Cardano is one of the most complex, well thought out, and usable cryptos to enter the space. It was started in 2015 with the stated objective of changing how crypto was developed. There was no white paper because the team was focused on being agile instead of sticking to a rigid plan.
Their plan involved:
Creating a new stack (best compared to TCP/IP)
Separate accounting and computation from transactions
Make everything modular – good coding practice
Apply security practices at start – like BTC and several other cryptos
Plan for upgrades
Decentralized funding for future dev – FINALLY
Planning for phones – About time!
Cross chain comparability
Build standard protocol from Internet engineering task force
Allow for regulators to oversee, but maintain some anonymity like BTC
Some highlights of the team
This is an important one; they seem actually to understand economics. They also recognize that every crypto can’t be in the fast lane or it stops being fast, just like the highways where people aren’t ticketed for cruising in the passing lane(s). Use efficiency instead of novelty, enough doing crap just because you can. Don’t build it unless there is an apparent and rational reason. Updates shouldn’t require a hard fork, allow room for patches instead of chain splits, they devalue the currency. Improve the process for social consensus to avoid future BTCs splitting 1K times. Regulators want in and need in if we’re going to integrate old systems like ACH and SWIFT. Include optional fields for things like name and reason for tx, metadata, etc.
New Cardano Protocol Stack
They are developing a two-layer protocol stack to include:
CSL – Cardano Settlement Layer
CCL – Cardano Computation Layer
We’ll see Delegated Proof of Stake from Ourboros, which allows additional protocols due to modularity. It’s the most secure as of yet. They’ve got the foresight to engage the community in development, and allow voting for priority development tasks. This will mitigate the politics and antagonistic parties, like bCash and BTCGold where new chains were created for no apparent reason except politics. (Yes I realize that block size was hotly debated, but it was only a band-aid on a gushing wound.)
Cardano Settlement Layer (CSL)
User layer (application) to be built on top of CSL
– will contain the values of transactions
– 2 scripting languages / 1 to move value / 1 to support applications
– support side-chains to integrate with other ledgers
– support for more signatures, including quantum resistant
– support user issued assets
– separated tx data from computational data
Funding the future
A decentralized trust to fund development from Monotonically decreasing inflationary tx fees. This is their fancy way of saying that they’ll control inflation to ensure they keep enough money to pay for future development. This creates a decentralized system where anyone can request funding, but all stakeholders get a vote in whether or not to pay the person. This requires you bring some legitimate value to the table, or you ain’t gett’n paid.
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Another new language…. SIMON, inspired by financial engineers. As you read through their documentation, you’ll see a lot of things, including the writing, was inspired by engineers. Cardano will automatically include all financial transaction elements. No need to specially design any “plugins”, libraries, or modules to make something work. The option remains if it becomes needed, creating more flexibility. This is also all about security, no more printing money like the US Federal Reserve, or Tether. PLUTUS, another made up language, to be explicitly designed for interoperability with the Settlement Layer, as well as legacy systems, specialized Databases, and whatever other weird stuff industry throws at it. This will be the support for all things specialized, including side chains.
Cardano went with elliptic curve cryptography, specifically Ed25519 curve. They plan to have more compatible signatures in the future to mitigate the currency becoming useless once a signature is broken.
——–User Issued Assets (UIA)
Tokens, like Kin, ETHOS, or anything sold on EtherDelta is a UIA on the Ethereum blockchain. OMNI is an example of one on the BITCOIN chain. The problem is, you still need to have some of the native currency to pay the transaction fee. In BTC, there is a massive backlog and outlandish high transaction fees. On ETH, delays occasionally occur, bringing the chain to its knees due to an inability to scale. There is also low or no motivation for some master nodes to support these UIAs as they just clog things up, require additional computational power and take away from the purpose that master node was set up. Different nodes care about different things and shouldn’t have to care about all things.
This is addressed in several ways, but the most important is probably the different incentive scheme to reward consensus nodes depending on the token transactions they include.
Current blockchain solutions don’t have the ability to use resources from users like something like Bit Torrent. Instead, they’re stuck and getting slower based on the number of users engaged. It’s a problem, and they say they’re addressing it….
——–CCL Cardano Computation Layer
This is separated, unlike most cryptos, only sharing this philosophy with BTC. The CCL is all about the work, with none of the emotion. How much money did you make, as opposed to, what did your boss say about that over time.
——–MPC – Multi-party computation
This is a subset of cryptography, enabling two parties to communicate and conduct calculations on one another’s data like in an audit, or manipulate jointly owned data. This most important aspect of this is that it’s all conducted privately, cryptographically signed, encrypted from prying eyes. This allows me to anonymously look at how much everyone else in my company makes, without seeing who any of them are and without them knowing I’m the person searching. This can only happen if all those numbers are public. A company can easily choose to make some data private and other data open, like in this example. I am unclear how the use of MPC will reduce blockchain bloat or reduce latency (lag), but they promise it will. In early 2018, Cardano planned to roll out a new library to support the CCL layer and the MPC for future functionality development.
They’re teamed with the University of Illinois to develop the compatibility functions to interface with Ethereum and other block chains. They will integrate the Ethereum virtual machine, allowing a new world of cross chain activities. This is all a test at this point but will set the framework for a final product to perform as expected, in a secure way once complete.
Smart contracts are just small, relatively simple programs. Cardano wants to build on that to make them more akin to services to be called as needed. This makes a world of sense, allowing a “plugin” or contract developer to charge a small fee for their work in developing that contract. Solidity is being adapted to use in low risk and legacy applications while Plutus is being designed for more security.
Ourboros, the Delegated Proof of Stake system being used is designed for flexibility and functionality, which enables the different layers and chains to work together. Some chains can entirely ban users based on a set of rules while others can be open to anyone holding the token. Some may allow regulators access while others may allow nobody but interested parties or everyone. Ourboros leaves options wide open based upon the need.
Hardware security modules are set to be added with Sealed Glass Proofs to enable guarantees better than SnapChat. You can be sure something was deleted and not copied or leaked to a malicious actor. This allows total anonymity and security, past the needed trust of the manufacturer. This will enable Personal info like a national ID or citizenship to be verified, without the info going to or being viewed by anyone. This also enables more taxation, which is a show stopper for some, but keep in mind, this is optional and an essential step in gaining credibility. The government will take their pound of flesh, one way or the other. The primary equipment being looked at as of late 2017 was the Intel SGX and ARM Trustzone due to their market trust and history of successful use.
The team has a solid understanding of reality where regulators WILL gain access or else, but also clear political and ethical philosophy. There is no way to set up for regulation due to all the varying global jurisdictions. Privacy is vital, and control must stay with the end user due to corrupt governments existence. Lastly, the blockchain must remain immutable. There is entirely too much temptation for anyone to gain to allow changes to be made. That being said, they do wish to integrate the Hardware Security as something of an ID to control movement and automatically pay taxes to your jurisdiction, verify your identity, and ensure jurisdictional compliance. A Decentralized Autonomous Organization (DAO) will be created and will have the ability to change transactions, but only within the scope of smart contracts they own and are used in that transaction. This is more or less a way to pay a little bit of money to ensure you don’t screw something up, or pay a Nigerian Prince to give you a couple $million.
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