A Technical Guide to Building Transactions on Cardano
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A Technical Guide to Building Transactions on Cardano
Technical Guide to Building Transactions on Cardano
Navigating Web3 tides with focused insightsTo fully understand how Cardano works, several concepts must be grasped—Cardano's mechanism is very similar to Bitcoin, with some additional features extended:
- UTXOs
- Native assets (tokens and NFTs)
- Smart contracts
In short, Cardano adopts the Bitcoin UTXO model and extends it. The two truly important features are native assets and smart contracts.
UTXOs
The most important concept to understand about Cardano is likely the UTXO model—the UTXO model was originally used in Bitcoin but has many limitations for smart contract development. Ethereum abandoned this model in favor of an account-based model to support smart contracts (most public blockchains supporting smart contracts follow this approach).
Cardano inherits Bitcoin’s advantages at the consensus layer, while considering smart contract implementation requirements in state selection, adopting a modified version of the UTXO model (EUTXO) inspired by Ethereum's design principles.
Cardano’s documentation includes a series of video tutorials that explain many concepts at a high level, including how transactions are executed and how UTXOs work.
The first two videos on UTXOs and transactions cover essential concepts that need to be understood, as they help us understand how assets are stored on Cardano and what information each transaction contains.
After understanding the high-level concepts of UTXOs and transactions, the best practice is to actually build and submit a transaction, which involves three steps:
- Construct a transaction;
- Sign the transaction using a private key;
- Submit the transaction to a Cardano node;
Cardano-cli
The first method to construct, sign, and submit transactions is using "cardano-cli." This method is very reliable and almost guarantees transaction success, but it requires users to set up their own Cardano node.
For many ordinary users, this is undoubtedly a significant barrier—requiring powerful hardware and substantial spare memory.
However, the Cardano documentation also provides a guide on how to run a node and CLI.
If you have already set up a node, here is a guide for a very simple transaction you can try.
Cardano-serialization-lib + a lightweight wallet
A second method to build and submit transactions combines the use of cardano-serialization-lib and a lightweight wallet.
Although users can use any lightweight wallet they prefer, I created a project as an example demonstrating how to use cardano-serialization-lib and the Yoroi wallet to build, sign, and submit transactions to the testnet.
The main demonstration shows how to generate an NFT and send it to a script address:
- First install Yoroi Nightly(a development version of the Yoroi wallet supporting testnets).
- Then obtain some testnet ADA from the faucet;
- Then you can clone this GitHub repository and run npm in developer mode (the default service location is http://localhost:8080/).
Tokens and NFTs
Once you understand how basic transactions work, it’s necessary to further explore how tokens and NFTs function on Cardano.
The Cardano documentation includes a detailed article. In fact, tokens and NFTs on Cardano are called "native assets" because Cardano supports custom tokens and NFTs at the blockchain layer, whereas Ethereum uses smart contracts to represent these assets.
Tokens and NFTs on Cardano are handled the same way as ADA—each asset essentially has a unique ID, with ADA using an empty string as its unique ID.
Regarding tokens and NFTs, there are two important concepts to understand:
- Mint policy
- Metadata
A token's ID is actually just the hash of its mint policy, and the mint policy consists of instructions indicating whether minting is allowed.
Token metadata is where other critical information about the token is stored. Currently, CIP25 provides a standard to formalize the structure of token metadata.
Minting Tokens
Using the CLI, or using serialization-lib + lightweight wallet,
Plutus Scripts (Smart Contracts)
To truly and completely understand Cardano, the final piece is understanding its smart contract system.
But there is no easy way to learn this part—it requires a significant time investment. No better learning resource exists than following the video series released by IOG—the “Plutus Pioneer Program.”
This video series walks us through creating Plutus scripts, testing them, deploying them, and provides many excellent examples of scripts that can be built on Cardano.
For more information and knowledge about Cardano’s technology, feel free to contact Adaverse
About Adaverse
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