You’ve probably heard of a number of developments and implementations about cryptocurrency. One of the most talked about developments is that of “smart contracts”.
The popular platform Ethereum was the first to really commercialize smart contracts as a viable exchange mechanism. These contracts are essentially digital automatic exchange systems.
Let’s say, for example, that you wish to buy a product from a merchant with cryptocurrency. The merchant can stipulate conditions on the contract which will auto-enforce and auto-validate the terms of the contract once those conditions are met.
It protects the stake of both the buyer and seller by ensuring that the transaction takes place if, and only if, the agreement made by the two parties is followed through. What’s more, it doesn’t require a third-party to speak for either individual in case of disputes – everything takes place between the two involved parties.
As the technology is still maturing, it is far from perfect. Other companies have pounced on the lucrative potential of smart contracts by offering similar platforms that make up for the inherent shortcomings of the technology that Ethereum runs on.
In this article, we take a look at Cardano, one such a cryptocurrency platform, and their plans for the future.
Cardano’s Unique Philosophy and Goals
Launched in 2015, the team behind Cardano is supported by a group of engineers and researchers across the world. They ardently follow open-source principles and the coin platform itself is completely open source.
Interestingly, they say that they are the first blockchain platform to evolve out of a scientific and research-first driven philosophy. Other coin companies have made this claim, though Cardano seems to be at the head of the pack. We’ll talk about the implications of this philosophy shortly.
Cardano also seems to know its place in the smart contract space and in the larger context of the worldwide economy. Perhaps the most telling sign is their own admission that they do not expect their platform and cryptocurrency to upend the economic system.
Their goal is to weave cryptocurrency and its innumerable advantages – equal economic power, a single point for all transactions and efficient financial processing, among others – into current financial systems. By focusing on the iterative evolution of design and the implementation of cryptocurrencies, they hope to bring its benefits to the developing world.
Cardano was built from a set of principles that the team admired and considered worthwhile as extensions of blockchain technology. They list this in detail on their website, but here are a few of the features that they are attempting.
The modern trend has seen us moving towards mobile devices, and they’ve well and truly become the primary medium on which we conduct transactions. In 2016, the United States Federal Reserve discovered that over 50% of US citizens with a smartphone conducted bank transactions on their smartphone; that number continues to rise.
One of the critical aspects of the Cardano project is taking a long-term view on designing mobile systems for cryptocurrencies. It is not the highlight of their work but in terms of the practical impact it could have on cryptocurrency adoption, it stands out.
They are also using the power of peer research and collaborative discovery to better cryptocurrency systems, a technology that is still being tinkered with for optimization. This includes groups of academics and developers testing themselves against peer reviewed research.
Furthermore, they state that they will analyze the over 1,000 altcoins that exist and embrace what works, so that they can adopt sensible features into their system. The general sense we get from this “study and improve” approach is that they are squaring their sights on innovation and improvement first.
This sets them apart from most other altcoins which are more keen on simply raising a workable platform with a running ecosystem. Not that this isn’t on Cardano’s agenda, but it’s just that they are intent on staying abreast on the latest developments in the rapidly evolving cryptocurrency technology – a good long-term strategy.
Most importantly, however, they are seeking to address the fundamental issues that platforms like Ethereum suffer from – scalability, future updates and social obstacles to adoption. You might have heard about the “forks” that Bitcoin and Ethereum have undergone over the past months.
This is when developers decide that changes must be made to the blockchain software and, often, it results in mass panic, as the coins on the new ledger are sometimes incompatible with the old one. It has been a serious issue in the community, given that there is a chance you may lose your investment. Cryptocurrency developers have yet been unable to handle this necessary upgrade flawlessly. Cardano wishes to solve this.
Cardano has also developed a proprietary Proof-of-Stake protocol dubbed Ouroboros – a mythological symbol representing a snake eating its own tail.
This is only a quick brief of what Cardano is about. Credit is due to the team for their informative communication on the issues of blockchain and what they see as barriers to global adoption of cryptocurrency. Their whitepaper, which can be found here, is well worth a close read.
Let’s take a look at how they’ve planned their grand attempt to pioneer smart contracts.
Broadly speaking, the roadmap is guided, in order, by the following goals:
- community growth
- network development
- technological advancement
Cardano has divided their project into three phases: the Testnet Era, the Bootstrap Era and the Reward Era. After two years of intense research, Cardano launched their platform; it is currently in the Bootstrap Era (codenamed the “Byron” phase).
The Testnet Era saw the initial interaction with the cryptocurrency community. The intention here was to see how the community would respond to Cardano’s platform and its objectives, as well as test for flaws and polish the execution of the platform. All features were available, including the reward mechanism and a testnet faucet for users to receive a supply of coins.
The first stage was a success and consequently, the team released the Cardano SL client, which spurred movement into the current phase, the Bootstrap Era.
Having deemed Testnet a success, Cardano is now in “bootstrap” mode, arguably their most important development phase. This is when they will debug the network, improve code in the middleware and make API integration for third parties more efficient and simple.
Essentially, Cardano wants to test and improve the ecosystem. Any Ada coins that are redeemed will automatically be offered to a node of trusted networks that will help the run the network – at no cost to the user.
This is so that the network can take off and get past the initial laggard pace that occurs when a network just comes into play. Coins and nodes are the fuel upon which the engine of a network runs, but a sufficient amount of this fuel is required to start and maintain the engine in the first place, and that’s what the Bootstrap era is for.
The principle mechanism in this second phase of development is State Locking. It refers to a predefined set of users who have a majority stake in the network and control over the system. For the network to run, a certain number of users will have to be online – hence the selected group of users. A network stake will be evenly distributed to these users and once the network has a majority of users who are online, the platform will proceed to the Reward Era.
A key point to note here is that, in order to have a stake in the network, a user must adopt some responsibility. In other words, if you want the network to succeed and operate, you must contribute to that process.
Codenamed “Shelley”, the Reward Era is the final phase of the Cardano project, when the system is up and running without the worry of an absence of running nodes. It is here that the network will be truly decentralized, without the need of delegated nodes or predefined stakeholders to run the system. It functions independently and without supervision. Any stakeholders in this era can pool their stake to keep the nodes running and receive corresponding rewards.
If the Bootstrap era is the engine ignition for launch, then the Reward Era is the takeoff itself. The innovations and features are plenty. First, as we said, the team will implement the Open Ouroboros protocol so users can stake their coins.
Then, HD and Paper wallets will be supported, and the general performance of the wallets will also be improved. The team has also decided to incentivize stakeholders by giving them everything they need to set up their own node, thus letting them participate fully in the protocol.
Quantum computing has been making the news in the cryptocurrency world and there is some anxiety that it might render the encryption of cryptocurrencies obsolete. Cardano has foresight, however, and will implement quantum resistant signatures to the ledger.
Three other features of note that will be implemented in this era are:
- The voting system which will give users the power to decide how the protocol will change, i.e. whether a fork should take place and what updates should be made.
- Human addresses which will see the implementation of shorter more easily understandable addresses for better communication.
- A new software release strategy will incrementally release software update information to the public, keeping them in the loop on how the development is progressing.
At this point, all of the development goals including the remedying of the flaws of smart contracts, computational models, and cost and complexity optimization will have been implemented. The team sees this goal as achievable in the next 18 months; meaning that by the end of 2018, we should able to see a clear picture of how and whether Cardano has engineered improvements for smart contracts.
With the platform running independently, the team will concentrate on making software improvements and introducing Cardano Improvement Protocols (CIPs).
How Does the Future Look?
It will be interesting to see if Cardano can actually stay true to their promises of revolutionizing smart contracts. Regardless of the breadth and scope of their undertaking, this is perhaps the most captivating aspect of their project.
Their single biggest supporting element is that they are backed by leading minds from institutions such as the University of Edinburgh and the University of Illinois. It may seem like that they have grand ambitions, but those grand ambitions have strong foundations in the form of clarity in approach, careful dissection of issues and a logical strategy for implementation.
Their Ouroboros PoS protocol has been proven – scientifically proven – to be completely secure, making it an excellent feature that should make it distinct from many others who can only claim their algorithm is worthy.
The careful stratification of their roadmap also indicates that they are tackling this problem smartly. By delegating certain users to the task of building and maintaining the network, and subsequently rewarding them with a stake, they are offering the community a tangible benefit that will only help the network grow.
The community should be further bolstered by the fact that the incremental updates to the ledger without any ramifications (as described by their own open-source principles) should see them stand out from altcoins that are still struggling with how to keep their ledger up-to-date with the latest technological advancements.
Most of all, however, it is the layering of accounting and computation such that they are separate that raises a curious eye. This is a potential idea to drive the widespread adoption of smart contracts and is the solution that Cardano has proposed to solve the social problem of cryptocurrency.
To achieve commercial adoption, a smart contract has to be practically infinitely flexible to meet the circumstances and conditions of various transactions. By separating accounting from computation, the team expects to make smart contracts more flexible and private. It is this potential revolution in smart contracts that may hold their key to success, outdoing big names like Ethereum and EOS.
Related: What is Cardano?