Cardano’s Approach to the Trilemma

Benjamin Cowen recently did a good video doing a fundamentals analysis of Ethereum. As someone that prefers fundamental analysis over technical this was a welcome breath of fresh air. However I did want to provide a response to his analysis.

His main argument for Eth was the following:

a) Blockchains often have to trade off between Decentralization, Security, and Scalability.

b) Each of the “Eth killers” has had to sacrifice one of these

c) Eth 2 is tackling all three and therefore cannot be compared

If we take it at face value, and other chains have not solved this trilemma problem, what is the likelihood Eth 2 will? Cardano spent many years researching the problem, are we saying Eth will find it easy to succeed where Cardano supposedly failed?

But let’s look a little closer at Cardano’s solution to the problem, and how it addresses the blockchain trilemma.

Decentralization:

Within the next 2 days, Cardano will be 100% decentralized; that is to say the 100% of transactions will be validated by public stakepools rather than the federated (IOG) nodes. Nodes can be run on fairly inexpensive consumer hardware (I believe you can run it on a Rapsberry Pi if you want). Also note, Cardano’s staking system is widely acknowledged to be one of the most successful out there and the most dollar value staked to it.

Security:

To achieve security, Cardano incentivizes a certain pledge size, striking the balance between the minimum amount needed to run a successful stake pool and making it costly to launch a 51% attack.

I think I hear today that it would cost something in the region of many billions in USD to launch a 51% attached on Cardano.

Scalability:

Which leaves scalability. This often conflicts with security and is a tough nut to crack. Cardano’s yet to be implemented Hydra solution will solve scalability using a Level 2 (offchain) solution, where each stake pool can contribute up to another 1000 transactions per second, making the network faster the more nodes that are added. More crucially, the design is said to complementary to a sharding solution

“We have also seen our extended UTXO model demonstrate successful space sharding, as well as development in the theory of consensus. The theory of Ouroboros matured to where it is comparable to bitcoin after recovering from a dishonest majority, to bootstrapping from genesis to operating in a semisynchronous environment to adaptive security. This is a major scientific milestone for the industry as a whole. We are proud to publish this paper.”

Let me translate that for you. It basically means, we know scalability without sacrificing security is hard, but we’ve theoretically shown it is possible with our design.

Therefore while it is yet to be implemented, IOG have a clear sense of how to achieve it.

If we look at the Ethereum roadmap we see pretty much the same plan () Rollups as a Layer 2 solution similar to Hydra, and Sharding as the more secure solution. However I get a sense the design of this is not as clearly defined: “It remains to be seen whether mainnet will exist as the only “smart” shard that can handle code execution – but either way, a decision will have to be made on phase 2 of sharding”

My point here is not that Eth 2.0 is going to fail, it’s simply to address the point Benjamin Cowen raised that Eth is trying to solve a different problem to Cardano. Based on the above, I would argue, no, both are solving the same problem.

There are two final elements worth a brief mention in all this. The hardfork combinator and on-chain governance. On-chain governance is the ability for the Cardano community to reach agreement on the future direction of Cardano such as raising or lowering fees without arguments that would risk splitting the chain into separate chains (like we have with Ethereum and Ethereum classic). It’s all controlled through voting. And the HFC allows fundamental upgrades to the blocklchain such as sharding to take place in an almost mundane like manner without any noticeable impact on the running of the live chain. Both these point to the extra level of thought that has been put into making Cardano a blockchain that will last for decades and decades to come.

Published by ReddSpark

Follow me on Twitter: https://twitter.com/Reddspark1

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