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What is the Cardano Ouroboros Protocol?

Cardano is one of the most important and interesting projects on the market. Founded by the co-founder of Ethereum, Charles Hoskinson, the cryptocurrency in 2017 had a sensational growth that has stopped in January, following the general collapse of the market. Currently boasts the ninth position in the global market cap with a capitalization of about 2.7 billion dollars.

Charles Hoskinson called Cardano a “third generation blockchain”. He believes that the cryptocurrencies used for the mere transfer of money are first generation blockchains, an example is Bitcoin. The second-generation blockchain can be that of Ethereum because it introduces smart contracts, decentralized apps and it’s something more than just the transfer of value. It has problems too (scalability, lack of governance, etc).

Cardano is designed to solve both the governance problem (which led to the fork from Ethereum to Ethereum Classic due to DAO hack) and that of scalability. The Proof of Work (PoW) is certainly a proven mechanism, but many now think it is not the best and over the years have emerged several alternatives.

Cardano uses a particular type of consent mechanism called Proof of Stake called Ouroboros.

 

Scalability of the Blockchain, Cardano and Ouroboros

Ouroboros not only solves the problem of scalability but also the number of transactions per second and data storage. This last problem is not to be underestimated. With an increase in network usage the blockchain begins to be heavy. It should be remembered that transaction data must be propagated to all participating nodes. To solve this problem, Cardano is trying to implement the Recursive Inter-Network Architecture (RINA) technology to improve the communication speed.

Moreover, for a blockchain platform that offers the possibility of creating smart contracts and decentralized applications, the size of the stored data can grow very rapidly.

Bitcoin’s blockchain, for example, is already over a hundred gigabytes and will continue to grow with the extraction of new blocks. Cardano’s approach to combat this problem consists in the implementation of sidechain and in the use of data compression.

 

Ouroboros vs. Ethereum PoS

First of all, it must be said that Buterin and associates are working to get Ethereum to the PoS. Ethereum should soon switch to Casper by adopting sharding. One of the fundamental advantages of Ouroboros over Casper is its academic background and the solid mathematical evidence that has been made available to the public.

Despite the same Vitalik Buterin is co-author of Casper FFG paper and FFG mini-spec, according to the developers of Cardano these documents do not sufficiently describe all that is behind Casper. Moreover, Ouroboros was thought from the beginning as a mechanism for a PoS blockchain, something that can not be said of Casper’s initial specifications. This means that the Ethereum blockchain could be vulnerable to a 51% attack even after the migration to Casper.

There are also many other differences between the two protocols: from security to the way a transaction is performed.

Essentially, the Ouroboros protocol works on the basis of the honest majority. The hypothesis is that any majority shareholder (therefore a person with an important amount of money) is likely to be honest, since he has no reason to see the value of the cryptocurrency collapse.

For the approval on Casper, instead, 2/3 of all validators are required. Buterin has stated that the system strongly encourages the validators not to try to be smart because if the system finds them they lose their reward.

Ouroboros and Casper also have some things in common. For example, in both mechanisms the oldest blocks are very difficult to reverse.

 

Conclusions

It is clear that Ouroboros is not infallible and far less perfect but probably no PoS mechanism is today. Vitalik Buterin and Prof. Aggelos Kiayias have extensively discussed the different implementations of the two technologies. In the end, however, both are trying to reach a similar goal, which is to no longer worry about the scalability of the blockchain.

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