How Cardano processes transactions: a step by step guide
Cardano processes a transaction by consuming eUTXO outputs, checking signatures and balance, then adding it to a block. Your wallet signs before nodes relay.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
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- Cardano uses an eUTXO model, not an account model.
- Each unspent output can be spent only once.
- Nodes check signatures and value balance before relaying.
- Plutus scripts run after basic validation passes.
- The IRS treats crypto as property, so keep records.
Cardano is a proof-of-stake blockchain that launched in 2017. It uses a protocol called Ouroboros, so stake pools produce blocks instead of miners.
How does Cardano process a transaction?
Cardano does not use the account model that Ethereum uses. Instead, it uses an extended UTXO model, or eUTXO. Every ADA balance sits in unspent outputs, and a transaction consumes some outputs as inputs and creates new outputs.
How do you send a Cardano transaction?
Sending ADA starts in your wallet. The wallet selects unspent outputs as inputs, creates new outputs for the recipient and change, then signs with your spending keys and submits to nodes.
- 1Open your walletUnlock your Cardano wallet and wait for it to sync. Paste the recipient address, compare the first and last characters, and review the network fee before you continue.
- 2Review the outputsYour wallet picks unspent outputs as inputs and creates new outputs for the recipient and change. Check the recipient's output amount before you sign.
- 3Sign and submitYour wallet signs with your spending keys. After it submits the transaction to nodes, you cannot cancel it from the wallet.
How is the transaction validated?
When a node receives your transaction, it checks the signatures and value balance. It confirms inputs are unspent and total inputs equal outputs plus the fee, then runs any Plutus script after basic validation passes and relays valid transactions.
How does it get confirmed?
After validation, your transaction waits in a node's mempool. A stake pool chosen by Ouroboros includes it in a block, later blocks add confirmation, and the IRS treats crypto as property so you should save records for taxes.
Frequently asked questions
eUTXO stands for extended unspent transaction output. It treats each output as a separate piece of value with its own script, and a transaction must consume whole outputs and create new ones.
Cardano produces blocks on a regular schedule, so a transaction usually appears in a block after a short wait. Each later block adds more confirmation.
Basic validation can pass, then the Plutus script runs and returns an error. The transaction does not do what it was meant to do, and collateral set aside for the script can be spent.
No. Once nodes relay a valid transaction and a stake pool includes it in a block, it cannot be cancelled. Only the recipient can send funds back.
