Two types of record-keeping models are popular in today’s blockchain networks. The first method is called the UTXO (Unspent Transaction Output) Model and the second one is the Account/Balance Model. The UTXO model is employed by Bitcoin, and Ethereum uses the Account/Balance Model.
In UTXO, a user’s wallet keeps track of a list of unspent transactions associated with all addresses owned by the user, and the balance of the wallet is calculated as the sum of those unspent transactions.
The Account/Balance Model, on the other hand, keeps track of the balance of each account as a global state. The balance of an account is checked to make sure it is larger than or equal to the spending transaction amount.