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In another question Andrew Westberg mentions that staking rewards are not stored as UTxOs to save space on the blockchain.

My question is: how exactly are those rewards associated with one's stake address? How can the blockchain store something that is not a UTxO and how does this save space?

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Cardano is using what we call a chimeric ledger, which means it uses both account (similar to Ethereum) and UTxO (similar to Bitcoin) style accounting systems.

This enables the ledger to take advantages of the UTxO system but at the same time be storage efficient where it comes to specific aspects of the ledger, such as rewards.

I highly recommend a video of Sebastien going thought the paper in question to learn more.

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