Cardano: The HOT New Crypto That Accepts Its Social Nature

On October 4th, 2017, Cardano had a market cap at USD $580,911,571 for an equivalent of 137,673 BTC with a circulating supply of 25,927,070,538 ADA at a price of $0.022406 per coin. Today, Cardano hits the lists at #16 by market cap, up +5.5% for the second strongest performance of the day amongst the top 20 cryptocurrencies (behind Ripple, which is posting a +5.75%).

Who is Cardano and why is their coin so HOT right now?

CARDANO: Blockchain | Cryptocurrency | Decentralised Applications

  • Cardano is a project that began in 2015 as an effort to change the way cryptocurrencies are designed and developed.
  • “The overall focus beyond a particular set of innovations is to provide a more balanced and sustainable ecosystem that better accounts for the needs of its users as well as other systems seeking integration.”
  • Cardano is a next-generation blockchain platform with more advanced features than any protocol yet developed.
  • “Our large team of expert engineers and researchers drawn from around the world started by deconstructing the concept of a cryptocurrency. Then, incorporating our groundbreaking Proof of Stake algorithm, Ouroboros, the IOHK team employed a first principles approach driven by peer reviewed academic research to build Cardano from the ground up.”
  • Cardano is the most precisely engineered cryptocurrency yet, a product that brings together such disciplines as distributed systems, mechanism design and cryptography.
  • Cardano’s multi layer protocol performs advanced functions, and has at its foundation a settlement layer that is elegantly linked to a control layer. The settlement layer will have a unit of account, while the control layer will run next-generation smart contracts. The control layer will be programmed to recognize identity, assisting compliance and allowing blacklisting for instance.
  • As a whole, the protocol’s design is geared towards protecting privacy rights of users, while also taking into account the needs of regulators.
  • “We have designed a system that can be upgraded by way of soft forks, and are installing a treasury system that will ensure the sustainability of the protocol.”
  • In the spirit of many open source projects, Cardano did not begin with a comprehensive roadmap or even an authoritative white paper. Rather, it embraced a collection of design principles, engineering best practices and avenues for exploration. These include the following:
    • Separation of accounting and computation into different layers
    • Implementation of core components in highly modular functional code
    • Small groups of academics and developers competing with peer reviewed research
    • Heavy use of interdisciplinary teams including early use of InfoSec experts
    • Fast iteration between white papers, implementation and new research required to correct issues discovered during review
    • Building in the ability to upgrade post-deployed systems without destroying the network
    • Development of a decentralized funding mechanism for future work
    • A long-term view on improving the design of cryptocurrencies so they can work on mobile devices with a reasonable and secure user experience
    • Bringing stakeholders closer to the operations and maintenance of their cryptocurrency
    • Acknowledging the need to account for multiple assets in the same ledger
    • Abstracting transactions to include optional metadata in order to better conform to the needs of legacy systems
    • Learning from the nearly 1,000 altcoins by embracing features that make sense
    • Adopt a standards-driven process inspired by the Internet Engineering Task Force using a dedicated foundation to lock down the final protocol design
    • Explore the social elements of commerce
    • Find a healthy middle ground for regulators to interact with commerce without compromising some core principles inherited from Bitcoin
  • Cardano is a decentralised public blockchain and cryptocurrency project and is fully open source.
  • Cardano is developing a smart contract platform which seeks to deliver more advanced features than any protocol previously developed.
  • Cardano is the first blockchain platform to evolve out of a scientific philosophy and a research-first driven approach.
  • The Cardano development team consists of a large global collective of expert engineers and researchers.
  • Cardano is a decentralised platform that will allow complex programmable transfers of value in a secure and scalable fashion.
  • Cardano is one of the first blockchains to be built in the highly secure Haskell programming language.
  • The aggregation of our principled exploration of the cryptocurrency space is two collections of protocols:
    • A provably secure proof of stake based cryptocurrency called the Cardano Settlement Layer (CSL)
      • Cardano SL (or Cardano Settlement Layer) is a cryptographic currency designed and developed by IOHK in conjunction with the University of Edinburgh, the University of Athens and the University of Connecticut. Cardano SL is based on the Haskell implementation of the white paper “Ouroboros: A Provably Secure Proof of Stake Blockchain Protocol” by Aggelos Kiayias, Alexander Russell, Bernardo David and Roman Oliynykov.
      • You can think of Cardano SL as Bitcoin reimagined with a freedom to fix Bitcoin’s design flaws.
      • Cardano SL is called “Layer” for a reason: It is the first component of the Cardano Platform.
      • CSL’s consensus algorithm is controlled by a diverse and increasingly more decentralized set of actors or their delegated assigns.
      • While there are similarities between Bitcoin and Cardano SL, there are also many differences between these two cryptocurrencies. The most significant difference is that Bitcoin is a proof of work type cryptocurrency, while Cardano SL makes use of a proof of stake approach to reach consensus. This encourages honesty and long term participation.
      • The value ledger is called the Cardano Settlement Layer (CSL). As the purpose is to account for value, the roadmap has the following goals:
        • Support two sets of scripting languages, one to move value and another to enhance overlay protocol support
        • Provide support for KMZ sidechains to link to other ledgers
        • Support multiple types of signature including quantum resistant signatures for higher security
        • Support multiple user issued assets
        • Achieve true scalability, meaning as more users join, the capabilities of the system increase
    • A set of protocols called the Cardano Computation Layer (CCL).
      • With CCL, it is possible to create a special purpose token held by delegates of that ledger who could be regulated entities, thereby creating a permissioned ledger.
      • The flexibility of this approach allows for different instances of CCL to materialize with different rules about the evaluation of transactions. For example, gambling activities could be restricted unless KYC/AML data is present simply by blacklisting non-attributed transactions.
  • “Our design emphasis is to accommodate the social aspects of cryptocurrencies, build in layers by separating the accounting of value from complex computation, and address the needs of regulators within the scope of several immutable principles.”
  • Cardano modularity allows for features such as delegation, sidechains, sub-scribable checkpoints, better data structures for light clients, different forms of random number generation and even different synchronization assumptions. As a network develops from having thousands to millions and even billions of users, the requirements of its consensus algorithm will also change. Thus, it is vital to have enough flexibility to accommodate these changes and thereby future-proof the heart of a cryptocurrency.
  • “We argue that users of a protocol need incentives to understand the social contract behind their protocol and have the freedom to propose changes in a productive way. This freedom extends to every aspect of a value exchange system, from deciding how markets should be regulated to which projects should be funded. Yet it cannot be brokered through centralized actors nor require some special credential that could be co-opted by a well funded minority.”
  • “Our hope is that Cardano will eventually include a formal, blockchain based system to propose and vote on both soft and hard forks. Bitcoin with its block size debate, Ethereum with the DAO fork, and many other cryptocurrencies besides have endured long standing and, in frequent cases, unresolved arguments over the technical and moral direction of the codebase.”
  • Cardano is a financial system that accepts its social nature.
  • Cardano’s design borrows from TCP/IP the concept of separation of concerns. In other words, separation of value from computation. This separation does not mean that Cardano will not support smart contracts. On the contrary, by making the separation explicit, it permits significantly more flexibility in the design, use, privacy and execution of smart contracts.
  • With respect to sidechains, Cardano will support a new protocol developed by Kiayias, Miller and Zindros (KMZ sidechains) based upon prior results from proofs of proofs of work.
    • The concept allows for the secure and non-interactive movement of funds from CSL to any Cardano Computation Layer or other blockchain supporting the protocol.
    • KMZ sidechains are the key to encapsulating complexity.
  • “For Cardano, we decided to start with using elliptic curve cryptography, the Ed25519 curve in particular. We also decided to enhance the existing libraries by adding support for HD wallets using Dr Dmitry Khovratovich and Jason Law’s Specification.”
  • “We are interested in integrating BLISS-B to add quantum computer resistant signatures to our system. We are also interested in adding SECP256k1 to enhance interoperability with legacy cryptocurrencies such as Bitcoin.”
  • “Cardano has been designed with special extensions that will allow us to add more signature schemes through a soft fork.”
  • Cardano has adopted a pragmatic approach to multi-asset accounting. Building in stages, the first challenge is designing the necessary infrastructure to support the demands of thousands of UIAs. Namely the following advancements are necessary:
    • Special purpose authenticated data structures to permit the tracking of a very large UTXO state.
    • The ability to have a distributed mempool to hold a huge set of pending transactions.
    • Blockchain partitioning and checkpoints to permit a huge global blockchain.
    • An incentive scheme that rewards consensus nodes for including different sets of transactions.
    • A subscription mechanic that allows users to decide which currencies they want to track.
    • Strong security guarantees that UIAs enjoy similar security as the native asset.
    • Support for decentralized market making to improve liquidity between UIA and the primary token.
  • “Our preliminary efforts for finding the right authenticated data structure have resulted in a new type of AVL+ Tree jointly developed by Leo Reyzin, IOHK and Waves. More research is required, but it is a foundational advancement that will be included in a later version of Cardano.”
  • “We expect — subject to research results — to include a protocol into Cardano for UIAs during the Basho of CSL release in 2018.”
  • “Our scalability goals for Cardano are greatly aided by our consensus algorithm.”
  • OUROBOROS
    • IOHK scientists led byProf. Aggelos Kiayias have designed the first provably secure proof of stake algorithm called Ouroboros.
    • “Our proof of stake protocol is called Ouroboros and it has been designed by an extremely talented team of cryptographers from five academic institutions led by Professor Aggelos Kiayias of the University of Edinburgh. The core innovation it brings beyond being proven secure using a rigorous cryptographic model is a modular and flexible design that allows for the composition of many protocols to enhance functionality.”
    • Ouroboros permits a decentralized way to elect a quorum of consensus nodes, which in turn can run more traditional protocols developed over the last 20 years to accommodate the needs of large infrastructure providers such as Google and Facebook.
    • Ouroboros determines how individual nodes reach consensus about the network.
    • Ouroboros eliminates the need for an energy-hungry proof of work protocol, which stands as a barrier to blockchain scaling up for much wider use.
    • Ouroboros is the first proof of stake protocol that scientifically has been shown to be provably secure.
    • In terms of consensus, Ouroboros was designed in a sufficiently modular fashion to support smart contract evaluation.
    • “In our current roadmap, scaling methods will be applied to Ouroboros starting in 2018 and continue to be a focus in 2019 and 2020.”
    • Both CSL and CCL will share the same consensus algorithm. The difference is that Ouroboros can be confirmed to permit both permissioned and permissionless ledgers via token distribution.
    • The core idea of proof of stake is that instead of wasting electricity on cracking computationally heavy problems, a node is selected to mint a new block, with a probability proportional to the amount of coins this node has.
  • Cardano’s HSM strategy will be to attempt implemented specialized protocols over the next two years using Intel SGX and ARM Trustzone.
    • Both modules are built into billions of consumer devices from laptops to cellphones and require no additional effort on the consumer side to use.
    • Both are also heavily vetted, well designed and based upon years of iteration from some of the largest and best funded hardware security teams.
    • The use of HSMs to provide an identity space where PII is not leaked but yet used to authenticate and credential actors should provide a global reputation system and allow for much lower cost regulated activities to be conducted, such as online gaming with automated tax compliance or decentralized exchanges.
  • The Cardano ecosystem is developing out into the most complete and most useful cryptocurrency ever constructed.
  • DAEDALUS
    • To use Ada you must download the Daedalus digital wallet. Daedalus is a secure, HD wallet for the Ada cryptocurrency.
    • Daedalus wallet has many special features, which make it easy to use and give you a high degree of confidence about its security. These include:
      • Encrypted private keys and spending passwords, offering protection against security threats such as malware.
      • Wallets can be exported to paper certificates, giving the maximum security option of placing funds in cold storage.
      • Ada redemption is built directly into Daedalus and supports encrypted and unencrypted redemption certificates.
      • Configurable transaction assurance level monitoring, allowing users to be sure when transactions become irreversible.
    • Future releases of Daedalus will allow third party developers to build innovative applications directly for the wallet. Whether you would like micro credit, to set up recurring payments, or to exchange cryptocurrencies, it will be easy to customize your Daedalus experience.
    • Daedalus is built on top of Electron, a battle-proven open source development platform to build cross-platform desktop apps using Javascript, HTML and CSS.
    • You don’t have to be a specialist in cryptography and security to build amazing plugins for Daedalus. “We provide you with rich and secure APIs to interact with cryptocurrency backends.”
    • The core features of Daedalus are just the beginning. “Our goal is to give anyone the power to extend Daedalus with custom plugins, automation and literally any innovation you can come up with.”
    • “To keep the experience consistent for Daedalus users and simplify your development workflow, we have developed a small but flexible React UI framework that you can use to build beautiful plugins that just merge into the whole platform.”
    • You will be able to easily adjust the current color theme for all components in the Daedalus Design Language. The best thing about this: “Developers just have to follow our guidelines to use the component framework to make this work.”
  • “Cardano is a software platform ONLY and does not conduct any independent diligence on or substantive review of any blockchain asset, digital currency, cryptocurrency or associated funds.”
  • “Stake” gives a user the power to control various Cardano SL algorithm parts, for example: being the slot leader, voting in the Update system, taking part in MPC/SSC. This is why all thresholds in Cardano SL protocol are expressed in terms of stake, not balance.
    • “When we are talking about the ‘stake’, we are talking about a user’s ability to control Cardano SL.”
  • IOHK will maintain a single official client, but there is also room for third-party alternative clients maintained by the community.
  • The Bootstrap era is the period of Cardano SL existence that allows only fixed predefined users to have control over the system.
    • The next era after Bootstrap is called the Reward era. Reward era is actually a “normal” operation mode of Cardano SL as a PoS-cryptocurrency.
    • After the Bootstrap era, the Reward era will start. During this time, the network will operate in a completely decentralized, trustless mode. “We expect staking pools to emerge during this era, allowing stakeholders with little stake to get rewards as stakeholders with large stake keep their nodes online to maintain the protocol in a decentralized fashion.”
  • The system will receive regular software updates moving forward, and a massive amount of new features will be released in the near future.
  • Though Cardano SL is designed and implemented as a distributed network, for purpose of DDoS protection additional facilities were added to Cardano SL implementation and topology.
  • Currently all nodes are divided into 3 groups:
    • Core Nodes:
      • “We bring additional security level around this set of core nodes: we put them inside a perimeter of relay nodes, so core nodes are isolated from the public internet and only relay nodes are allowed to communicate with core nodes. This is how we reduce probability for them being attacked.”
      • Core nodes never create currency transactions.
    • Relay Nodes:
      • You can think of relay nodes as of proxy between core nodes and public internet.
      • Since relay nodes are not isolated, they can be attacked, but they are in principle stateless and do not have any stake, so they can be moved, or their number can be increased.
      • If relays are taken down, this does deny service, but the integrity of the core nodes (and the blockchain) should not be compromised.
      • Since relay nodes do not have any stake, they cannot be slot leaders.
      • Cannot create currency transactions.
      • Relay nodes are fully under the control of the federated committee of initial stakeholders.
    • Edge Nodes:
      • Edge node is a simple node that anyone can run on their computer.
      • Only these nodes can create currency transactions.
      • Since edge nodes do not have any stake, they cannot be slot leaders as well as relay nodes.
      • Edge nodes cannot directly communicate with core nodes, only with relay nodes and with other edge nodes.
  • ADA max supply: 45,000,000,000 ADA
  • The primary market for ADA is Bittrex under currency pairing ADA/BTC.
  • The Twitter handle for Cardano is: @CardanoStiftung
  • Cardano market cap history: CLOSED October 3rd, 2017, at market cap $624,651,000.
  • In Cardano’s roadmap is the creation of a modular regulation DAO that can be customized to interact with user written smart contracts in order to add mutability, consumer protection and arbitration.
  • Resources:

“The reason we are building Cardano is that we feel we have a legitimate shot at delivering — or at least advancing — this vision for the developing world.”

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