In 2015, when IOHK’s Charles Hoskinson started working on Cardano, the first question that they asked was “what is bedrock for a cryptocurrency?”
Despite the meteoric interest in cryptocurrency and blockchain technology that we’ve witnessed in the last several months, it’s humbling to realize that until 2015 we didn’t even know what a ledger was.
Charles Hoskinson, who spoke at an MIT meeting on the future of blockchain technology said, “we had an idea of a blockchain, an append only linked list. There had been some ideas of directed acyclic graphs, like Spectre...yet we didn’t know what properties they should have or how to write a security proof…. So our chief scientist had to write a paper on it. It’s called GKL15 where we define, ‘this is a secure ledger, this the standard by which we ought to be judged’”
Often the easiest way to understand new innovations is by looking at their predecessors, in this case we will look at Bitcoin.
If we could only scientifically understand what made up a provably secure ledger in 2015, then it begs the question if Bitcoin features a secure ledger.
Amazingly, the answer is yes. Satoshi definitely deserves to be the man of the year.
“[Satoshi Nakamoto] heuristically designed a protocol that actually turned out to have all the security properties you’d want it to have without providing any security proofs that did it years before anybody bothered to clean it up. That almost never happens. So, Bitcoin is pretty magical and there’s a reason why it’s so loved.”
In other words, Bitcoin’s Proof of Work (PoW) system does create a ledger with all the security properties that we now know scientifically that a ledger should have.
If you’re wondering what Proof of Work is, it simply refers to the way Bitcoin’s mining structure is set up. When Alice sends Bitcoin to Bob, that transaction is being put into a block for miners to verify. Verifying that transaction and all the transactions in a block requires miners to use their computational power to solve a mathematical puzzle.
Imagine it like a bunch of computers are all using their brain power to solve a complicated sudoku puzzle. They compete because whoever solves the puzzle will get a reward, in this case an amount of Bitcoin. Solving the puzzle is essentially validating Alice’s transaction to Bob and all the other transactions in a particular block (group of transactions).
We call this system Proof of Work because the only way to solve the puzzle is to use some of your computer’s computational power until it figures out the solution and can claim the reward.
Where Bitcoin leaves us hanging is the fundamental property of scalability.
This is where Cardano turns to other systems like Proof of Stake (PoS). Recently, a lot more research has been done on Proof of Stake as teams look for ways around the scalability challenges faced by Bitcoin and Ethereum.
But does Proof of Stake have an equivalent level of security as Proof of Stake?
Asking questions like this usually results in crypto community members parting like the Red Sea.
Many say “Of course not!”
Cardano, taking the academic route in everything they do, didn’t see this as a valid response.
“We said ‘Let’s use this foundation we’ve generated that we’ve proven that Proof of Work is secure with and then let’s go ahead and see if Proof of Stake has the same properties’”
Miraculously, the answer is yes.
The only challenge that Cardano faces now is the prospect of ensuring those secure properties as the network scales to millions and potentially billions of users.
By 2016, Cardano’s team had written up their Proof of Stake Protocol, Ouroboros.
What many don’t know about Ouroboros is that it had to go through six revisions before they submitted it to Oakland (academic conference) where it got rejected.
Cardano then submitted it to an even better conference called Crypto in Santa Barbara where their paper on Ouroboros was finally accepted. Conditionally, of course.
“We had to go hand out with Adi Shamir and Whitlock Diffie and the rest of the old guys and some of the new guys and get yelled at. Which is out favorite thing to do in the whole wide world. Then after that we said ‘you know we’re not done, we have like six more papers to publish because this is hard stuff’...and we wrote another paper called Ouroboros Praos that’s making our protocol more practical”
On January 23, 2018, valuewalk.com announced that “ [Ouroboros Praos] has been accepted into Eurocrypt 2018, one of the most prestigious conferences in the cryptography field.”
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With each paper and conference, Cardano’s consensus algorithm gets stronger and more robust. Ultimately, this will culminate in the creation of a network that, like BitTorrent, is able to gain resources as new users join.