Table of Contents

Blockchain

Types of blockchain

Two main blockchain types are commonly discussed: public and private.

Nexus connects to public blockchains, where the main crypto-currencies are exchanged (for example, Bitcoin and Ethereum). These networks are distributed and decentralized, meaning no single entity controls them. Transaction validity depends on agreement between network nodes. Public blockchains are often called permissionless because users do not need verified real-world identities to execute transactions.

Private blockchains (often called permissioned) are fundamentally different. They rely on user identity verification to assign specific rights and permissions on a platform. These blockchains are typically designed for internal enterprise use, for example to manage internal value movement. Nexus is not built to support private blockchains; Quasar (another Quantoz product) is designed for this use case.

Another important classification is based on how blockchains track balances: the UTXO model and the account-based model.

UTXO-based Blockchains

The UTXO (Unspent Transaction Output) model is used by Bitcoin and Cardano. You can think of it like paying with cash:

  • Every coin or bill you own is like a UTXO.
  • When you buy something, you must hand over the full coin/bill. If the item costs less, you get change back as a new coin/bill (a new UTXO).
  • Your wallet balance is simply the sum of all the coins (UTXOs) you hold.

Example:
If you have two UTXOs worth 3 BTC and 2 BTC, your total balance is 5 BTC. If you want to pay 1 BTC, you might spend the 3 BTC UTXO, send 1 BTC to the recipient, and get 2 BTC back as change in a new UTXO.

Dust Limit in UTXO Blockchains

In UTXO-based systems, there is a concept called the dust limit. This refers to the smallest transaction output that is considered practical to spend.

  • If a UTXO is smaller than the transaction fee required to spend it, it becomes uneconomical. For example, spending 100 satoshis when the fee is 200 satoshis makes no sense.
  • Such tiny outputs are called dust. Keeping too many of them would bloat the blockchain and create unnecessary storage overhead.
  • To prevent this, Bitcoin and similar blockchains enforce a minimum output size (the dust limit). Any transaction that tries to create an output smaller than this threshold will be rejected by the network.

Cardano has a similar mechanism: holding tokens in a UTXO requires a minimum ADA amount to be included, ensuring that UTXOs are not created with negligible value.

Account-based Blockchains

The Account-based model is more like a bank account. Ethereum and Algorand use this approach:

  • You have a single account with a running balance.
  • When you send money, your account balance decreases, and the recipient’s balance increases.
  • There are no "coins" or "change" — just balance updates.

Key points about Account-based:

  • Simple for users to understand because it works like a bank ledger.
  • Well-suited for smart contracts, which directly interact with account balances.
  • Uses anti-spam mechanisms like gas fees (Ethereum) or minimum account balances (Algorand) instead of a dust limit.