Summaries/Cardano overview with Charles Hoskinson

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IOHK Cardano whiteboard; overview with Charles Hoskinson[edit]

This summary is also available in German - Deutsch

Summary[edit]

Introduction[edit]

Cardano is a 3rd generation protocol built to be scalable, interoperable and sustainable. It’s the view of the team behind it of how we get cryptocurrencies from the first million to the first billion users. Built with peer-review with high assurance software standards and by a large international team.

  1. Scalability
    • Transactions per second
    • Network
    • Data Scale
  2. Interoperability
    • Communication between cryptocurrencies (cc)
    • Communication between cc space and banks
  3. Sustainability
    • How do we pay for futher development?
    • Where should we go?

Scalability[edit]

“What we are trying to do is figure out ways to solve these (scalable) problems in a very elegant way namely that as we add people network we naturally get more transactions per secound we get more network resources and eventually we’ll get more available overall data storage without compromising our security model.”

  1. Transactions per second
    • Ouroboros Proof of Stake Protocol (Videos#Dr._Peter_Ga.C5.BEi_presenting_Ouroboros_at_MIT video) is designed in a modular way.
      It breaks time into epochs and grabs a random stakeholder to slotleader which do the same work as miners do in Bitcoin. But a slotleader doesn’t have to maintain just a single block and a single chain they can actually maintain other blocks and other chains (parallel transaction processing). It’s intended that Ouroboros will be using a quantum resistant signature scheme (sometime in 2018).
  2. Network
    • RINA: Recursive Internetwork Architecture
      A blockchain is like a distributed computer and TCP/IP isn’t particularly well suited for this. RINA is a better way of structuring networks that gives us similar types of privacy/transparency and scalability guarantees that you would expect to get from TCP/IP. They are still working on it and will bring it to Cardano ecosystem in part in 2018 and completely around 2019.
  3. Data Scale
    • Partitioning
      A user doesn’t have a full copy of the blockchain, rather some chunk of the chain as opposed to many other chunks and there’s some notion that you can put all of these chunks together. But overall still get the same level of assurance and security.
    • Sidechains
      Creating a compressed representation of a blockchain and creating a interoperability between chains with a high level of certainty even if the proofs are quite small (KB/MB).

Interoperability[edit]

"Let’s say you’re a cc company and you issue a ERC20-Token […] you raise millions of dollars worth of ether. As a company with a bank account you begin selling that ether and deposit into your bank account. The first question they’re going to ask is where did you get these millions of dollars from? […] Who did you get it from? Who are your customers? And you respond people over the internet - unfortunately that’s really not a good answer."

  1. Communication between cryptocurrencies (cc)
    • Currently it’s very difficult for Ethereum and Bitcoin to understand each other. Atomic Swaps or Sidechains give the ability to know if a transaction is legitimate or not. You have to have the ability to do that in a very compressed way without having a full copy of the entire blockchain because cryptocurrencies are becoming larger and larger. There is a Cardano sidechain paper on the approach to generate proofs in the proof-of-work-world. The goal is to build a internet of blockchains. Take a look at the Videos#Cardano_whiteboard:_Sidechains_with_Dionysis_Zindros Sidechain-Whiteboard video.
  2. Communication between cc and banks

    “If we are successful with this (interoperability side) we can really think of Cardano as the glue that can facilitate the internet of blockchains. Bitcoin can stay as Bitcoin, Ethereum can stay as Ethereum, Ripple can stay as Ripple and the banks don’t have to change much but Cardano provides this necessary bridge that isn’t centralized and isn’t fragile, rather it’s a decentralized network and it really ushers in this great new era of interoperbility”
    • Metadata
      This is the story behind the transaction (where did you spend it / what did you spend it on / who did you give it to). Metadata allows you to put transactions into an hierachy of risk. These informations are incredibly personal and private and in a blockchain these informations would be permanent to the general public. Cardano want to figure out where, when and how we can put metadata on a blockchain to benefit in terms of audit ability, immutability and time stamping in a responsible way.
    • Attribution
      This is about identity of actors involved in transaction. We have to know where the money came from and where the money is going. Now we don’t have a good way to identify people. Cardano is exploring how and when we can use cryptocraphic mechanisms to identify ourselves. This can be used in a very graceful and easy way when people are required to give attribution of transactions.
    • Compliance
      This combines things like:
      KYC = Know your Customer
      AML = Anti Money Laundering
      ATF = Anti Terror Financing
      These are points that are not considered in the cc-space but that’s the groundwork of any financial institution. Cardano wants to find a healty balance so metadata and compliance can put together on a case-by-case and voluntary base. When somebody in the cc-space wants to do business in the legacy world they should have an ability to transmute the transaction from a cc-transaction to one that a bank can recognize and feel comfortable with.

Sustainability[edit]

  1. How do we pay for futher development?
    We know two common financing methods. First is the patronage model (for details please see the video at time 35m46s). It will lead to centralization of power into the hands of a few who want to modify the protocol in a certain direction. Second model is the ICO (Initial Coin Offering). It’s like a quick float of energy and provides a lot of capital in the very beginning but it’s finite and eventually runs out.
    • Can we construct a system with a treasury?
      Treasury is a decentralized bank account funded through the system. There will be democratic participation connected to the system that allows the stakeholders to start having discussions about priorities, namely what ballots ought to be funded. So if someone want to work on Cardano (e.g. a software developer marketer or a research scientist) they can submit a ballot and the stakeholders can vote. If the ballot is approved the treasury will open up and pay out. This system is robust because it has a way of being refilled on a continuous basis; it’s directly proportional to the overall influence of the size of the currency so as the currency grows it has more and more resources available which in turn can be spent to grow the currency.
    • This is a tremendous endeavor
      We need:
      • a proper and fair voting system
      • incentives to vote and participate to provide the notion that this system is a common good
      • an easy and constructive ballot system; reasonable ballots have higher precedence but doesn’t require centralized governance.
    • Voting system
      It will be a modification of liquid democracy combined with an incentive treasury model. For more information take a look at this video.
  2. Where should we go?

    A cryptocurrency isn’t static, it has to be able to change and generally this is done with soft- or hard-forks. So how we can make a change on a chain without break with it? A good analogy is the constitution of a country: if you want to change it you can do this in a difficult universal consensus way without break the constitution.

    Adoption for Cardano
    With a treasury system for approving ballots Cardano is able to consider improvement proposals. Someone can propose a change and then there is going to be a process which they can follow that allows the network to vote on whether this should be ratified or not. This should be a slow systematic deliberate process that takes time and effort with increasingly higher thresholds prior to eventual adoption.