P.S. — Please keep posting responses to this article. The crying and the whining about Cardano crack me up.
For those that are unfamiliar with the coin, Cardano, this article should serve as a helpful overview to get a better understanding of what it is exactly.
Before we can discuss anything that’s related to Cardano, it’s important to first give the backstory to its inception. The creator and founder of Cardano is a man by the name of Charles Hoskinson. So, before we can go into any detail about Cardano, its token currency ($ADA), purpose or anything, we will provide a brief overview of his background and his specific affiliation with cryptocurrency.
Currently, Charles Hoskinson is considered to be one of the foremost experts in the cryptocurrency field. While there are different viewpoints on Charles as a human being and his ethical standard of conduct (we’ll get into that later), few will dispute the fact that he’s legitimate in terms of his innovative ideas within the realm of blockchain technology and his contributions to some pretty large cryptocurrency projects that are still in existence today.
Below, is a short biographical synopsis of Charles that you can find online with ease:
The world came to become familiar with Charles Hoskinson through his involvement with the Ethereum project. If you remember back in time, Charles Hoskinson teamed up with Vitalik Buterin to start that Ethereum project circa 2013/2014. Long story short, time went by and Vitalik and Charles got into a tiff over whether Ethereum should be some non-profit, open source software like Bitcoin or if it should be used to monetize. Charles was on the side of those that wished to monetize the Ethereum project directly like a business.
Eventually, after some period of bickering & back and forths, Charles made the decision to simply abandon the project altogether, then go after other pursuits. Hoskinson officially departed from the Ethereum project in 2014.
As you can probably guess, this wasn’t really an amicable parting of ways and Charles more or less vowed to create a rival crypto capable of ‘dethroning’ Ethereum one day.
Soon afterward, Charles Hoskinson started something called the IOHK with a guy named Jeremy Wood:
Jeremy Wood ^
What is IOHK?
So, that brings us over to $ADA and it also shows that Charles is closely linked with the $ETC project as well [edit: This is not to suggest that $ETC was borne out of this split. I am well aware of the DAO hack, I’ve written a published article on the $ETC fork]. Also, to clarify, $ADA is currently ranked 7th among all coins in terms of market cap, which sits at $7.6 billion. So, you can see that $ADA lost a considerable amount of value since the article that I posted above was published. What’s crazy is that the original date on that article is February 7th, 2018. So, they’ve definitely been getting their asses kicked in the past few weeks.
Ethereum Classic is currently 15th with a market cap of $3.13 billion at the time of writing.
So now that we’ve gotten the back story out of the way, we can begin to focus on what Cardano is actually purposed for.
So, essentially, Cardano is another blockchain that can be used as a method of payments and is also being designed to have smart contract-based projects and activities to be built on top of the primary “settlement” layer for $ADA. In order to facilitate this, they will build extra layers, as mentioned above. Thus, they won’t need “gas” to power the transactions in the same way that one would need with Ethereum. We won’t debate the merits of whether this should be considered an inherent ‘advantage’ or not, but it’s definitely a difference worth noting (this is also present in the Ethereum Classic protocol — no doubt signaling that it’s a manifestation of the IOHK ideology of how such cryptocurrencies should be operated).
As you can see, the principle behind Cardano is fairly similar to what you see from Ethereum. Check ou t this quote from the picture posted above:
“After the settlement layer that will run ADA is complete, a separate computing layer will be built to handle smart contracts, the digital legal agreements that will underpin future commerce and business. Cardano will also run decentralized applications, or dapps, services not controlled by any single party but instead operate on a blockchain.”
One of the most unique things about Cardano ($ADA) is its consensus algorithm.
Quick Review: What is Conensus?
Consensus, in the context of blockchain technology, refers to the process by which all nodes come to an agreement. A consensus method in the context that we’re discussing refers to how all the nodes on a network come to a consensus on who has the privilege to produce the next block for the blockchain. For example, Bitcoin possesses a ‘Proof of Work’ consensus, so the miner that does the necessary calculations and figures out the ‘answer’ before all other miners becomes the ‘winner’.
…back to the consensus method discussion for $ADA
The $ADA blockchain uses a consensus method called the, “Ouroboros Praos”. If you’ve never heard of this before or don’t know how to pronounce it, don’t worry — it’s a very new concept and no one else has heard of it before $ADA introduced the concept to the world.
Here’s a description of the consensus method below, as quote don the IOHK website.
The post above states that, “Specifically, the adversary can corrupt any participant of a dynamically evolving population of stakeholders at any moment as long [as] the stakeholder distribution maintains an honest majority of stake; furthermore, the protocol tolerates an adversarially-controlled message delivery delay unknown to protocol participants.”
To those wondering what this is saying, allow us to break this down for a moment. What the quote that we extracted above is saying is basically that they’ve created a consensus algorithm where, as long as over half of the all the nodes (>50%) in the network are not corrupted by a dishonest party (someone trying to “hack” the blockchain/double spend/attack the network etc.), then the network will remain safe under this consensus method.
There’s nothing revolutionary in that concept itself, so that’s not anything you need to pay attention to. In fact, in another consensus method, the Byzantine Fault Tolerant consensus method that $NEO implements requires (>66%) of the potential actors in the network to be corrupted entirely in order for the dPoS to be rendered ineffective. There are other potential faults within that consensus method though, so it’s far from perfect, but we won’t get into that at this point because this is an article for $ADA. We just wanted to mention that fact so that everyone can have a baseline understanding of the current standard for consensus methods for the blockchain.
So, in terms of Cardano, specifically, the Ouroborus has been described as “proof of stake mining”. Essentially, the actual idea of Ouroboros combines the consensus algorithms of Proof of Stake and Proof of Work.
Here’s a link to a video on the Ouroboros algorithm — https://www.youtube.com/watch?v=Nlmv4fg4NQk
Essentially, the ‘Ouroboros’ consensus algorithm refers to a type of Proof of Stake. For those that are unfamiliar with Proof of Stake, here’ s a formal definition of the term:
Here’s the Definition of Proof of Stake
This definition above will give you a fundamental understanding of how Proof of Stake truly works. There’s a bit of a difference when exploring how this consensus algorithm works for Cardano though.
The most important thing to note though is that stake on the Cardano network is determined by one’s relative stake in relation to all others that are on the network.
For example, if there are 10 coins on the network in total and you own 4 of them, you have a 40% stake and would more than likely have the largest ‘stake’ out of all other parties (assuming that no other party owned 4 or more coins). However, if there were 100 coins on the network, then those 4 coins would only represent a 4% stake in the entire network, which isn’t insignificant, but it isn’t substantial either.
According to the Cardano website, “Nodes with a positive stake are called stakeholders, and only stakeholders may participate in running the protocol. Moreover, to be able to generate new blocks for the blockchain, a stakeholder must be elected as a slot leader. The slot leader can listen to transactions announced by other nodes, make a block of those transactions, sign this block with its secret key and publish it to the network. You can think of a slot leader as a miner in bitcoin, but the above-mentioned consensus, defines who will be able to mine, when and how much.”
Essentially, the setup that Cardano has is very similar to the delegated proof of stake consensus algorithm that you’ll find on other coins such as $EOS.
Without getting too wrapped up in the flowery speech like the claim that it’s the “fastest, most decentralized, and most flexible consensus model available”, the above should give a pretty good definition of dPoS, making the parallels between this consensus method and the Ouroboros algorithm obvious.
What’s unique about Cardano’s setup is that they reject all of the normal naming conventions of blockchain technology such as ‘blockchain’ and ‘blocks’.
Instead they divide their blockchain up by ‘epochs’, which are labeled for a pre-defined period of time. For example, 10-minute increments could be considered an ‘epoch’.
Within these time frames, there are multiple slots. For each slot, there is a slot leader, which is the role that we mentioned above when explaining the Ouroboros algorithm.
Below is an illustration straight from the Cardano website outlining how this works graphically:
Take note of the note posted at the bottom outlining that each slot represents a very short time-period like 20 seconds.
What you see above from the Cardano website explains the gist of how the $ADA blockchain is formulated and how TX are processed.
Another really important consideration to take into account for the $ADA blockchain is the process by which slot leaders are elected:
Thus, as in the other PoS methods, the wealth that one possesses on a given network correlates to their likelihood of being able to contribute to the formation of subsequent blocks. The thinking behind this type of system is that those that own the most coins would have the least incentive to undermine the integrity of the blockchain because they would have the most to lose.
However, what many PoS algorithms (not all) fail to realize is that a bad actor could obtain a substantial amount of the token/cryptocurrency in question for a short period of time specifically for the purposes of undermining the chain before dumping his/her stake.
Thus, it would be more logical if Proof of Stake consensus algorithms accounted for the amount of time that one has been staking their coins on the chain if they wish to truly enforce this principle.
As noted on the website, the slotholders are selected ‘randomly’ using a MPC (multi-party computation) algorithm.
The choices of the electors go through a ‘commitment’, ‘reveal’ and ‘recovery’ phase, as described below by the Cardano team:
From this point, the values from each one of the ‘electors’ on the chain are condensed into a value that’s called a ‘seed’. This seed is then inputted into the ‘FTS’ (Follow the Satoshi) algorithm, as alluded to in the last sentence of the paragraph posted above.
Once this occurs, a random coin is selected on the blockchain. Based on who the owner of that coin is, he/she will be deemed the slot leader for a particular slot in the next epoch. If that node is not available, then the algorithm will seek another candidate using the same method. Thus, in many ways, this resembles a ‘lottery’ system that is akin to how the NBA Draft Lottery works (for those that are familiar with the league). The more coins that one owns, the more likely it is that they will own one of the coins.
As with most other chains $ADA notes that their blockchain is susceptible to 51% attacks in the event that an attacker owns more than 51% of the total coins that are offered. An ideal situation would be complete parity among the token holders of $ADA.
No Blockchain Explorer [Edit: There is one]
[EDIT: There is a blockchain explorer!]
As the responses to the article suggest, this was incorrect. I found the blockchain explorer —https://www.cardanoexplorer.com
As we can see above and anyone can see whom visits the website, the Cardano blockchain averages a hefty 1–2 transactions every 5 minutes. Not sure how I overlooked this blockchain with all the bustling activity going on.
[Edit: Ignore the above]
Personally, I don’t like this aspect of Cardano. I believe that blockchain explorers are almost mandatory for projects nowadays (with the exception of privacy coins), so that one can see the passage of coins from one wallet to another. Otherwise, it looks like something fishy can be going on, especially with a coin like Cardano that works via Proof of Stake. Transparency would help to ensure investors that there is parity among the coin’s stakeholders. For all we know, Charles Hoskinson owns 75% of all of the coins distributed.
Above is the $ADA / BTC chart. As you can see, $ADA has depreciated against BTC by a whopping 70%.
The story remains the same for the USD chart as well, below (at the time of writing):
The drop has been steep and noticeable.
What’s the Reason for the Drop in Price?
There are a few reasons why Cardano has dropped so substantially in price:
1.) Multiple accusations from the cryptocommunity that $ADA is vaporware (bullshit) and has no real utility in there sphere. ←-This is the main one.
2.) Failure to invigorate their investor base with any noteworthy news or updates as of late. There was a roadmap that was released on March 5th, however, if you look at the prices above, it didn’t appear to have too much of an impact.
3.) Charles Hoskinson himself.
In regards to #3, there have been a number of notable criticisms that have been leveled against the man, some of which are legitimate concerns. See some examples below:
Many have also noted that the ‘Media’ section of his Twitter profile is filled primarily with pictures of him visiting different locations, eating lavish meals, attending raves, and participating in a host of activities that are entirely unrelated to Cardano or cryptocurrency in general.
Many have made the cogent point that Charles is a free, independent thinking adult that has the right to do whatever he chooses. While this is true, the flaunting of wealth and luxurious experiences appears painfully tone-deaf in the faces of the many investors that have currently lost well over half of their initial investment in Cardano if they bought at any price above $1.00 USD.
The unprofessional nature of his conduct on his official Twitter account has bothered other individuals as well. For example, denying a reporter the ability to ask questions without first receiving a public apology or doing vlog updates to the Cardano investment pool in pajamas reflects a blatant disregard for common courtesies that one would expect in this sphere from a man in his position.
While this criticism may seem harsh, it doesn’t strike me as ill-placed. I have nothing against Charles, personally. However, I feel that his apathetic disposition toward the Cardano project and it’s plummeting levels of support are totally out-of-sync with how he should be reacting to the situation.
What About the Roadmap?
The roadmap that was released by the Cardano team on March 5th is perhaps even more disappointing than the price action has been over the past few months.
Here’s a link if you wish to view it yourself: https://cardanoroadmap.com/
Apart from launching the mainnet in September 2017, there have been no other notable upgrades to the $ADA protocol. There are no approximate dates or estimations for the release of other technology by the team either. According to their website, it doesn’t look like they’re anywhere near finished any of the upgrades that they have proposed with the highest completion percentage listed on the website being 50%.
All in all, the roadmap did little to combat the claims that $ADA is vaporware. In fact, following this release, it’s looking more and more likely that this claim is true.