Cardano Reviews minUTxO Friction in Token Transfers

Researchers Nicolas Henin, Will Gould and Polina Vinogradova submitted a Cardano Problem Statement on September 11 addressing friction created by the network’s current minUTxO implementation. The document identifies seven use cases and establishes requirements for proposals designed to simplify transaction funding and construction. It remains open for review and does not introduce a protocol change.

Why Cardano Requires Minimum Value in Transaction Outputs

Cardano stores assets in unspent transaction outputs known as UTxOs. Each output can contain the network’s base currency together with native tokens, including NFTs.

The minUTxO rule requires every new output to contain a minimum amount of the network’s base currency. The exact requirement depends on the serialized size of the output, including its assets, datum and any reference script.

This mechanism creates an economic cost for maintaining persistent ledger state and limits the creation of large numbers of low value outputs. The accompanying funds are not a transaction fee or a transfer to the treasury. They remain part of the output and are controlled by whoever can spend it.

When outputs are consumed or consolidated, their value can fund new outputs and transaction fees, provided the outputs that remain satisfy their own minimum requirements.

Small Payments and Token Distribution Face Added Friction

CPS-0037 describes situations in which a user wants to send a native token without transferring additional ADA. Under the current model, the sender must fund the minimum requirement for the new output, while the recipient gains control of the accompanying funds.

The cost becomes larger when a project distributes tokens to many addresses. Every recipient output needs its own minimum value, requiring the distributor to supply additional funds across the entire batch. A claim model can move the funding obligation to recipients, but it also changes the user flow and requires their participation.

The document also covers small payments below the applicable minimum. They cannot be represented as independent outputs unless additional value is supplied or the payment is combined with an existing recipient output.

Another case involves a wallet that can preserve a token in a successor output but lacks the surplus needed to pay the transaction fee. Completing the transfer then requires another input, a withdrawal or an external fee sponsor.

CPS-0037 Sets Requirements for Future Cardano Solutions

CPS-0037 defines the problem and the conditions a future solution must satisfy. It does not change Cardano mainnet rules, lower the current minimum or specify a deployment schedule.

Henin said on September 14 that work following BuilderFest discussions was examining possible changes in the Cardano ledger code. The team is studying whether application value could be separated from the funds supporting an output and whether deposits could be balanced across an entire transaction.

Any future design must continue protecting the ledger against excessive accumulation of live outputs, preserve value conservation and keep existing outputs spendable. It must also address compatibility with deployed smart contracts that check exact amounts of ADA.

The authors require proposed solutions to be tested through reproducible transactions covering funding, fees, recoverable value and application logic. Those comparisons must identify whether a design removes the burden, reduces it or transfers it to another participant.

CPS-0037 gives wallet developers, application teams and ledger engineers a shared set of cases against which future designs can be measured. A separate proposal will still be needed before Cardano can replace the current rule, but the discussion now has defined technical requirements instead of a general request to make token transfers cheaper or easier.