The coming of the Cardano Age

Photo by Pixabay on Pexels.com

Cardano has been making headlines for different reasons lately. After shooting up to become the third biggest crypto project in terms of market cap, behind only Bitcoin and Ethereum, it then found itself embroiled in a debate about whether it can handle concurrent transactions (short answer is yes). After a multi-year wait, Cardano is set to become smart-contract enabled on the 12th of September, making way for a plethora of announced projects to go live in the weeks and months to follow. This is the start of the Cardano Age.

Fundamentally better designed

Cardano is a well established project, built upon years of academic research. It was designed to take into account the learnings from both Bitcoin and Ethereum. As a result its underlying security model, known as extended-UTXO can be thought of a Bitcoin Plus. Bitcoin plus smart contract capability. As opposed to Ethereum which adopted a fundamentally different accounting model from what Bitcoin uses). There are several shortcomings of Ethereum’s model as detailed here by Sundaeswap, one of the decentralized exchanges building on Cardano:

First, every transaction must be sequenced and processed in some order, since it is difficult if not impossible to determine which transactions may try to touch the same piece of state. If one transaction updates your account balance at the same time as another one, you could inadvertently destroy tokens, double-spend, and other nasty bugs.

Second, as a consequence of the above, the ordering of transactions matters, which fundamentally gives the entity ordering those transactions a lot of power. This leads to undesirable phenomena including Miner Extractable Value (MEV) and front-running.

Third, this model fundamentally requires a sacrifice of determinism, and thus demands greater trust. Because the state of the blockchain could change between when you construct your transaction and when you submit it, the smart contract needs to be trusted to do “what’s in your best interest” when it runs, even if that isn’t what you intended. 

Cardano’s eUTXO model is a well thought out model that is better designed for scalability. Think of it as a tree where each branch is independent of the other branches. A transaction on Cardano can be one portion of one branch and get carried out without a need to know about the other branches.

Ethereum’s model is more like taking the whole tree into account for every transaction (i.e. global state). Global state makes things easier in a lot of respect but Cardano’s design gives you certain benefits that you otherwise cannot get. As stated by SundaeSwap:

  • It is incredibly simple and secure to validate. It becomes very obvious if value is being created or destroyed: compare the total bitcoin in to the total bitcoin out.
  • It is very easy to validate transactions in a block in parallel; simply check the signature on each transaction in separate threads.
  • It is highly deterministic. When a user creates and submits the transaction, they are explicitly declaring what their section of the ledger should look like after the transaction is accepted

Not having global state does mean however that solutions would have to be designed differently to fit in with a eUTXO model, with concurrency being a well known programming challenge.

Concurrency is the ability for multiple actors to make progress on a task, without interfering with each other. Parallelism is the ability for multiple actors to make progress on a task at the same time, without interfering with each other. Contention is when multiple actors do actually interfere with each other.

To understand this better, let’s use an analogy: chefs in the kitchen. A single skilled chef can work on preparing multiple dishes at a time, switching between them at just the right time. This chef is highly concurrent. 

An elegant model like the eUTXO model, requires an elegant solution to concurrency rather than simply slapping a global state on top which leads to other aforementioned issues. There are several ways of implementing this and it’s been up to the DApp developers to decide on a method that suits them best. A number of DExes has stated that they have implemented a solution but are treating it as a trade secret for now and will publicize the solution post launch. This is completely understandable given the competitiveness in the DEX space.

However the fact that DApp developers need to design an elegant solution in keeping with Cardano’s elegant eUTXO model, is what got blown up last week into a narrative about Cardano not being fit for DeFi applications. It was triggered by one Dapp developer that deployed an early version of their product on the testnet without having a concurrency solution in place, which soon manifested itself as a problem, and which Cardano critics immediately jumped on and misrepresented.

But let’s be clear – this is not an impossible problem to solve – it’s just a problem that no one has had to engineer a solution for previously. A lot of DEXEs have stated that they have already put in a place a solution and see no concern.

The FUD that has been generated will easily be dispelled once DApps start rolling out in the next weeks and months. And beyond that as stated by Charles Hoskinson, in two recent videos [1] [2], the Cardano design sets them up for much more innovations in the future.

Better suited for regulatory risks

That stiffer US regulation is coming to the crypto space is inevitable. Regulation is something that has been anticipated by IOHK for a while and they’ve been working on both identity management solutions (Atala Prism) as well as striking partnerships to help with AML. Very few other blockchains have been this forward thinking.

Green credentials

Bitcoin and Ethereum, both proof-of-work based systems, have been coming under criticism for being energy inefficient. As covered previously, it takes a huge amount of wasted energy to mine for Bitcoin. Ethereum is attempting to transition away from this to Proof-Of-stake .. which Cardano has already had up and running for well over a year. Cardano is far more energy efficient than Bitcoin and far more protected against criticism of energy use directed at the crypto industry.

Strong DApp pipeline

Some people doubted whether developers would want to build on the Cardano platform. That question has been put firmly to bed with hundreds if not thousands of developers currently building Cardano Dapps. Not only that, Cardano has a strong pipeline of products in the most closely watched part of the Dapp ecosphere – DeFi apps. There is a number of high quality DEXEs due to launch in the coming week, who have engineered for the aforementioned concurrency challenge and have excellent teams leading them. I don’t want to pick favorites but I have to mentioned SundaeSwap and ErgoDEX as two that I particualarly like though there are many more great projects.

The Cardano Age

What this means is that pretty soon we will have hundreds of DApps, running at low cost, on an energy efficient, regulatory ready blockchain, with a passionate community that is only getting bigger. The Cardano Age is coming. Are you ready for it?

Photo by ThisIsEngineering on Pexels.com

Published by ReddSpark

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

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