Qtum is commonly read as Quantum. This Singapore-based open-source project combines Bitcoin's UTXO (unspent transaction output) model with EVM (Ethereum Virtual Machine) functionality. The latter also implies that it is compatible with smart contracts written in Solidity, the language used by Ethereum developers.
Qtum uses the Proof-of-Stake consensus mechanism. The team aims to promote the platform in the logistics, finance, and manufacturing industries.
How UTXO work in Qtum
Firstly, it's worth explaining how transactions work in the Bitcoin network. The results of a previous transaction become the input for a future transaction.
Let's say you need to send 3 BTC to another address. This is only possible if the wallet determines that the input from previous transactions in the wallet will yield a total of 3 BTC or more. The output will be the number of bitcoins the recipient will have after the transaction, and the remainder will be returned to the sender and become the input for a future transaction.
Let's explain it more simply using the example of real money:
- A friend owes you 60 dollars.
- He takes 50 and 10 dollars from his wallet and gives them to you.
- Now you want to give 80 to someone else.
- You take the 50, 10, and 20 you received from another friend earlier.
- All the payments received earlier (50, 10, 20) are input data based on which you can form a new transaction (80).
UTXO — unspent transaction balances that can be used for the next transactions. So why did Qtum decide to adopt this particular model? Firstly, it has been tested on bitcoin and proved its soundness and stability. Secondly, it allows for fast and high-quality transaction validation and "lightweight" nodes that load only a portion of the blockchain for operation.
Qtum and EVM
Ethereum once ushered in the era of smart contracts - automated, self-executing contracts between two or more parties. Their advantage is the complete absence of intermediaries. EVM is the Ethereum Virtual Machine, the platform for hosting and executing smart contracts. It provides an isolated environment and prevents transaction spam, infinite loops and other problems.
QTUM has combined two concepts as different as UTXO and EVM in its platform. It did this by adding an abstract account layer (AAL). The AAL acts as an interface layer between UTXO and any virtual machine, not just EVM.
Qtum and decentralization
The project positions itself as carefully following the principles of cryptocurrency, the main one being decentralization.
- Decentralized governance. The community has access to a set of smart contracts that can regulate the cost of gas, block size and other essential functions.
- In theory, Qtum can process up to billions of transactions per second by combining Tier 1 and Tier 2 solutions. The actual speed is currently around 1,100 tps.
- The network uses energy-efficient Proof-of-stake for security. Participants can place bids even offline to save more energy.
- The blockchain system supports many token standards popular in today's world. This includes, for example, ERC20 and NFT tokens, which can be sent and received without paying huge fees.
- An exciting feature is using the web3 proxy adapter Janus, which can be used as a web3 provider with Qtum. It allows developers to bring their applications written in Solidity to this network from other networks.
The project's resulting functionality shows excellent resistance to censorship, i.e. tampering with existing data on the blockchain.
The QTUM cryptocurrency is a service asset of the ecosystem that enables transactions and keeps the network up and running. The Qtum blockchain uses an advanced form of Proof-of-Stake — Mutualised Proof-of-Stake, mutual PoS or mPOS for short to achieve consensus.
From a user perspective, it's not much different from regular staking. A node must hold QTUM in the wallet to verify and process transactions. Nodes are rewarded for their work verifying and recording transactions in the form of newly minted QTUM, along with transaction fees included in the blockchain.
The unique difference is that each new block reward is divided equally between the nodes directly creating it and the nine previous nodes. This reduces the likelihood of an attack — there is no point for attackers to break into the system if they will only get a small portion of the reward anyway.
Qtum has long been considered one of the most promising projects in the blockchain ecosystem, although as of 2023, it has lost ground somewhat to newer competitors. The combination of UTXO, EVM and PoS provides high security and excellent scalability. With full support for the Ethereum Virtual Machine and the Solidity language, the project can attract interested developers who do not have to build applications from scratch but can freely port them to the Qtum network with minimal patches. The only obstacle to the active development of the system is high competition from other scalable blockchains.