Verifying initial conditions in Plutus

On a UTxO-style blockchain such as Cardano, transaction outputs are normally to the (hash) of a public key; in order to spend such an output, the spending transaction must be signed with the corresponding private key as evidence that the party creating the transaction has the right to spend the output.

The extended UTxO model introduces a second kind of output: an output to a smart contract: a piece of code f. Along with the contract itself, the output also contains an additional argument d, known as the datum. When a transaction spends such an output, f(d) is executed; when f indicates that all is fine, the transaction is approved; otherwise, it is rejected.

An immediate consequence of this model is that outputs are only verified when they are spent, not when they are created. This can lead to some tricky-to-verify initial conditions. We will explore this problem in this blog post, and suggest some ways in which we can solve it. Along the way, we will recap some often misunderstood Plutus concepts.

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