Cardano (ADA) Blockchain Beginner’s Guide to Ouroboros, Daedalus, CSL and CCL


Cardano is a decentralized public blockchain and cryptocurrency project that is entirely open sourced. It is the first blockchain platform to evolve out of a scientific philosophy and a research-first driven approach. This unique collaborative venture slowly and steadily built one of the most accurately engineered cryptos, a product that brings together systems as distributed systems, mechanism design, and cryptography.

The result is the first cryptocurrency to be based in Haskell code, an industrial strength product that delivers the resilience necessary for mission-critical systems, in this case securing investment. It is almost impossible to predict what the ecosystem will look like in a few months, so it’s essential to have a sturdy programming language like Haskell.

The development team consists of a large global collective of expert engineers and researchers. Since its inception, they have kept users and regulators in mind. The platform is trying to find a middle ground between the two. Cardano is the first protocol to balance these requirements in a nuanced and effective way, pioneering a new approach for cryptocurrencies.

Cardano doesn’t have anarchical goals to overhaul the entire banking and financial systems(like many other crypto projects) rather they aim to just make the current systems cheaper and more efficient.

What’s Under the Hood of Cardano Infrastructure?

Cardano aggregates their principled exploration of the crypto space is two collections of protocols; a provably secure proof of stake based cryptocurrency called the Cardano Settlement Layer (CSL) and a set of protocols called the Cardano Computation Layer (CCL).

CSL is the primary layer of the platform and pretty much acts like any other balance ledger. They have chosen the view that the accounting of value should be separated from the story behind why the value was moved. In essence, 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.

The aim of CSL is as follows:

  1. Support two sets of scripting languages, one to move value and another to enhance overlay protocol support
  2. Provide support for KMZ sidechains to link to other ledgers
  3. Support multiple types of signature including quantum resistant signatures for higher security
  4. Support multiple user issued assets
  5. Achieve true scalability, meaning as more users join, the capabilities of the system increase

The second computation, Computation Layer (CCL) layer of Cardano shows the reasons behind the transactions. Due to the result of the computational layer being attached from CSL, users of CCL can create desired rules to their likings.

For example, there are numerous activities online that are universally deemed illegal or despised, such as the trafficking of child pornography or the selling of state secrets. By using sturdy decentralized infrastructure, it is possible to provide a channel for this activity to occur with the same censorship resistance than normal commercial transactions enjoy. It is legally unclear if the consensus nodes of the network would be held accountable for the content they host.

The kinds of complex behavior that would enable the acts elaborated previously cannot run on CSL. They require the ability to run programs written in a Turing complete language and some form of gas economics to meter computation. They also require consensus nodes willing to include the transactions in their blocks.

This is where CCL comes in.

The Daedalus Wallet

Cardano’s open sourced wallet is called Daedalus. It is a secure, multi-platform, HD (hierarchical deterministic) wallet for the Ada cryptocurrency. It allows the users to send and receive Ada and view the transactions the user has made. The wallet supports multiple currencies which can be freely traded. Recently, they have added support for Bitcoin and Etherum Classic.

Given below is the tutorial video to set up the Daedalus wallet.

Ahead of being used to send and receive Ada, the wallet has other features, which make it easy to use and give you a high degree of confidence about its security.

These include:

  • Encrypted private keys and spending passwords, offering protection against security threats such as malware.
  • Wallets can be exported to paper certificates, giving the maximum security option of placing funds in cold storage.
  • Ada redemption is built directly into Daedalus and supports encrypted and unencrypted redemption certificates.
  • Configurable transaction assurance level monitoring, allowing users to be sure when transactions become irreversible.

Ouroboros

Cardano uses a proof of stake algorithm called Ouroboros, which defines how individual nodes reach a consensus about the network. It is a critical part of the infrastructure that supports the Ada cryptocurrency and is a major innovation in blockchain technology.

Ouroboros drops the need for an energy-hungry proof of work protocol, which stands as a barrier to blockchain scaling up for much wider use. Designed a team led by IOHK Chief Scientist, Professor Aggelos Kiayias, Ouroboros is the first proof of stake protocol that has mathematically been shown to be provably secure, and the first to have gone through peer review through its acceptance to Crypto 2017, the leading cryptography conference. The level of security demonstrated by Ouroboros compares to that of Bitcoin’s blockchain, which has never been compromised.

For a blockchain to be secure, the means of selecting a stakeholder to make a block must be truly random. An innovation of Ouroboros to produce the randomness for the leader election process is to do this by way of a secure, multiparty implementation of a coin-flipping protocol.

The following video sums up the Ouroboros algorithm.

KMZ Sidechains

Sidechains are developing tools that support digital assets on one blockchain to be securely used in a separate blockchain and then be moved back to the original blockchain if needed. Cardano supports a new protocol based upon prior results from proofs of proofs of work. The concept allows for the secure and non-interactive movement of funds from CSL to any Cardano Computation Layer or other blockchain supporting the protocol.

KMZ sidechains are the solution to encapsulating complexity. Ledgers with supervisory requirements, private operations, robust scripting languages and other special concerns are effectively black boxes to CSL, yet the CSL user will gain certain guarantees about accounting and the ability to recall funds once the computation is complete.

Transaction Fees

Whenever a user requires to transfer Ada, some minimal fees are computed for it. For the transaction to be confirmed, these minimal fees have to be included, although the sender is free to pay higher fees if they wish so.

The minimal fees for a transaction are calculated according to the formula:

a + b × size

Where:

  • a is a special constant, at the moment it is 0.155381 ADA;
  • b is a special constant, at the moment it is 0.000043946 ADA/byte;
  • size is the size of the transaction in bytes.

All transaction fees of a given epoch(time in which slot leaders validate transactions) are collected in a virtual pool. The purpose is to reallocate the money from that pool amongst people who were elected slot leaders by the PoS-algorithm during that epoch and who created blocks.

Buying and Storing ADA

ADA is available for purchase on various exchanges. Binance has the highest trading volume with a 24-hour volume of more than $4 million. Although to buy Cardano on a majority of the exchanges, one will need to first purchase ETH or BTC and then convert it to ADA.

Currently, only Daedalus wallet can store ADA which is available on Mac and Windows. Their mobile versions are supposed to release soon.

Conclusion

Cardano is a project aimed to solve many problems not only in the crypto ecosystem but of the traditional banking establishment too. In fact, the project has two founders, Charles Hoskinson, and Jeremy Wood, who played a very important role in the launch of Ethereum in 2013.

The credentials of the founders helped them raise $63 million in ICO within a couple of years. The problems of Ethereum such as unscalability and security have made the founders more prudent in developing Cardano.





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