track unspent outputs throughout the network, ensuring that when new transactions are created, their inputs are valid and not yet spent. This model requires that each validation checks all relevant UTXOs to ensure their usability, which can increase the computational overhead, particularly when processing a high volume of transactions. Conversely, other models like the account-based model (used in Ethereum) allow for simpler transaction processing since balances can be directly queried on accounts, streamlining the computation required. Choices related to privacy, length of computation, and automaticity of swaps, while they have their own merits and drawbacks, do not directly address the intricate computational requirements imposed by the UTXO model. Privacy, for instance, can vary significantly based on the implementation and additional protocols used, while the length of computation can be influenced by numerous factors, not solely by the ledger model itself. Automaticity of swaps pertains more to the ability of systems to facilitate transactions without