Bitcoin’s UTXO model tracks discrete transaction outputs, ensuring security and immutability but posing challenges for implementing custom tokens or complex asset protocols. Unlike Ethereum’s account-based system with a global state for straightforward token transfers, Bitcoin lacks a native global balance ledger. Users’ holdings must be inferred from UTXOs, complicating token-like logic. Embedding token data in Bitcoin’s transaction scripts often violates consensus rules, limiting script execution and data storage. These constraints necessitate additional layers or mechanisms, like Goldinals, which leverage innovative approaches to enable secure and trust-minimized token functionality within Bitcoin’s UTXO framework without altering its base-layer consensus.

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