This platform does not have a clear practical benefit, it has been repeatedly criticized for the lack of smart contracts, but nevertheless, it has become one of the leaders of the crypto world, taking fifth place in the rating of digital assets by market capitalization.
We’re going to find out what is the secret to success and what are the key features of the Cardano project.
In June 2014, mathematician and entrepreneur Charles Hoskinson, who was at the origins of Ethereum, left the project because of disagreements about the vector of further development of the platform. Together with the executive director of the Ethereum Foundation, Jeremy Wood, in 2015, he founded the Input Output Hong Kong company, which began to prepare and develop a new crypto platform — Cardano.
The name was chosen in honor of the 16th century Italian mathematician Gerolamo Cardano, whose encryption inventions lie behind modern cryptography. And in honor of the first programmer in history, more precisely, a female programmer who lived in the 19th century Countess Ada Lovelace, the project’s cryptocurrency, ADA, was named.
White paper of the Ouroboros blockchain protocol (named after the mythical snake biting its tail) was released on February 7, 2017. The platform was officially launched on September 29, 2017.
What sets Cardano apart is its deep scientific approach. The founders of the project claim that the Proof-of-Stake consensus algorithm, which is used in the Ouroboros protocol, is the only consensus protocol that can be mathematically proven to be safe. Knowledge intensity is also the reason the implementation of the protocol’s capabilities in practice takes longer than in other similar systems. Since its founding, Input Output Hong Kong has produced over 40 academic articles on Cardano security.
The Ouroboros protocol has several versions. The first is the Ouroboros Classic version, which was focused on security in a synchronous environment — when blockchain nodes are always online, ready to create blocks, and their clocks are running in sync. Initially, it was the main Cardano staking protocol, so let’s focus on it in detail.
The Ouroboros Classic protocol operation is divided into time segments called “epochs”. Each “epoch” is divided into 21,600 time “intervals” with a duration of 20 seconds. The whole “epoch”, accordingly, is exactly 5 days. Each slot is a 20-second time window in which the “slot leader” (the selected node) can create a block. Before an epoch begins, all slot leaders for that epoch are chosen at random.
To do this, Ouroboros Classic uses the Follow-the-Satoshi method. In short, each Lovelace bet (0.000001 ADA, similar to how 1 Satoshi equals 0.00000001 BTC) is a lottery ticket that gives you a chance to win the right to create a block. This means that anyone can participate with any bet amount (even with 1 Lovelace) and that the chances of winning are proportional to the number of coins placed: the higher the bet, the higher the chance.
However, a lottery requires more than just lottery tickets. It also needs a method of randomly selecting a winner. To do this, the initial number of random numbers that determined the slot leaders during the first epoch was placed in the genesis (historically the first) Cardano block.
The randomness algorithm for the next epoch is generated using a cryptographic scheme called Publicly Verifiable Secret Sharing (PVSS). Basically, every time a block is created, the nodes play a coin flip game to generate a random number and use PVSS to encrypt the results in the blockchain, making them publicly available.
At the end of an “epoch”, these numbers are combined to produce a final random number, which all participants use to select slot leaders for the next epoch. As the randomness data generated during an epoch is transferred to the next one, a closed loop is formed. That’s why the protocol was named Ouroboros, after that mythical snake.
Research groups (which, as we remember, are enough in the project) determined that the work of the Ouroboros Classic protocol has vulnerabilities: the need for synchronous operation of all nodes, as well as the publicity of “slot leaders”. That is why, besides Ouroboros Classic, alternative consensus protocols have been developed in the blockchain.
- Ouroboros Praos. Adapted for a semi-synchronous environment.
- Ouroboros Genesis. Adapted for autonomous operation.
- Ouroboros Hydra. Second level off-chain protocol, aimed at further horizontal scaling of the network.
- Ouroboros BFT. Protocol based on the Byzantine fault tolerance consensus used at one stage of the platform’s development, when it was transitioning to the decentralization stage.
On The Way To The Third-generation Blockchain
After updating the consensus protocol to Genesis, Ouroboros was the first Proof-of-Stake protocol that proved mathematically to guarantee consistency and survivability in both synchronous and semi-synchronous environments — as long as most participants are honest — as in Bitcoin. Therefore, it is more secure than other PoS protocols, which require at least 2/3 honest participants, and just as secure as Bitcoin, but with less energy consumption and better performance.
In its development, Cardano goes through five eras, or phases, each of which represents a milestone in the platform’s development, and the components of these phases are being developed in parallel. These are the phases:
- Byron is the first stage, named after the father of Ada Lovelace, the English poet, Lord George Byron. It marked the launch of a network with basic functionality, such as the ability to translate ADA.
- Shelley is a stage named after Lord Byron’s friend, the poet Percy Bysshe Shelley, or perhaps after his wife Mary Shelley, author of the novel Frankenstein; or, The Modern Prometheus. Percy Bysshe Shelley’s poem “Ozymandias” the protagonist of which collects fragments of the once whole statue, and Mary Shelley’s Frankenstein, assembled from body parts of various people, seem to push the understanding that this era of Cardano development is about the decentralization that is to come after the transition to the Ouroboros Genesis protocol.
- Goguen is an era named after the American mathematician Joseph Goguen, during which the platform will implement native tokens, which differ from ERC-20 in greater security, and in that they do not require the creation and execution of smart contracts.
- Basho is a phase named after the Japanese poet Matsuo Basho, the optimization period of scalability and compatibility.
- Voltaire is a phase named after the French Enlightenment philosopher Voltaire, on which the transition to direct democracy in blockchain governance is to take place.
The first was the Testnet era, which lasted from the start of the project in 2015 until January 2017, when the initial network deployment and beta testing took place.
The second era, Bootstrap, or the “promotion era”, is happening now. At this stage, the network is completely centralized, all consensus nodes are controlled by Input Output Hong Kong and its partners, and there is no smart contract support.
After its end, there will be a Reward era, when the network will be fully decentralized, and ADA owners will begin to receive rewards for staking coins.
Five Million Ethiopian Students
When all stages are completed, Cardano should become a third-generation blockchain. This path, however, is overcome rather slowly, as observers often talk about. For example, billionaire Mark Cuban recently questioned a blockchain project that does not support smart contracts and has no practical application for users.
In response to the criticism, Charles Hoskinson, father of the project, recalled that back in 2018, Cardano representatives signed a memorandum of understanding with the Ethiopian Ministry of Science and Technology to teach Ethiopian developers and use Cardano in the industrial sector.
We have five million students in Ethiopia, thousands of assets issued on Cardano, a nice DApp ecosystem brewing for smart contract launch, a new VC model with catalyst, huge community.
The five million students Hoskinson talks about is expected to be the predicted amount that blockchain will work with. Cardano reached an agreement with the Ethiopian government to implement a decentralized platform, Atala PRISM, which the Ethiopian government will use to identify and track students’ progress throughout their schooling. Atala PRISM will allow them to track academic grades, student identities, completed assignments, desired courses, and more. As of this writing, this partnership is considered the largest agreement between a government agency and a blockchain development firm.
Cardano is a promising and ambitious project with a multi-level structure. The independent development of its elements allows the blockchain to easily adapt to environmental conditions.
When all levels of its ecosystem are complete, the blockchain expects to squeeze out Ethereum. It is expected that in the second half of 2021, implementing smart contracts will take place in Cardano, which will provide the ability to create DApps, decentralized financial products, and other projects that require advanced coding, but decentralized.
Fundamentality and knowledge-intensiveness are both advantages and vulnerabilities of the platform because, in a rapidly changing world, ideas quickly become obsolete. While Cardano is rocking, other projects have appeared that implement more innovative ideas and are better suited for business adoption.