# How Accounts Work

IOTA Smart Contracts provide secure, trustless transfers of digitized assets:

• Between smart contracts on the same or different chains
• Between smart contracts and L1 addresses on the UTXO Ledger

On the UTXO Ledger, just like with any DLT, we have trustless and atomic transfers of assets between addresses on the ledger. The tokens contained in the address can be moved to another address by providing a valid signature using the private key which controls the source address.

In IOTA Smart Contracts, the smart contracts which reside on chains are also owners of their tokens. Each smart contract can receive tokens that are transferred to it and can send tokens it controls to any other owner, be it another smart contract, or an ordinary L1 address on the UTXO Ledger.

There are 2 types of entities that can control tokens:

• L1 addresses on the UTXO Ledger
• Smart contracts on IOTA Smart Contracts chains

There are 3 different types of trustless token transfers possible between those entities. Each type involves a different mechanism of transfer:

• Between L1 address and smart contract
• Between smart contracts on the same chain
• Between smart contracts on different chains

To make the system homogenous, we introduce the following two concepts:

• Agent ID: Represents an owner of tokens independently of the type of owning entity.
• On-chain account: Represents the unit of ownership on the chain.

Each IOTA Smart Contracts chain keeps a ledger of on-chain account balances

## Account Ownership​

### Smart Contract ID​

Unlike with blockchain systems like Ethereum, we cannot simply represent the smart contract by a blockchain address: IOTA Smart Contracts can have many blockchains. Each chain in IOTA Smart Contracts is identified by its chain ID. A chain can contain many smart contracts on it. So, in IOTA Smart Contracts, each contract is identified by an identifier that consists of the chain ID, and the hname of the smart contract. In human-readable form, the smart contract ID looks like this:

cfQL3Vzay65ZZnPgsDKwXRRGwDWK68QkQwZqzvVs8UXM::cebf5908

The part before :: is the chain ID, the part after :: is the hname of the smart contract.

### Agent ID​

The agent ID is an identifier that generalizes and represents one of the two agent types in one identifier: either an L1 address on the UTXO Ledger or a smart contract ID.

It is easy to determine which one is represented by the particular agent ID: an L1 address always has the hname part all zero.

### Different Types of Account​

Given that an on-chain account is identified by an AgentID:

• The AgentID for accounts owned by L1 entities (regular IOTA wallets) looks like:
Hname: 0Address: "some address"
• The AgentID for accounts owned by L2 entities (Smart Contracts):
Hname: "Hname of the entity"Address: "Address of the chain where the entity exists"

For example, the smart contract with hname 123 that exists on the chain with address 000, can be identified on any chain by the following AgentID:

Hname: 123Address: 000

## The Accounts Contract​

The Accounts contract manages which funds are owned by which accounts.

Internally there is a mapping of Account (AgentID) to balances, which can include normal IOTAs and/or any colored tokens.

By calling this contract it is possible to:

## Interoperability Between Chains​

Each chain contains any number of accounts. Each account owns colored tokens: a collection of color: balance pairs.

Each account on the chain is controlled by some agent ID. It means that tokens contained in the account can only be moved by the entity behind that agent ID:

• If the agent ID represents an address on the UTXO Ledger, the tokens can only be moved by a request signed by the private key of that address.
• If the agent ID represents a smart contract, the tokens can only be moved by that smart contract. Note that the smart contract may reside on the same chain or another chain.

The picture illustrates an example situation. There are two chains deployed, with respective IDs Pmc7iH8b.. and Klm314noP8... The pink chain Pmc7iH8b.. has two smart contracts on it (3037 and 2225) and the blue chain Klm314noP8.. has one smart contract (7003).

The UTXO Ledger has 1 address P6ZxYXA2... The address P6ZxYXA2.. controls 1337 iotas and 42 red tokens on the UTXO Ledger. The same address also controls 42 iotas on the pink chain and 8 green tokens on the blue chain. So, the owner of the private key behind the address controls 3 different accounts: 1 on the L1 UTXO Ledger and 2 accounts on 2 different chains on L2.

At the same time, smart contract 7003 on the blue chain has 5 iotas on its native chain and controls 11 iotas on the pink chain.

Note that “control over account” means the entity which has the private key can move funds from it. For an ordinary address, it means the private key of the address. For a smart contract, it means the private keys of the committee which runs the chain (the smart contract program can only be executed with those private keys).