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VTXOs

As described in the Commitment Transactions section, a Virtual Transaction Output (VTXO) is a user's claim to a specific portion of value within a Batch Output. VTXOs mirror the semantics of Bitcoin's UTXOs, but exist offchain in Ark’s execution layer. They are created by Ark Transactions and remain enforceable through presigned exit paths anchored in Bitcoin.

Lifecycle States​

A VTXO can exist in multiple states, depending on its origin, use, and confirmation status:

  • Preconfirmed
    The VTXO was created offchain through an Ark Transaction but is not part of a confirmed Commitment Transaction. It can be used for further offchain activity but carries trust assumptions.
  • Unconfirmed
    The VTXO is a leaf in a Batch Output, but the corresponding Commitment Transaction is not yet confirmed onchain.
  • Confirmed
    The VTXO belongs to a Batch Output that is confirmed on the Bitcoin blockchain. It enjoys full settlement guarantees and unilateral exit rights.
  • Expired
    The Batch Output that anchors the VTXO has expired. Control of the underlying funds reverts to the Ark Operator.
  • Spent
    The VTXO has been used as input to another Ark Transaction and is no longer active.
  • Replaced
    The VTXO’s corresponding Commitment Transaction was double-spent or invalidated, rendering the VTXO unusable.

Spending Paths​

Each VTXO is constrained by at least one variant of each of the spend paths:

Exit Path (Unilateral)​

This allows the user to spend their VTXO on Bitcoin without Ark Operator involvement.

In order for this path to be accepted as part of the Ark address, the main requirement is a CSV delay. This mitigates the risk of a malicious user attempting a theft of funds by batch-swapping their VTXO and concurrently unilateral exiting it as an attempt to recover their funds.

This path guarantees recoverability in the event of Operator failure or dispute.

Collaborative Path (Offchain)​

This path is used for offchain coordination with the Operator for rapid execution. The main requirement is that it must require the Ark Operator’s signature.

This design allows Ark to remain compatible with Bitcoin Script and paves the way for composable Bitcoin-native contracts within the virtual execution layer.

Security Considerations​

  • Expiry Risk: Users lose unilateral control after expiry.
  • Coordination Risk: Preconfirmed VTXOs require honest Operator behavior until confirmed via a Batch Swap.
  • Dust Limits: Very small VTXOs may be offchain-only and not redeemable on Bitcoin.
  • Deep transaction chains: VTXOs part of a deep ark transaction chain makes unilateral exit less feasible.

Best Practices​

  • Monitor expiry deadlines
  • Regularly swap preconfirmed VTXOs into confirmed batches
  • Maintain a copy of all relevant exit transactions

Summary​

VTXOs are the core abstraction that enables offchain execution in Ark while preserving enforceable ownership over Bitcoin. They provide the flexibility of fast, cheap coordination while maintaining strong security guarantees — as long as users manage them actively and exit before expiry.