Decoding Cardano (ADA) Whitepaper

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cardanologo 5bfc32b1c9e77c0026b65328 Decoding Cardano (ADA) Whitepaper
Decoding Cardano (ADA) Whitepaper 2

Introduction

  • Cardano is a project that began in 2015 with the goal of changing the way cryptocurrencies are designed and developed.
  • The overall focus is on providing a more balanced and sustainable ecosystem that better accounts for the needs of its users.
  • Cardano embraces a collection of design principles, engineering best practices, and avenues for exploration.
  • The project has a long-term view on improving the design of cryptocurrencies.
  • Cardano is standards-driven and uses a dedicated foundation to lock down the final protocol design.
  • The project seeks to find a healthy middle ground for regulators to interact with cryptocurrency commerce.

Proof of Stake and Social Elements of Money

  • Cryptocurrencies are a prime example of the social component of money.
  • A large part of the value of a cryptocurrency is derived from its community, the way it uses the currency, and its level of engagement in the currency’s evolution.
  • Disagreements about philosophy, monetary policy, or even just between the core developers lead to fragmentation and forks.
  • Cardano will implement a system of overlay protocols built on top of CSL to accommodate the needs of its users.
  • Funding discussions force a relation of long and short term goals, the cryptocurrency’s social contract, priorities and the belief in value creation with particular proposals.
  • The use of formal methods, machine understandable specifications and merging a treasury with this process for financial incentives are being explored as possible avenues for inspiration.

Designing in Layers – Cardano Settlement Layer

  • When designing protocols and languages, one should look to history for inspiration, as many great ideas have been lost over time.
  • Simplicity usually wins over complexity.
  • Once a standard is set, it is likely to stick around, regardless of whether it is optimal.
  • Bad ideas can evolve into good ones if there is a will to do so.
    Cardano is a financial system that accepts its social nature.
  • Cardano’s design borrows from TCP/IP the concept of separation of concerns.
  • Blockchains are ultimately databases ordering facts and events with guarantees about timestamps and immutability.
  • Adding complex computation by storing and executing programs is an orthogonal concept.
  • It is incredibly tempting to choose the latter as Ethereum has done because it is more flexible, but it violates the design principles above.
  • Figuring out the story means that a single protocol has to be able to understand arbitrary events, script arbitrary transactions, permit arbitration in cases of fraud and even potentially reverse transactions when new information is made available.
  • Thus, we have chosen the position that the accounting of value should be separated from the story behind why the value was moved. 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.

Scripting – Sidechains – Signatures

  • Cardano is a cryptocurrency that is based upon Composing contracts, an adventure in financial engineering.
  • The primary advantage of Cardano is that security and execution can be extremely well understood.
  • Cardano will support a new protocol developed by Kiayias, Miller and Zindros (KMZ sidechains) based upon prior results from proofs of proofs of work.
  • In order to securely move value from Alice to Bob, Alice needs to prove she has the right to move the funds. The most direct and reliable way of accomplishing this task is to use a public key signature scheme where funds are connected to a public key and Alice controls an associated private key.
  • Cardano has been designed with special extensions that will allow us to add more signatures schemes through a soft fork.

Whats is the Point of All of it?

  • The main purpose of Cardano is to provide a vision for a self-evolving financial stack that can be used in jurisdictions where traditional banking systems are too expensive to deploy.
  • Cardano has been designed with feedback from hundreds of experts in the cryptocurrency industry, and it features tireless iteration, peer review, and the incorporation of great ideas from other projects.
  • Even if Cardano does not succeed in its ultimate goal, it can still make a significant impact on the way cryptocurrencies are designed, evolved, and funded.

Sustainability

  • The Cardano project is designed to create a reference library of Marketplace DAOs for smart contract developers to use.
  • The goal of the project is to promote decentralization and to encourage the community to participate in the governance of the protocol.
  • IOHK is working with a team of researchers from Lancaster University to develop a reference treasury model for Cardano.
  • IOHK is also working on a mechanism to formalize the process of proposing and vetting changes to the protocol.
  • Finally, work is being done to improve the incentives for Ouroboros, the proof-of-stake protocol used by Cardano.

Conclusion

  • Cardano is a cryptocurrency that is designed to be better than previous protocols.
  • The team behind Cardano has been careful to avoid cognitive biases, learn from history, and follow a rigorous process.
  • Cardano is meant to be a digital embodiment of the evolutionary process, able to adapt to changing needs.
  • The goal of Cardano is to be a pragmatic dreamer that is a good citizen in its community and always finds a way to pay its bills.

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