Skip to main content

Transactions

What is a Transaction?​

A transaction is a request to change the blockchain's state. On Cardano, every transaction:

  • Consumes one or more existing UTXOs (inputs)
  • Creates new UTXOs (outputs)
  • Optionally mints or burns native tokens
  • Pays a fee to the network

Unlike account-based blockchains where you update balances, Cardano transactions explicitly list what goes in and what comes out. The total input value must equal total output value plus the fee. Nothing is left unaccounted for.

This explicit structure makes transactions deterministic: you know exactly what will happen before you submit. For the full model of how inputs and outputs work, see the EUTXO Model.

For Builders

Client SDKs handle transaction building, CBOR encoding, and fee calculation for you.

Transaction Validation​

Transaction validation on Cardano uses scripts (pieces of code) that implement pure functions returning True or False. Script validation occurs for several actions:

  • Spending UTXOs: Scripts validate whether UTXOs can be consumed
  • Minting tokens: Policy scripts control token creation
  • Reward withdrawal: Scripts govern stake reward claims
  • Certificate applications: Scripts validate delegation and registration certificates

Each transaction specifies all arguments passed to scripts during validation, including user-provided redeemers that serve different purposes depending on the script logic.

Script Execution Costs

When spending from script addresses or minting tokens with smart contract policies, additional computational costs apply. These are measured in execution units (memory and CPU steps) and added to the base transaction fee. See Transaction Fees for the complete fee structure including collateral requirements.

Deterministic Outcomes​

The predictable nature of Cardano transactions is ensured by several key factors:

  • Scripts always terminate and return consistent results for the same inputs
  • Transactions fix all arguments passed to the script interpreter
  • All required script validations are specified in the transaction
  • Cryptographic signatures prevent transaction tampering
  • EUTXO model ensures deterministic ledger state updates

Whether scripts succeed or fail, the outcome and associated ledger changes are predictable for any given transaction.

Transaction Anatomy and CBOR Format​

At the lowest level, Cardano transactions are binary data encoded using CBOR (Concise Binary Object Representation), a format similar to "binary JSON" that provides compact serialization while maintaining structure.

CBOR and Cardano Specifications​

CBOR allows Cardano to define precise transaction formats in the ledger specifications using CDDL (Concise Data Definition Language). Each Cardano era has its own specification document that defines the exact structure transactions must follow - any deviation causes rejection.

Understanding CBOR becomes crucial when debugging transaction failures, as blockchain explorers typically show processed data rather than the raw transaction structure that nodes actually validate.

Advanced: Transaction Structure Details

A complete transaction consists of four main components:

transaction = [
  transaction_body,      // Core transaction data
  transaction_witness_set, // Signatures and scripts
  validity_flag,         // Transaction validity
  auxiliary_data         // Metadata (optional)
]

Transaction Body contains:

  • Inputs (field 0): References to UTXOs being spent
  • Outputs (field 1): New UTXOs being created
  • Fee (field 2): Transaction cost in lovelace
  • Script Data Hash (field 11): Hash of redeemers and datums for script validation
  • Collateral (field 13): UTXOs spent if script validation fails
  • Other fields: Time validity, minting, certificates, etc.

Transaction Witness Set contains:

  • Signatures (field 0): Cryptographic proofs of authorization
  • Plutus Scripts (field 3): Smart contract code being executed
  • Plutus Data (field 4): Unhashed datums referenced in the transaction
  • Redeemers (field 5): Arguments passed to script execution

Implications​

Input Ordering: Inputs are automatically sorted lexicographically by (transaction_id, index), not by the order you specify. This affects redeemer indexing.

Script Data Hash: Any change to redeemers, datums, or protocol parameters requires recalculating this hash. Transaction libraries handle this automatically.

Two-Phase Validation: Phase 1 validates basic transaction structure, Phase 2 executes scripts. If Phase 2 fails, collateral is consumed as penalty.

For complete technical specifications and debugging tools, see the Cardano Ledger Specifications and Lace Anatomy for decoding raw transactions.

Validity Intervals and Time​

Smart contract execution on Cardano is fully deterministic, which raises an interesting challenge: how to handle time-dependent logic? Since asking for "current time" would break determinism, Cardano uses validity intervals to introduce time constraints.

How Validity Intervals Work​

Transactions can specify a time window during which they're considered valid:

  • Lower bound: Transaction valid only after this time
  • Upper bound: Transaction expires after this time

These intervals are checked during Phase 1 validation, before script execution. This means validators can assume the transaction is within the specified time bounds, enabling deterministic time-based logic.

Practical Applications​

Time-locked contracts: Record a deadline in the datum and check that the transaction's lower bound exceeds that deadline.

Auction deadlines: Set an upper bound so bids can only be placed before the auction ends.

Transaction Latency vs Finality​

Understanding the difference between when a transaction appears on-chain versus when it becomes permanent is crucial for dApp development.

Latency: Time for a transaction to appear in a block (~20 seconds average block time).

Finality: Time for a transaction to become immutable and irreversible. This depends on:

  • Network conditions and adversarial stake proportion
  • Number of confirmations required (Risk tolerance of your application)

For most applications, waiting 6-20 confirmations provides really strong finality guarantees. High-value transactions may require more confirmations, while small transactions might accept fewer.

Next Steps​