Cardano Documentation

Blockdaemon's Cardano Documentation

Cardano Introduction 

Cardano (ADA) is a third generation Proof of Stake blockchain, focusing on scalability, interoperability and governance. Cardano’s network originally launched in September 2017 as a federated, permissioned blockchain where block production was controlled by a few central entities. These entities were founded as the core pillars supporting the growth and adoption of the Cardano ecosystem. Input Output Global (IOG) is responsible for engineering the Cardano blockchain itself, EMURGO is the venture and commercial arm of the ecosystem and the Cardano Foundation looks after community management and the future strength of the network itself. The Cardano project’s development is one with five distinct phases before full completion. 

 

  • Byron: The phase of Cardano’s mainnet launch in a federated and permissioned state. The launch of the ADA cryptocurrency. 
  • Shelley: The era of decentralization and a transition to Proof of Stake, where Cardano moved from being static and federated to dynamic and decentralized. 
  • Goguen: The introduction of smart contracts into the network. 
  • Basho: Bringing scalability and thousands of transactions per second (TPS) to the network. 
  • Voltaire: The roll-out of on-chain governance to the decentralized network. 

 

In 2020 Cardano successfully transitioned to a decentralized network powered by Proof of Stake where block production was managed by Cardano community validators. While only a percentage of the blocks were produced by the community at first, with the original entities still responsible for some block production, Cardano is now fully decentralized and the world’s  Cardano’s Proof of Stake is underpinned by the Ouroboros Praos consensus mechanism, a peer-reviewed Proof of Stake blockchain protocol. This paper guarantees a similar level of security as Bitcoin, without the energy needed to secure the network. Today, Cardano is the world’s most decentralized Proof of Stake protocol. This is achieved by using a small percentage of the energy requirements needed by blockchains such as Bitcoin. 

 

Cardano’s accounting structure is based on the Unspent Transaction Output (UTxO) model. This is the same accounting model as Bitcoin. However, to accommodate the use of smart contract scripts, Cardano employs a unique Extended Unspent Transaction Output (eUTxO) model. This enhances Bitcoin’s original design and facilitates highly secure smart contracts. 

Fast Facts

Token ticker: ADA

Number of validators: >2,000

Token unbonding period: Instant

 

Quick Start Guide: How to stake on Cardano

Step 1: Download Yoroi web wallet

 

This step can be done by downloading the Yoroi extension to your desired browser, which is also Ledger supported. 

 

Step 2: Create or restore a wallet

 

After going through the initial steps, you’ll be given the option to create or restore, or connect to a hardware wallet. For new users, create a wallet and record the secret seed phrase. 

 

Step 3: Delegate to a stake pool

 

Delegation takes place in the delegation list tab, where one can easily browse available pools. These stake pools are the validators on the network, and are responsible for its continuation. They are referred to as pools as delegators (ADA token holders) pool their virtual resource (the native asset) to increase the likelihood of their validator being chosen to mint a block. More on this later. A full list of available pools can be found on Pooltool.io.

 

Step 4: Reward Distribution

 

For first time stakers, rewards take between 16 – 20 days to reach a wallet. This represents three epochs following stake delegation. After this, rewards are distributed per epoch, meaning rewards reach wallets every roughly five days. 

Key Features of Cardano

Proof of Stake (PoS)

Proof of Stake (PoS) selects who will be a validator to produce blocks in the Cardano blockchain. The two key parties involved in this process are validators and delegators. Validators are people in the Cardano network who add blocks to the blockchain, while delegators give their right to produce a block to a validator. This is because while anyone who holds the native ADA token (stake in the network) has the right to produce a block when selected, not everyone has the skills or hardware to do so. Delegation allows any holder of ADA to participate in network consensus without becoming a fully fledged validator themselves. Multiple entities delegating stake to a validator accumulates into a pool, known as a stake pool. Delegating the right to produce a block to a validator is totally safe, without any risk of funds being lost or stolen. This is because no financial value is transferred to the validator, rather only their right to mint blocks. Block production takes place in each slot, with a group of slots comprising an epoch, roughly equivalent to five days. 

 

Ouroboros is a family of protocols created by IOG as a way of securing the network. The launch of Proof of Stake at the launch of the Shelley era implemented Ouroboros Praos into the network. Ouroboros Praos uses a Verifiable Random Function to securely and fairly select the next validator to produce a block based on a secret lottery. The protocol is designed to generate fresh randomness at every epoch, which is used as a basis for the lottery that selects the validator chosen for a given slot. This ongoing process inspired the naming Ouroboros, a mythical creature eating its tail, to represent the continuation of the network in perpetuity. 

High Assurance 

Cardano’s foundational research is peer-reviewed, meaning the code currently in use was built to formal specifications and is regarded as high assurance. A peer-reviewed approach is often taken in mission-critical industries with high amounts of value on the line, such as aerospace or medical technology. For this reason, Cardano’s methodology is seen as laying a solid bedrock for high-value financial applications and transfers of value which the blockchain aims to host. Furthermore, Cardano is built using Haskell, a statically typed, purely functional programming language. This programming language has a strong type system and is considered extremely safe as a programming language for building software. 

 

Cardano’s smart contract programming language is Plutus. Plutus is a functional language with roots largely based in Haskell. The Plutus programming language aims to bring a higher level of security to the creation of smart contracts than what is seen on other blockchains. Cardano also hosts Marlowe, which is a Domain Specific Language (DSL) for building and executing smart contracts via a graphical user interface. Marlowe allows anyone with domain specific knowledge to get started building contracts without a deep understanding of programming required. This means that experts in law or finance could begin easily developing their own smart contracts without relying on an external developer. 

Hard Fork Combinator 

Cardano has pioneered a gold-standard for upgradability in live blockchains through their innovative hard-fork combinator. Separating these concepts out, a hard fork generally refers to a radical change in the blockchain in which a new version of the code is run. A downside of this traditionally would be that the chain restarts and the previous history of the blockchain would be unavailable. Cardano’s hard fork combinator eliminates this problem by combining two sets of code bases into one single unbroken chain whenever a radical change to the rules of the ledger is needed. 

 

An example of this hard-fork combinator used in practice was in the transition from Byron to Shelley. This move from a static and federated to a dynamic and decentralized system required an entirely new set of ledger rules, however could be facilitated by the hard-fork combinator. This incorporated all of the rules of the previous Byron era, with the new and upgraded Shelley era. The result was a single unbroken chain from the September 2017 mainnet launch to the present day.

 

This functionality is significant because the system has a seamless ramp for upgrades which does not result in contentious hard forks. Future upgrades to Cardano’s ledger rules can incorporate the entire history of the chain without compromising security. Such capability is unique to Cardano’s blockchain. 

Treasury

Cardano’s decentralized treasury provides a pot of funding to help finance projects and developments on the Cardano blockchain. Cardano’s treasury is is outlined in the paper A Treasury System for Cryptocurrencies: Enabling Better Collaborative Intelligence. The treasury is constantly replenished by funds from minting new ADA, staking rewards and donations. As the value of the ADA token grows, so too does the purchasing power of the treasury to fund developments in the ecosystem.

 

According to Zhang et. al, the core pillar of the treasury system is summarized as follows: 

“The core component of a treasury system is a decision-making system that allows members of the community to collectively reach some conclusions/decisions. During each treasury period, anyone can submit a proposal for projects to be funded. Due to shortage of available funds, only a few of them can be supported. Therefore, a collaborative decision-making mechanism is required.” 

Why should I participate in Cardano staking with Blockdaemon? 

  1. Secure validator nodes

PoS networks are heavily dependent on network participation and validator integrity. Blockdaemon makes it easy to run your own dedicated validator node or stake your tokens to Blockdaemon’s validators to earn participation rewards. With regional and data center diversity and node redundancy, Blockdaemon takes an engineering 1st approach to provide best-in-class uptime. We have deployed over 1,000 full nodes – making us the most battle-tested provider in the node infrastructure industry.

 

  1. Failover Safeguards

Blockdaemon has manual failover with a trained and battle-tested team to eliminate risk of double signing. Blockdaemon manages all of this for you automatically, so you don’t have to worry about staying online, in sync, and up to date. Just follow our easy delegation instructions for your preferred protocol, and monitor your balance.

 

  1. Enhanced monitoring 

Blockdaemon monitors all machine and protocol metrics with 24/7 human and automated monitoring to avoid downtime-related slashing. With engineers distributed globally, protocol-specific failover strategies are in place to eliminate risk of double-signing, and hot-spare and fully-synced backup nodes exist for fast recoveries when needed.

 

  1. Slashing Guarantee

If slashing does occur due to any fault on the part of Blockdaemon, we ensure 100% loss coverage. However, Blockdaemon do not cover slashing losses that result from network malfunctions, as these are outside of our control.