Glossary · Smart Contracts

Collateral.

A reserved input the network collects as a fee if a Plutus script fails on-chain.

Think of it as

A small deposit the network keeps if your script throws an error on-chain. Like a no-show fee that only fires when something actually goes wrong.

In depth

Plutus transactions declare a collateral input (a key-locked UTxO worth at least 150% of the fee, the `collateralPercentage` protocol parameter). Every node validates in two phases: phase-1 checks (signatures, fees, balance) are cheap, and a failing transaction is simply rejected at no cost; phase-2 runs the scripts. If a script unexpectedly fails in phase-2, the transaction is still added to the chain so the network is paid for the work, and the collateral is forfeited into the fee pot (not burned). Since the Babbage era, a transaction can also declare a `collateralReturn` output; the collateral input may then even hold native tokens, only the required ada is taken and the rest comes back, you don't lose the whole input UTxO.

Example

If a swap script fails because the price moved, the user loses just the collateral (a few ada), not the funds they wanted to swap.

Next on this path

  1. Inline datum A datum stored directly inside the UTxO it belongs to, instead of as a hash that the spender has to resolve.
  2. Reference script A script body stored on-chain in a UTxO so transactions can use it by reference instead of bundling the whole script every time.