How Does Cardano Work?

hello world it’s Suraj and today we’re gonna talk about a cryptocurrency called card on oh well the coin itself is called ah da but the blockchain that it supports is called card ah no and it was created by the cofounders of aetherium you’ve got Charles Hoskinson which is he’s basically like the Steve Jobs of crypto and you’ve got Jamie wood so both of these guys have been in the space for five plus years and they’ve seen a lot of the problems that happen with crypto currencies and they took all of those problems in the decide to make one single solution call court card on Oh which I’ve been researching a lot lately and I think the platform is very very cool so in this video I’m gonna talk about its architecture how it works how its delegated proof of state algorithm works and how it’s different from Bitcoin and etherium so let’s start off with Bitcoin you always gotta start off with Bitcoin right when it comes to crypto currencies so there have been three generations of distributed ledger technology so far the first generation was obviously Bitcoin right you got litecoin and all the initial altcoins but the idea was always the same can we create decentralized money and the answer was yes right so money that doesn’t require a trusted third party no I’m not gonna explain how Bitcoin works I’ve done that in previous videos but I will say that Bitcoin allows Alice to send money to Bob without meeting a trusted third party right we had the traditional way to do this and involve the bank a clearinghouse the ACH network all these different networks that were pre internet right and so it took it takes some time for Alice to send money to Bob if he’s in a different country because it’s requiring all these different old old-world protocols but there’s one thing that Bitcoin cannot do what if Alice wants to send money to Bob only if Bob mows her lawn right so you’ve got to have a network that’s able to communicate with the real world some kind of lawn mowed API or something like that where the transaction can tell if Bob mowed Alice’s lawn and and if and only if that happened it will release the funds and send them to Bob from Alice but Bitcoin does not allow for this however a lot of people don’t realize that Bitcoin does have its own scripting language right Satoshi implemented a scripting language in Bitcoin however it’s very limited and that’s for security reasons mostly for example the Bitcoin scripting language does not allow for looping at all so this is an example of a Bitcoin script it’s a very trivial example you just have three variables here I add them together and then I return them so that’s an example of Bitcoin script it’s useful for things like escrows but not very detailed escrows or anything more than just you know Multi multi signature transactions so enter etherium so if ariane came from a problem with bitcoin as in can we decentralize everything else in the way that we can decentralize transactions without the need for a third party can we also decentralize computation right can we decentralize the way of building an application in general so I’ll take quote Vitalik the founder of aetherium when I say comparing Bitcoin to aetherium is kind of like comparing an apple to a phone there’s just completely different technologies so if you’re in for example is if theorem is a programmable blockchain that’s the way you could think of it it’s a programmable blockchain and you might be saying what wait a second Bitcoin has its own scripting language its programmable it is but it’s very very limited if theorem is a has a turing-complete programming language called solidity turing-complete means it’s able to do everything loops is one trivial example recursion is another one but anything that any programming language can do if theorems solidity can do it’s kind of like when javascript came to the browser for example before javascript all web pages were static right you had HTML you had CSS but once javascript entered the browser we were able to do dynamic things and had much much many more features than we could before right so it allows for customizable transactions and what I mean by that is code on the blockchain so Heroku is a great example pre aetherium you’ve got Heroku you code some script you upload it to Heroku Heroku is that centralized source for that code it runs the computation and then all nodes that are can to your web app with your Heroku back-end have to connect to this central source however with aetherium you don’t push that code to Heroku you post you push it to all the nodes in the network via a transaction that’s your push your push is a transaction and then all the nodes that are running a full aetherium client have to process that computation block and so then once that code is run all the nodes in the network have to compute that code right so it’s decentralized computation and this allows for unstoppable applications applications that no one can shut down this has a range of use cases from financial transactions to healthcare all sorts of things but I won’t go into that either here’s an example of aetherium script right here solidity it’s much more readable it looks kind of like Python but this is a proof of existence script in etherium you’ve got one function that’s returning another function so that’s an example of solidity but aetherium as awesome as it is has its own problems right so a theorem has governance problems aka the hard fork or in the soft Fork it’s got security problems aka sick scalability how do we solve these problems right how do we solve scalability how do we solve interoperability and how do we solve sustainability I’m gonna go into each of these three points in a second but if we look at the blockchain history Bitcoin allowed for a distributed ledger and it allowed for the advent of cryptocurrency aetherium allowed for this is the same two things in addition it allowed for smart contracts now the third generation of blockchain has to do more than both of them combined what can it do well we know that any kind of programmable blockchain is turing-complete it allows for building all sorts of decentralized applications however the problem is not the number of features that the problem is it’s its infrastructure how do we improve that infrastructure right so one huge problem when it comes to block chains of scalability and these are the three points that Cardno aims to solve I’m gonna go into how it aims to solve all three of them right so for scalability there are different proposals for solving Bitcoin scalability right what we shift the burden onto the users via trusted intermediaries for aetherium what if we tweak the tuning parameters limited Headroom or do security margins and then there’s entirely different solutions like semi-closed groups like the ripple protocol or stellar you lose your openness but you have public transparency benefits and then the hardest solution is to rethink your architecture entirely and that’s where third-generation cryptocurrencies are coming into play right now I talked a bit about iota right so iota just discards the idea of a blockchain entirely and moves to a directed acyclic graph right so it’s it’s it’s instead of a linear data structure it’s a dag data structure but that’s just one way to solve it it’s not that the idea of a blockchain is inherently bad it’s just that the infrastructure around it can cause these problems right having a blockchain that uses the proof-of-work for example requires huge amounts of computation way too much a lot of electricity a lot of scalability problems having all the nodes have to download a full copy of every transaction in and of itself is just not able to scale right what if we have you know what if in five years we have billions and trillions of transactions you’re telling me if I want to be a miner I have to download all of those transactions to my laptop that’s a lot of transactions hence the problem with scalability right and so that brought the blockchain protocol the Bitcoin protocol specifically relies upon many nodes possessing a full copy of the blockchain data and so this restriction prevents crypto currencies from scaling to compete with legacy financial systems like Visa for example right the Bitcoin network allows for seven transactions per second visa is something on the you know just orders of magnitude more like 10,000 plus transactions per second so what Cardno offers as a solution to this is its own proof of stake protocol it’s it’s actually a delegated proof of stake protocol and they call it Ouroboros which I’m gonna go into at the end of the video there’s another problem with scalability it’s not just about the number of transactions per second it’s all about bandwidth so when it comes to bandwidth how much data can we pipe through these networks all at once and so their solution for this is using a network architecture called Rena which is short for recursive internetwork architecture which I’ll go into a bit as well at the end and the last problem when it comes to scalability is data scale right how do we scale the amount of data that it’s that is in the network how do we structure that data so everything is as fast as possible and there are several solutions for this there’s pruning there’s compression there’s partitioning so there’s a lot of problems when it comes to this and there’s a lot of proposals on how to fix this so interoperability right so this is the second major problem we’ve got scalability interoperability and the last one which is sustainability so when it comes to interoperability whenever we want to send cross-border payments using the legacy financial system one bank will send money to another Bank right and they have this partnership right they have these protocols to send money between different banks they have partnerships and they have all these you know kyc and all these different compliance protocols so they’ve been around for a while and so it’s very difficult for Bitcoin to communicate with aetherium for example and other altcoins however for banks it’s easy because they built these protocols over many many decades and so in the traditional financial world how is a bank supposed to talk to Bitcoin forget about Bitcoin talking to about talking to other altcoins how do you get a bank like ING to talk to the Bitcoin network for example this is very hard right banks need these compliance regulations kyc you know there’s all these different compliance regulations that other banks are really good at complying with that cryptocurrencies are not they’re just these networks run by developers and they’re not as mature so we would need these compliance protocols built into these crypto currencies for the traditional financial world to be able to talk to the new financial world and we need cross chain transactions without the need for a third party right so right now the way that Bitcoin can talk to aetherium is by using a centralized party like coin base for example or crackin or any of these exchanges so these are kind of per area solutions to transfer value between different currencies but their centralized solution in and of themselves right so we need a way to allow for value transfer between crypto currencies without the need for a third party and we also need three other kind of smaller details we need metadata that is who is sending the transaction and have that be opt in or opt out based on whether or not you want to be visible we need attribution who sent what right and we need compliance like I talked about before kyc and so for Bitcoin there’s this idea of the sidechain proposal where you peg an altcoin to Bitcoin and this would require a change inside of the Bitcoin network that the developers have to accept and there’s this whole theory behind how side chains can work etc but it’s in the works now lastly there’s one more problem when it comes to crypto currencies in general and that’s sustainability okay so how do we sustain a network over a period of years if not decades so one way to do this is by using the ICO model right so the initial coin offering model this is a way for the network to gain a huge sum of money all at once but the problem is this is a huge sum of money all at once right this money can well no matter how big it is eventually it’s gonna run out so it’s not a very sustainable model for fundraising for the developer to the network and for the the users and the contributors it’s just not sustainable so a better way of sustainably funding a network is through the idea of a Treasury right a Treasury system so one cryptocurrency that did this very well is the – protocol so what the – protocol did is it has this Treasury that is this kind of vault of savings that the network holds and so the users can vote on how that on how the money in the Treasury is spent through voting right so you have all these different proposals for things that would grow the – network like launching – in Zimbabwe promoting – to 200,000 people let millions of Chinese investors on who all be invest in – all these different things right – documentary and users can vote on how much cryptocurrency want of to be allocated towards these proposals so that’s just a more sustainable way of doing things and Cardno has adapted this model of using a Treasury right so oh you know how should we go about something how do we solve the problem of governance and this is a this is a very hard problem right with even with aetherium there’s been this idea of the hard fork and the soft fork to explain a little bit about the difference between the two hard forking is not backwards compatible so it’s a completely different type of network soft forking is right so it’s it’s it’s a change to the network that the old nodes would have to upgrade to or else they’re not a part of the network ever anymore so let’s talk a bit about Cardinal now that we’ve talked about the problems with blockchain so far so the team so far consists of Charles Hoskinson and Germany would both of these are co-founders of etherium these guys have been around for a while so they’ve they’ve seen the problems that come from both turing-complete and non turing-complete block chains and so they claim that it’s the first blockchain platform to evolve out of a scientific plus philosophy and a research first driven approach I mean if you look at their team they’ve got a bunch of PhDs it’s a it’s a very solid team which is which is cool and it’s backed by three independent entities the Cardinal Foundation which is a non-profit the IO HK which is a crypto studio started by both of these two and emergo which is a card a no specific blockchain studio so it’s got a lot of money that’s been funded into a lot of resources development and and funds so when it comes to its architecture one thing that I think is very interesting is the fact that it uses Haskell as a programming language it’s the first blockchain to be coded in Haskell and in Haskell if you’re if you love math Haskell is a language for you but basically Haskell is a language that allows for prototyping very complicated math equations very fast and I’ve got a little example for you here that I just pulled from their repository to see just so you can see what Haskell looks like in the context of a blockchain so it’s the first cryptocurrency to be written in Haskell it also has two scripting languages one of them is solidity so it another example of solidity very readable language looks a lot like Python and if you’re familiar with Python you’ll you’ll catch up with solidity very fast also it’s composed of two independent blockchain layers you’ve got the settlement layer and then you’ve got the control layer and I’ll talk about the difference between the two Cardno separates the accounting from the story behind it by creating two protocol layers a settlement and the control layer the settlement layer will have a unit we’ll have a unit of account or value while the control layer runs computations in the form of smart contracts so right now we can look at the settlement layer the computation layer is still in the works it’s still to be built so let’s take a look at the settlement layer which we can look at on github right now but it’s a standalone blockchain powered by the actual ADA token which you can buy right now and Ouroboros there a proof of stake algorithm allows for features such as delegation and side chains which allows for interoperability so if we look at this github repository right now we can see that what the settlement layer looks like the whole thing is coded in Haskell it doesn’t have that much internal documentation on the github website but if you want to see documentation they’ve got the separate website called Cardinal Docs which we can look at a lot of it is just reasons why you’d want to use Cardno but it’s also got installation instructions as well for supporting platforms you can install their their wallet on Windows and Mac OS and it’s got a bunch of descriptions of how api’s work how that how the transactions work how the stake is distributed it’s got a lot so it’s got a lot of documentation which is a good thing and I can make another video on that to go really into those technical details but check out the github repository and check out that technical documentation now the computation layer is what they want to build so this is kind of a future thing but it’s where information contained in this settlement layer is processed or computed in particular transactions so it’s the smart contract layer TBD it’s just I mean TLDR it’s a smart contract layer it’s what never touches or wait for the CSL layer except for when a reference point is necessary and runs an implementation of their proof of State algorithm just like the settlement layer so they both do so let me talk a bit about Ouroboros now their their consensus algorithm so when it comes to proof of work the way proof of work works is you have the probability of mining a block dependent on how much computational work a miner does and so payouts become smaller and smaller for Bitcoin miners and there’s less incentive to avoid a 51% attack and they’re these pows systems become these powerful mining communities that tend to become centralized so the way proof of steak works is instead of saying it’s all about computing power it’s about how much money you have in the network how much stake you have in the network so a person can mine depending on how many coins they hold so depending on how much stake they have in the network and the POS system makes any 51% attack more expensive and so POS systems are more decentralized but must work hard to build communities around their coins right you don’t want centralization in terms of only these people have you know this much stake so when it comes to delegated proof of stake and this is what aura Boros implements voting power is determined by how much stake you have it’s not just about how much mining power it’s about voting power right so a whale that owns a hundred thousand tokens has much more voting power than a minnow that only owns a hundred tokens right and so based on how many tokens you have your voting power increases right so it’s kind of it’s it’s it facilitates the decentralized elections of a quorum of consensus notes so it’s not completely decentralized it’s not totally centralized it’s a mix between the two it’s kind of like liquid democracy if you’ve heard that term before but it’s delegated proof of State you’ve got some delegates right that people vote for in the network and if the delegate is bit as corrupt everything is transparent then you just fire the delegate and find a new delegate right so that that’s kind of what they do bad actors are firing and it removes the requirements for widespread storage of the entire chain so not every node has to download a full copy of the blockchain which speeds up speeds up transactions right it solved that scalability issue and so these consensus dode and run more traditional protocols developed over the last 20 years to accommodate the needs of large infrastructure providers at Google and Facebook that are more centralized because these notes have been elected democratically by the network and it reduces resource requirements which makes it easier took for multiple quorums concurrently to partition transactions to different forums so the the other part is the recursive internet work architecture and this solves the problem of bandwidth so rina is actually pretty complex there’s a lot of there’s there’s a lot of theory behind it and they’re actually still developing it but it’s been around for 10 years but essentially it’s an alternative to tcp/ip that is more suited for decentralized applications so it’s it’s better suited than tcp/ip is for nodes that are completely decentralized right so in the end of this video I want to go into how you can buy card on Oh so this is great link here called get crypto info slash card on oh and they’ve got the step-by-step tutorial on how to buy card on oh but the first the first step is you want to download their wallet which is Daedalus I hope I said that right Daedalus but you’ve the first efforts for you to download their wallet don’t worry they have it for Windows they have it for Mac so go ahead and download their wallet you can run the program and once you’ve synced with the blockchain you’ve created your personal wallet you’ve created your passphrase then you can go you could pick any theory of exchange to buy some aetherium or you could buy some Bitcoin and then exchange it from there coinbase is another example but this is a great link for that get the wallet download it I think this is this cryptocurrency has a lot of promise and I hope you found this video useful please subscribe for more programming videos and for now I’ve got to study some networking protocols so thanks for watching

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