What IOG has delivered for Cardano

This paper has been written by Fernando Sanchez and Olga Hryniuk with input from all IOG teams. Toil without song is like a weary journey without an end Introduction The development of the Cardano blockchain is guided by a methodical, research-based, and deliberate approach to innovation. Since Cardano’s first iteration as a federated network of just seven nodes, Input Output Global Inc. (IOG) has added many new pieces to the blockchain design, one at a time. Over five development phases, IOG introduced innovations, new functionality, and novel features, with each phase building upon the previous phase's achievements. Every addition has improved or enhanced Cardano in one way or another. Some features, like smart contracts, are highly visible. Others, such as pipelining or block diffusion, are more subtle but no less impactful. And each new feature brings Cardano one step closer to becoming a leading, robust, and reliable enterprise-grade blockchain. Rationale for this paper Today, Cardano is a third generation, open source, proof-of-stake blockchain platform. Its name derives from Gerolamo Cardano, a mid-16th century Italian physician and mathematician. Third generation blockchain platforms are designed to resolve the issues that the first two generations (Bitcoin and Ethereum) suffer from, including scalability and interoperability, while fulfilling an ambitious agenda of decentralization. But how did IOG, the blockchain engineering company that designed and built Cardano from the ground up, achieve this? This paper highlights the importance and impact of the research and development driven by IOG since the inception of the Cardano mainnet. Structure of this paper For clarity and completeness, the structure of this paper matches Cardano's journey. From the initial, foundational steps taken during Byron in 2017 to the delivery of a self-governed, self-sustained, fully decentralized blockchain during Voltaire in 2022. In keeping with this narrative, this paper includes five chapters: Byron: the foundation of Cardano Shelley: decentralizing the blockchain Goguen: introducing native tokens and smart contracts Basho: scaling Cardano Voltaire: self-sustainability and governance Each chapter focuses on a single phase, recounting its achievements and defining its bearing and importance on the overarching development journey. Byron: the foundation of Cardano The story of Cardano began in 2015, with a vision of addressing the three strategic challenges facing all blockchain networks: scalability, sustainability and interoperability. Two years, thousands of GitHub commits, and hundreds of hours of study later, the first version of Cardano – Cardano Byron – shipped in September 2017. Byron allowed users to buy and sell the ada cryptocurrency – so named after the revolutionary mathematician Ada Lovelace – on a federated network running the groundbreaking Ouroboros consensus protocol. The heart of the Cardano network, Ouroboros is the first proof-of-stake protocol based on academic, peer-reviewed research, with a mathematically-proven level of security. The Byron reboot updated multiple components of the Cardano network, including the Cardano node, the Cardano explorer, and the wallet backend, and also delivered Daedalus, IOG’s official desktop wallet. Yoroi, a light wallet from EMURGO built on original development work from IOG and designed for quick transactions and day-to-day use, was also delivered. To track the history of ada transactions, Byron included a Block Explorer – a tool specifically designed for browsing chain activity. Impact As much as Byron was about the first crucial technology development, it was also about building a community and getting people involved in creating the blockchain of the future. It allowed Cardano to grow from a small group of enthusiasts to a global community, with ada hosted on more than 30 cryptocurrency exchanges. Shelley: decentralizing the blockchain Shelley created a decentralized economic system that drives Cardano’s growth and optimization. Moving away from Byron's federated network maintenance, more and more nodes were run by the Cardano community in a progressive evolution to full decentralization. Since the launch of Shelley, Cardano has gained over three thousand stake pool operators (SPOs). The SPO community greatly contributed to the success of the Shelley launch, playing an integral role in Cardano’s evolution from the early days of the ITN to the mainnet fork, and beyond. Shelley focused on several critical steps to ensure an enhanced user experience for stake pool operations, delegation preferences, and incentives. As a proof-of-stake blockchain, Shelley allowed users to stake their ada to participate in network consensus. Painstakingly designed using game theory and the latest research into proof-of-stake networks, the delegation and incentive mechanism encourages users to delegate their stake to stake pools – always-on, community-run network nodes – and be rewarded for honest participation in the network. Since the launch of Shelley, the IOG team has worked on many new features and upgrades, all intended to improve and optimize the user experience for both delegators and SPOs. The staking and delegation strategies underwent parameter changes and calculation improvements, focusing on long-term benefits for the community rather than one-off profit. To level the playing field, IOG changed the network parameters to allow an even spread of the stake across the network, thus eliminating the potential for larger stake pools to dominate the ecosystem. SPOs and ada delegators could then experience more favorable staking opportunities for network sustainability and continuous returns. In March 2021, block production on Cardano became fully decentralized when the d parameter was set to 0. This placed the responsibility for block production in the hands of the SPO community. Along with these significant enhancements, IOG worked to expand Cardano’s functionality. For a better stake pool operation experience, RTView enabled real-time monitoring of node activities. IOG deployed the transaction metadata feature to allow the embedding of specific data to transactions, which was useful prior to smart contract support implementation. Finally, data accountability has always played an integral role in staking and delegation. To enable better stake pool data tracking and maintenance, IOG implemented the SMASH system for recording stake pool metadata and has continuously improved the ranking system within the Daedalus wallet. These upgrades were based on user feedback and scientific research, which have driven user interface and user experience enhancements so that both SPOs and ada holders can seamlessly navigate between pools and their respective data. Impact Shelley represented the natural maturation of the network, making it more useful, rewarding, and valuable for existing users new and old. Shelley was also about preparing for the future. Setting the stage for a distributed and functional network, Shelley laid the groundwork for Goguen, Basho, and Voltaire. Goguen: introducing native tokens and smart contracts While Cardano Shelley provided a greater level of system decentralization, Goguen development focused on the establishment of a global, financial and multi-functional system for decentralized application (DApp) building, smart contract support, and custom token issuance. The Goguen development theme is named after Joseph Goguen – a computer scientist specializing in the philosophy of computation and information – who worked on the earliest approaches to the algebraic characterization of abstract data types. He was also involved in formal methods and theorem proving, the techniques which IOG implements while building Cardano’s solid foundation of peer-reviewed research and high-assurance development. Goguen established a versatile platform to build solutions around such application domains as supply chain, track & trace, finance, medical records, identity voting, property registration, peer-to-peer payments, and many others. With its functionality, Goguen set initial enablers for turning Cardano into a more interoperable and scalable platform satisfying business needs. The introduction of the multi-asset (MA) support extended the functionality of Cardano by enabling users to define, create or destroy, and exchange their own natively-supported tokens on Cardano. With MA support, the Cardano accounting ledger allowed the handling of custom tokens with no need for smart contracts, which significantly streamlined operation processing and simplified token movement. Another benefit was the easier integration of smart contracts and DApps involving multiple cryptocurrencies. Plutus application development is another significant feature within Goguen. Plutus applications are built on top of the Plutus platform – a purpose-built smart contract development and execution platform utilizing Haskell. The use of Haskell allows developers to build secure and reliable applications with straightforward, concise, and reusable code that grants the highest level of security and efficiency of use. Goguen also opens Cardano up to wider audiences via Marlowe, allowing financial and business experts with no previous technical knowledge to create smart contracts. Marlowe is a high-level, domain-specific language (DSL) that allows building contracts both visually and through coding. Financial institutions can use Marlowe to develop and deploy custom instruments for their customers and clients. Marlowe comes with the Marlowe Playground, which enables development, simulation, and testing of the process of writing smart contracts in a sandbox environment. Impact The implementation of such functionality as token locking, multi-asset, and smart contract support made Cardano a multi-functional platform for DApp development. The combination of Plutus and Marlowe enables a new class of enterprise-level smart contracts with verified functionality, capable of underpinning large-scale implementations in the real world. This is a step change in the abilities of Cardano, opening the way to the development of mission-critical, decentralized smart contract applications, with even more exciting things to come during Basho and Voltaire. Basho: scaling Cardano Basho is Cardano's development theme focused on network optimization, scalability, and interoperability. With the core functionality in place, Basho is about improving the underlying performance of the Cardano network to better support growth and adoption for thousands of applications with high transaction volumes. During Basho, IOG aims to steadily increase the capacity and throughput of the Cardano ledger by deploying new layer 1 and layer 2 solutions. These solutions include such on-chain improvements as block size increase, on-chain storage, diffusion pipelining, Plutus memory and speed enhancements, as well as an improved cost model. Off-chain solutions include Hydra Heads to maximize throughput and cost efficiency of transaction processing, and Mithril, which improves chain synchronization times for full and light node clients. Basho is also heavily focused on interoperability using solutions like sidechains and cross-chain bridges, which enable bidirectional communication with other blockchain systems. The upcoming launch of the sidechains toolkit will allow developers to bootstrap their own sidechains to benefit from Cardano’s first-in-class security, cost efficiency, and environmentally-friendly impact. Sidechains enable value transfer between blockchains that may operate under different rules or consensus mechanisms. The result will be greater interoperability for Cardano and the ability to support new kinds of use cases on the network. IOG together with ecosystem partners have also carried out research on the Djed stablecoin. Djed is an algorithmic stablecoin with proven price stability, which is accomplished due to the use of formal methods. Stablecoin’s algorithmic design provides enhanced security settings and eliminates price volatility. Djed is being implemented by COTI. IOG also created a UTXO alliance by partnering with other UTXO-based blockchains to cultivate innovative solutions and advance interoperability, programmability, and scalability. The UTXO alliance facilitates cross-ecosystem initiatives to extend the capabilities of UTXO, and to foster further research, development, and education across the entire blockchain space. Impact Basho will see Cardano become one of the most high-performant, resilient, and flexible blockchain platforms in the industry. This will provide network infrastructure with the capability to scale in a sustainable, secure way, as well as the ability to add new functionality without compromising the reliability at the core of the network. Voltaire: self-sustainability and governance Decentralized governance and decision-making lie at the heart of Voltaire. Voltaire provides the Cardano community with the ability to decide on network development updates, technical improvements, and project funding. For the Cardano network to become truly decentralized, it requires not only the distributed infrastructure introduced during Shelley, but also the capacity to be maintained and improved over time in a decentralized way. Voltaire focuses on the implementation of the final components required for the Cardano network to become a self-sustainable system. The introduction of a treasury system is one such component designed to ensure a continuous and self-sustaining source for funding Cardano improvements. The treasury is replenished every epoch from a portion of stake pool rewards, minted coins, and the percentage from fees. To enable fair decision making on how these funds should be used, Voltaire also introduces the decentralized software updates process. This allows ada holders to participate in decision making and take an active part in voting to influence system advancements. This work is in progress and IOG has already started implementing social experiments and designing the engineering tools for these needs. Cardano improvement proposals (CIPs), for instance, are deployed within Voltaire as a social communication system that acts as an open-source library with resources describing formal, technically-oriented standards, code, and processes that provide guidelines for the Cardano community in a transparent and open-source way. Another major step towards decentralized governance was the launch of Project Catalyst, which underpins the treasury system functionality, combining proposal and voting procedures. Project Catalyst maintains the source of funding for supporting initiatives and improvements proposed by ada holders, while simultaneously rewarding and incentivizing people who dedicate their time and effort to making productive decisions. Impact Voltaire is about extension and development of concepts, tools, and experiments, driving a fully decentralized ecosystem to democratize the Cardano network. With all the components in place, Cardano becomes a truly decentralized platform no longer under the founding entities. With the final Voltaire deliverables, Cardano’s future will be in the hands of the community, who will have everything they need to grow and evolve Cardano from the secure, decentralized basis established by IOG.