Cardano 101

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Nápoles / May 15, 2021

Announcing new stake pools chosen for our delegation strategy

Committing to the health and diversity of the Cardano network, we are now announcing the new round of winners for delegation

Cardano continues to grow, powered by a stake pool operator (SPO) community working toward a vision of an independent, globally decentralized ecosystem. Stake pools have always been the driving force of the Cardano network and we launched our delegation strategy to recognize and bootstrap the promising pools.

To support our long-term vision for Cardano’s growth and network decentralization, we have already delegated the stake from retired IO Global pools to a number of promising stake pools in the ecosystem – to bootstrap their business and support community development goals, technical contributions, and geographical distribution. Our analysis has shown that our contribution helped them to become more stable in the network and attract delegators and community members who share their ideas and development objectives.

Diversity & distribution

Any community ecosystem needs its engineers and entrepreneurs, its technocrats, and its diplomats – globally. Equally, the pool ecosystem needs a balance of larger established players, a strong core, and an inflow of new entrants primed to build further success upon strong fundamentals.

The problem that many stake pools currently face is their recognition within the ecosystem or rather visibility that allows the attraction of community support to ensure stable and consistent pool operation. Running a stake pool is not an easy process; unlike mining, it does not presume straightforward funds earning from just setting up a pool on the machine. You cannot buy your way to success through a better and better kit – indeed, Cardano is designed to be relatively light on computing resources. Stake pool operation is a complex business that has the hallmarks of both a commodity and a distributed market, and requires a blend of skills, persistence, and luck.

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Markus / Mar 30, 2021

Cardano’s secure switch to decentralization

This translation has been made by [name of translator] from the original document published by Prof Alexander Russell at https://iohk.io/en/blog/posts/2021/03/29/the-secure-transition-to-decentralization/

The event will be ushered in with a ‘public assertion of randomness’, featuring entropy infused by the community

The security of proof-of-stake blockchains is provided by a mutually dependent relationship between its native token and the consensus mechanism that powers it: after all, electing nodes to issue blocks according to their stake requires a consistent global view of the stake distribution, while maintaining consistency itself requires a fair election mechanism. Indeed, the name Ouroboros – a classical symbol suggestive of mathematical recursion – was originally selected to draw attention to this relationship.

The Ouroboros protocol determines block producers via an evolving sequence of leadership nonces – each nonce runs the show for a 120-hour ‘epoch’, during which it contributes to determining which stake pools are chosen as the one-off leaders for block creation. Along with committing new transactions to the ledger, the blocks appearing in each epoch are additionally responsible for generating the leadership nonce for the following epoch – more recursion! All told, the leadership nonces and stake distributions evolve in concert to provide the fundamental ledger properties we demand of the system.

The Cardano blockchain transitions to fully decentralized block production on March 31. Just afterwards, the running leadership nonce will be enhanced by adding in a ‘transition nonce’ that reflects entropy from a variety of external, unpredictable sources. Specifically, all transactions posted to the blockchain before Wednesday, April 7 at 15:44:51 UTC (slot 151200 of epoch 258) will play a distinguished role in the future of the blockchain: their accumulated hash value, reflected in the ‘previous-block hash’ from the first block on chain created on or after this time, will determine the transition nonce and hence directly contribute to the protocol’s perpetual cycle of randomness generation.

IO Global scientists and engineers will contribute a number of specific, external, unpredictable sources of entropy. Additionally, to reflect the decentralized nature of Cardano we are asking the extended community, including stake pool operators and developers, to join us (on chain) for an event we’re calling the Cardano public assertion of randomness. This community exercise will establish the once-in-the-system’s-lifetime random 256-bit transition nonce that will herald the protocol’s official transition to decentralized operation.

We’re going to get more technical now so buckle up, or skip to the end.

Some background

The Ouroboros protocol is organized into five-day (120-hour) periods called ‘epochs’. As described above, these coordinate two critical activities: updating the stake distribution and updating the leadership nonce. The proof of correctness of the protocol shows that it achieves an auspicious steady state: so long as an epoch begins with an unpredictable leadership nonce, it will deliver a fresh, unpredictable leadership nonce to the following epoch. To bootstrap the recursion, this public assertion event is designed to ensure this property of unpredictability. We remark that proof of work protocols are subject to similar randomness demands: famously, Nakamoto included the presumably unpredictable string ‘The Times 03/Jan/2009 Chancellor on brink of second bailout for banks’ in the genesis block of Bitcoin.

The entropy mechanism and the timeline

Cardano’s implementation of the Ouroboros protocol provides an ‘entropy addition mechanism’ that can add a bitstring identified on the blockchain to subsequent leadership nonces; these are exactly the intended targets of the transition nonce. Naturally, this mechanism requires public declaration of the bitstring and explicit, cryptographically secure approval: specifically, only a collection of digitally signed votes from genesis delegates can complete the process. Furthermore, the process has a specific time horizon: votes must appear prior to the 48-hour mark in the epoch.

The epoch beginning on Monday, April 5 at 21:44:51 UTC (epoch 258) will invoke the entropy addition mechanism: in particular, the previous block hash appearing in the first block on or after Wednesday April 7 at 15:44:51 UTC (slot 151200 of epoch 258) will determine the transition nonce; this will take place roughly 42 hours after the epoch has begun and thus leave six hours for the genesis delegates to cast their votes. Recalling the hash chain structure of the Ouroboros blockchain, this hash value depends on the entire blockchain up to that point.

Closely examining the correctness proofs of the protocol paints a more precise picture of the essential properties of the transition nonce: it must rely on random values – introduced in our setting via Cardano blockchain transactions – that cannot be predicted accurately when the stake distribution for the April 10 epoch is settled. This places special emphasis on transactions appearing in the blockchain between the 12-hour mark, when the stake distribution is firmly settled, and the 42-hour mark, when the hash value will be lifted.

Entropy sources introduced by IO Global

While the Cardano community is bound to introduce a wide variety of random sources – see below! – IO Global scientists and engineers will inject transactions with metadata determined by several public sources of entropy: hashes of the closing prices of the New York Stock Exchange on April 6, and real-time seismic data from the US Geological Survey, the University of Athens, and the Japan Meteorological Society. Seismic data from these sources will cover the first 36 hours of the epoch. Further details, including the scripts to be used for harvesting the data and the exact sources, appear in this public github repository.

We’d also like the more technical members of the Cardano community to join in too, by adding their own contribution to the randomness. Here’s what we’d like you to do.

Select some entertaining sources of randomness: a lottery drawing from your region, a new RSA public key generated using your standard tools, or the outcome of a number of rolls of a 20-sided die. Paste the result of these sources into a text document, save it, and hash the file using your favorite hash function, such as SHA256. Post this hash on the blockchain using a transaction with metadata. (See this video.)To be most useful, your source of randomness should be determined after Tuesday, April 6 at 9:44:51 UTC (slot 43200 of epoch 258) and must be included in a blockchain transaction before Wednesday, April 7 at 15:44:51 UTC (slot 151200 of epoch 258).

If you are less technical, you can still join in. You might like to test out an interesting new community tool, Cardano Wall. This allows you to easily write to the Cardano blockchain. However you choose to get involved, please announce your act of community service on social media, by publishing both your (unhashed) source along with the hash value appearing in your transaction.

Thanks for your support and we’re looking forward to slot 151200 when we can convene, in spirit, for a ‘block party’ to watch the genesis delegates’ votes appear on-chain!

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Markus / Mar 11, 2021

Reliability and consistency through true decentralisation – which pool should I choose?

On 10 March there was a catastrophic fire at an OVH data centre in Strasbourg in the heart of Europe.

Despite great marketing promises with the highest quality claims, everything currently indicates that the building structure made of wood, metal poles and corrugated sheeting had no automatic fire protection. Usually, fire suppression in data centres is done by releasing fire-smothering gas. In the event of an alarm, people only have a short time to leave the rooms before the gas is forced into the server rooms at high pressure to quickly displace all combustible oxygen.

What impact such an incident has had on the Cardano network?

In short: After only half a year, the Cardano network already consists of several thousand publicly accessible relay nodes. Only about 10-20 of them were operated in this now completely burnt down data centre in Strasbourg.

So there was no visible reduction in the density value, which is very close to 5 in ideal block production.

So you can see that there is a very good distribution and therefore decentralised deployment. This is very good for all those who want to build on the Cardano network in the future.

Nevertheless, the question arises

Which constellations can have a significant and negative impact on the network?

Here we can clearly say that it is highly recommended to all ADA holders to think about the right things and to make an educated decision with which they also support the resistance of the network.

After all, it is not only a matter of the nodes being geographically distributed worldwide in networks of various data centre and backbone providers. Each ADA-holding delegator can decide for itself whether to follow a herd instinct and support an already very large pool operator who may already be running several pools. In the vast majority of cases, these are all operated at the same location and by the same servers.

If these pool clusters become too large, they generate a lot of blocks. And if they fail – for whatever reason (fire, attack, error, carelessness …) – this has a noticeable impact on the stability and credibility of the Cardano network. Much more than a whole burned down datacenter.

Let’s take the very well-known and still growing 1PCT pool cluster as an example. All of its current 28 pools operate through only two publicly registered relay nodes. And if you break down the two hostnames, you can even see that they have the same IP address, so they run on only one server. One would think that the 500-900 ADA or 600-1000 $ in rewards that each of these 28 pools generates for the 1PCT operator every 5 days should allow a higher investment in his infrastructure.

Considering that the 1PCT pools currently account for slightly more than 5% of all delegations, and thus generate blocks at this rate, it is strange that only one of the currently 2500 active and public registered relays of the Cardano network are provided by 1PCT. Once IOHK no longer runs hundreds of relay servers for all Daedalus wallets after full decentralisation is achieved (d=0), it is we stake-pool operators who will have to make this infrastructure and resources available to all users.

Source: https://adapools.org/groups/

So as I said before, each delegator should consider very carefully which pool operator they support. I recommend considering only those operators who consciously and transparently operate one single pool. In good conscience for a central, fair and resilient Cardano network.

Please read more here about how to choose a stake pool wisely.

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Markus / Jan 13, 2021

What are Cardano hard forks?

Here you will learn what Shelley, Allegra and Mary mean and what these Cardano hard forks are all about. ()

The Cardano blockchain runs on thousands of independent nodes. They all use an up-to-date software version so that they can exchange data reliably.

Most importantly, it’s about finding the consensus on block production. On average, a new block is created every 20 seconds. All nodes must receive this and check for validity before the next block can be placed on it.

Blockchains are constantly evolving and getting new features. This means that all these nodes need to be updated by the stake pool operators. This is relatively common, especially with Cardano, as many new features such as token locking, smart contracts, and governance are gradually added. For good reason, Cardano has played a leading role in statistical comparisons of developer activity for years.

get better step by step

In the case of minor updates and function enhancements, this is done in an uncomplicated and continuous manner. The old and new versions remain compatible. The normal user does not notice any of this.

But when it comes to fundamental protocol changes, blockchains perform what is known as a hard fork. In this case, a new software version is used which brings incompatible functions, a new data format or changed communication to the old version.

With earlier blockchain generations, a hard fork took place in which all operators (miners) convinced of the innovation started their nodes with the new version at a certain time announced in advance. The others stayed with the old version. Often this ended up in two separate blockchains. A well-known example is the Ethereum DAO hardfork of 2016 from which ETH and ETC emerged. Or in 2017, the Bitcoin Cash hardfork where no agreement could be found on the maximum block size and implementation of Segwit.

intelligent innovation

Cardano has also provided innovations in this area. The so-called Hardfork combinator technology allows a smooth and therefore controlled and secure transition from an old to a new protocol version. In this process, the proportion of blocks that are generated according to the old specification is gradually reduced over several epochs and replaced by new blocks. So the transition from the Byron era to the Shelley era started in August 2020 and was migrated in a slow, controlled way over several months.

However, an update can also take place from one epoch to the next. To do this, the nodes install the new software, which can handle both the old and new protocol versions. A proposal for the time of the changeover is then submitted at the protocol level, which serves as a common signal to all nodes for the changeover to the new version. So there will be no rebooting or splitting of the blockchain.

Not every software update means a hard fork event. In order to clearly identify the various hard forks, names are given to the respective era introduced, such as

Shelley (Aug-2020) : switch from BFT to Ouroboros PoS.Allegra (Dec 2020) : Introduction of token lockingMary (Feb 2021) : Actuation of multi assetsupport.

So from the risky and uncertain hard forks of the early blockchain generation, Cardano has become what can be called a decentralized yet coordinated software update.

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Markus / Dec 08, 2020

the k effect (from 150 to 500)

The Cardano main network was set at 150 with the parameter k in August 2020. This is the desired number of pools. It is not a hard cap, but reward and ranking formulas use this parameter to achieve a so-called Nash equilibrium around this value.

On 5 November 2020 and after some discussions with the Community, the researchers and engineers involved, there was a decision and communication to increase this value from 150 to 500 and to put it into effect on 6 December 2020.

This is a big step but makes sense. Many small steps would require both pool operators and stake delegators to permanently adapt on a new epochs desired state, in order to avoid ending up in over-saturated and less rewarding pools.

We have refreshed our previous work showing the development of pools and pool clusters and will look now at the effects after this new k value announcement.

As expected it wasn’t that easy for all pool operators to quickly reach out to their delegators. It took many epochs and weeks to rebalance the stake to more pools at less size.

At k=150, the saturation point of a pool was about 210 million ADA. At k=500, the new saturation point is 64 million ADA. This pushed many pool operators to create additional pools. However, this also prompted some delegations to flow into existing smaller pools.

the progress over time

The following animated graph shows the pool growth and resizing progress over time. Pay special attention to the period from epoch 227 to 234. You can easily jump to every epoch by clicking on the desired position on the timeline.

what did it achieve?

We make snapshots at the beginning of October and 6th December. Then we compare the silhouettes, in order to see the effect of re-delegations to smaller sized pools.

At the first view, it looks good because the red line now is more equilibrated. The ideal Nash Equilibrium would be reached with all 500 pools at equal size (almost flat line).

Update 11.December 2020after another epoch, we repeated the snapshot and draw another silhouette at the end of epoch 234.

We see that now – after the new k-value has become active – some delegators have reacted a little late but nevertheless. The red curve has clearly flattened further. But there are still 35 pools that are very clearly above the new saturation point and are thus experiencing significant losses in yield.

Whether this red line also means more decentralisation is another question. Pool operators who have created additional pools and directed their delegations to the new pools are not acting in a decentralised way because they are owned and managed by the same entities.

All data used for this visualization comes from pooltool.io

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Markus / Nov 09, 2020

Cardano’s 2020 development activity

Every now and then you hear: Cardano is going for number 1 This is why you see many who like to share the following tweet about top development activity:

TOP Blockchains by average daily development activity on the Github in October – November 2020TOP 3: @Cardano @Ethereum @Polkadot Data from: @SantimentFeed$ADA $ETH $DOT $KSM $GNO $SOL $ATOM $CELO $SNT $ANT $LOOM $DASH $BTC $ARK $MANA $DCR $XLM $MKR $POLY $HBAR pic.twitter.com/uOVfqug1Ky— CryptoDiffer (@CryptoDiffer) November 9, 2020

And as you can read from various news articles this is an impressive series.

But what exactly does that mean, and how does this huge lead come about?

Cryptodiffer counts the activity and progress of various projects in the blockchain and cryptography area. For one of the comparisons, they look at the code base of the top blockchains to see which activities are there. I.e. whether there is really active work on progress and innovations.

Strictly speaking, CryptoDiffer only evaluates data that actually comes from santiment.net, which provides tools to analyze the crypto market.

Before we go into detail, let’s use a simple comparison to show that two directly related projects with very similar code bases can have strong differences in their development substance.

Bitcoin vs Bitcoin-Cash on github

As you can see, the activities differ quite considerably, which points to much more innovation and substance for the original Bitcoin.

Is this real code or just trickery?

Theoretically, someone can start a blockchain project and use scripts to publish more or less useful and working parts of code automatically and in high frequency on Github. This way he could quickly overtake even very large blockchain projects in such an activity statistic.

That’s why it’s important to understand what activities there are on Github, and what you need to include in such evaluations to get something meaningful. Such as the number of

new code commitsissues and pull requestsadd/edit/delete commentswiki editsrepositories

If you want to read more about, I recommend a medium article from Valentin Mihov CTO at Santiment.

And Cardano beats them all?

By capturing all these activities in detail, you can compare the code base and substance of different projects very well. We did this with weekly values for 4 projects. Bitcoin as an industry leader, and two top Cardano competitors: Ethereum and Polkadot (pos 2 and 3 in Cryptodiffer’s tweet)

We see that so far Cardano has had an exceptional year 2020 with a top performance and leading development.

If you want to compare other blockchain projects, Santiment has a long list of projects from which you can check the activity index.

We also looked around for other statistics and evaluations. Cryptomiso seems to be completely out of date and forgets practically all important Cardano repositories. At Coincodecap you can see that it is a very simple formula and data basis.

By the way…

If you want to get an overview of the many development activities in the Cardano ecosystem then there is a perfect place for it https://cardanoupdates.com/

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Markus / Mar 26, 2020

testing layer4 techniques

Over the past 100 days, Jormungandr has used a P2P technique called poldercast to enable communication between nodes.

If you want to know more about the overlays, rings, vicinity and cyclons, here is an excellent summary written by Pal Dorogi: The Hitchhikers Guide To The Shelley – The Network

But somehow something was missing, with which the operator of a node could influence directly and manually which other nodes he wanted to connect to in any case. And this is where layer 4 could come into play. It was part of the network specs for a long time. With the help of community member M.Fazio a first attempt to implement and test such techniques became reality.

In short, the point is that a pool operator adds the “preferred” marker to some of its trusted peers. That’s all. In practice, the node will still use the usual poldercast layers to connect to hundreds of other nodes and not block anything. But it will also try to establish direct connections with these preferred trusted peers.

Now it needs several pool operators to perform the effective test of how something like this reacts and whether it really leads to improved communication between the block-generating pools. The pools often found it difficult to distribute and receive blocks of the short 2-second slots quickly enough across multiple poldercast stations to reliably create their own block. The many passive wallet nodes were not really helpful for this.

Starting around Era 100, some pool operators have decided to try configuring each other as trusted peers and observe how the network reacts.

The following figure shows epoch 100 and a node that works with the standard poldercast still without layer4. Every 10 seconds a measured value was recorded and compared with several other nodes. If the own node was behind by one or a few blocks, the graph shows with the blue bars. The red lines show a moving average which makes the course and the typical level more visible. The average level of all recorded values in epoch 100 is 0.4

In epoch 101, the preferred trusted peers was activated with about 30 direct connections to other block-generating nodes (Stake Pools)In the second graph we can see that the level of backlog is not constant but always lower. Partly even much lower, so that the average of all measured values in epoch 101 with 0.22 is almost half as without layer4.

This is a significant improvement!

The third graph shows the transition and the difference between the two epochs without and with layer 4 side by side in one graph. The lower the values, the better the situation of the node to successfully create its block at the right moment. This leads to fewer misunderstandings, forks and thus to a more stable and efficient network. Probably also for all other pools that do not (yet) use this technology.

The developers involved in the implementation were also very pleased with this result:

this is an encouraging results. This show that there is a real benefit from improving stake pools connectivities and with the final step of the 4th layer (the bottle in the sea protocol) we hope to provide this improved connectivity to all stake pools.Nicolas Di Prima (Team Leader)

After a few more epochs we will have collected enough data to be able to evaluate and report how this affects the network quality and reliability of Block production over time.

Stay tuned!

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Markus / Feb 23, 2020

testnet rewards back to mainnet

In November 2019 a snapshot of the Cardano mainnet happened in order to start the incentivized testnet (ITN) with a copy of the existing ADA distribution. Let’s imagine this snapshot as many accounts filled with more or less ADA.

Any ADA holder at that snapshot time (excluded exchange and hardware wallets) can now access his Testnet-wallet and use his Testnet-ADA (tADA). Imagine this box here is your wallet filled with your ADA. tADA mind you!

The goal of the testnet is to try and develop node and wallet software, as well as getting familiar with the staking process and delegations. All of this based on an incentivised model to earn staking-rewards.

Epoch by epoch a small amount of staking rewards is added by the Ouroboros Proof of Stake protocol to your wallet. (orange)

But the test network is not limited to delegating and receiving rewards. Wallet owners can send ADA to other addresses or receive. These can be other wallets you own, or they can be transactions with other people.

At the end of the ITN phase the earned rewards should be snapshotted again and brought back to the (Shelley) mainnet as real ADA.

But beware: the rewards will be transfered to the mainnet, not your tADA funds from the November snapshot! This is rather logic because you will not double your mainnet ADA holdings, but just get the earned staking rewards.

Now think about …

What does this mean for your wallet in the testnet?

The snapshot back from test- to mainnet can only consider rewards earned in the testnet. Since you can move your rewards in the testnet at any time and mix them with the existing tADA amounts, you should be careful not to get false expectations.

You should always remember the pass-phrases of the accounts where your rewards were paid out, not where you moved them or transferred them to. and also not what you bought from someone on tADA.

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Markus / Dec 21, 2019

does anyone want to jump the queue?

In epoch 7 the CLIO1 pool was a leader to produce a block for slot 3161. Our monitoring normally shows a constantly rising red line for each block created by the testnet pools:

The brown horizontal line is the approached next scheduled slot. If everything goes correctly, the block is created at the exact time and the line jumps to the next scheduled slot in the monitoring graphic.

But at the mentioned slot 3161 in epoch 7 we observed something very unusual: The actually constantly growing block chain suddenly jumped to slot 3245 and this before the time for slot number 3161 has come.

So: How was this possible and what effects did it have?

As can be seen in the graph, there was no progress for a long period of time then due to the extraordinary event. The stake pools probably tried to find out which of the two blocks was the right one.

Since CLIO1 could only refer to the block 3123 previously produced with the lower slot number, there were suddenly two blocks and thus a fork. If everything goes right and honest there shouldn’t be any fork!

If the blocks had been produced in order according to their height, there would be no problem and the hash checksums of all blocks in a row would fit together.

But so the subsequent block creators had to make a selection, append their block to one and discard the other including the user transactions contained in it. In this case, the pool who had pushed forward had won the race and CLIO1 had unfortunately lost its block, even if created correctly on time.

For us pool operators it is an exciting time. Especially when the network still has strong fluctuations, you try to find out what the error is and what you can do on your own site to ensure stability and performance.

Misconception or deliberate strategy?

The obviously too early generated and distributed block came from BNTY1 Pool. The question now is whether this is due to an imprecise server clock or whether the pool operator deliberately tried to generate and send his block a bit earlier in order to beat a competitor for the same slot and then shine with better performance values at the end of the epoch. But all this at the expense of stability and with the side effect of rolling back user transactions that were discarded with the CLIO1 block.

After this incident, we observed the matter, recorded a lot of data, and consulted with other pool operators known to us. They checked their own recordings and confirmed the “extraordinary” event was also seen on their nodes. We also contacted the Jormungandr development team. They checked if there is a possible process error that can be fixed.

If, on the other hand, it were a deliberate strategy of a pool operator, a completely different situation and challenge would arise for the stable and proper operation of the Cardano blockchain.

We assume that in the past epochs some pool operators have fiddled around with time and slot-schedules, with the aim of gaining an unfair advantage. However, since this has led to twists in the block order and thus to forks, we also consider it likely that these tricks have made a significant contribution to the instabilities and problems in epoch 4-5-6.

The solution is v0.8.5

We are really pleased to report that release v0.8.5 includes a mechanism that allows honest pool operators to sideline these prematurely created and distributed blocks. It is a fork that only becomes significant when its time has come.

This means that this trick turns into a normal 51% attack Vector. Only if a majority of pool operators decide to move their pools’ system clocks into the future they will win. If there is no majority, they will create a block that may contain invalid transactions because they created it too early.

If a majority of pool operators would decide to always put their system clocks a little bit before the others, it could happen that we humans at the end of the test net actually have April, but the blockchain is already in May. And that would probably be pretty crazy, we think.

So please let us remain honest and serious! The challenges are there, and with the research and development work made available to us all free of charge, there are many real opportunities.

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Markus / Dec 18, 2019

Stake Pool Costs And Rewards

The Cardano Shelley incentivized testnet was launched on 13 December 2019. As a pool operator, we naturally observe closely how the various components and participants of this complex system behave and react.

We noticed something unexpected when we saw the delegations of ADA holders to IOHK pools.

IOHK has a great interest in making the initial phase (bootstrap) as safe as possible, and with its large pools plays an important role in this. Gradually, the block generation is decentralized to many pools then.

There are 4 IOHK pools available which differ in the registered values 8, 10, 12 and 14%. Interestingly, the 14% pool received the most delegations so far:

IOHK 8% 215
IOHK 10% 274
IOHK 12% 103
IOHK 14% 303

So it might be a good idea to explain the rewards structure of Ouroboros and Jormungandr in a blog post, focusing mainly on the criteria that affect the payment to the delegates.

Cardano Staking rewards explained

For each epoch – which lasts 24 hours – a certain amount is available from the reward pot. From this amount, a share (e.g. 10%) goes to the Treasury, from which future projects for further development are to be financed.

The rest is distributed to all stake pools. The larger the stake pool is, the more often it was selected by the Ouroboros protocol to create blocks in the epoch. In the best case, the pool-node was always ready, because the operators of the pool ensured safe and reliable operation (staff, connectivity, servers, monitoring, security, redundancy, …).

In this case, the pool will receive the maximum possible share of rewards. If, on the other hand, the pool has only created half of the blocks, there will be fewer rewards available.

Now it is the turn of the pool operator. He has made a business calculation and registered his pool with corresponding cost and profit margin values. He has three parameters for this:

Fixed (costs): A fixed ADA value that is deducted from the total pool return. This can be 0 or 1000 ADA, for example.Ratio (margin): Here the pool operator specifies a share of the total amount that he will keep for himself before it is paid out to his delegators. This can be 0, 7 or 14 percent, for example.Limit: Here the pool operator can optionally enter that he will never take more than e.g. 1000 ADA as profit margin.

Stake Delegation rewards

What remains after this expense compensation goes as rewards to the delegates.

And therefore this high number of delegations to the IOHK Pool with 14% cost explanation seems to us to be an indication that there is a frequent misunderstanding here. We do not believe that all these 303 delegates have the desire to pay IOHK as much as possible to run the pools, but that they probably expect an increase in the value of their ADA delegation of 14%. That is not the case!

When the delegates look at the fixed and ratio costs in the delegation centres and on the stake pool performance pages (pooltool.io and adapools.org), it is advantageous to know them correctly.

However, it may not be a good idea to choose the cheapest ( low cost ) provider, and here is why:

Why you don’t earn twice as much with a 2% pool as with a 4% pool

So let’s try to look at the rewards after deducting the pool costs to understand what really happens.

If one pool charges 2% and another 4% as margin costs, then 98% or 96% remains for the delegators.

For example, if someone receives 100 ADA reward for their delegation to the 2% pool, by delegating to the 4% pool he would receive about 98 ADA.

For the pool operator, however, it makes a big difference whether he gets 50 or 100 ADA for the operation because this allows high-quality support and guidance.

A 0% pool is either someone who likes to work for free, or then in the course of epochs will probably also try to operate as little effort as possible.

But what happens if a pool gets stuck and is not noticed until the next morning?

As mentioned above, a pool and its delegators are entitled to maximum returns in proportion to the staked amount. However, this becomes correspondingly less if only a part of the blocks is produced.

A pool that has invested in a stable system and ongoing monitoring can react quickly in an emergency before the next block appointment is due.

We at CLIO1 have that because our team can look back on 20 years of experience in the Internet service business:

Each step in the above graph represents a CLIO1-produced Block in the growing epoch 4 (red area) The spike in the middle happened due to an unexpected event and was solved before the next block production was scheduled.

A failure of 8 hours would the yield of the pool by around 33% because he will miss his schedules to produce blocks for the Cardano system.

The pool operator will still deduct his fixed and relative cost and distribute the rest of the 66% to his delegators. So you can see that this is a completely different ratio, and that it is probably a good decision to leave a fair share to the pool operator.

Read more about the incentivised reward model and try out the free rewards calculator.

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Markus / Nov 07, 2019

Ouroboros at work

There are several approaches to replacing the incredibly energy-intensive proof-of-work mechanism with something more intelligent and resource-friendly. Proof-of-Stake is one such approach, and Cardano’s Ouroboros is seen as a very promising, elegant and scientifically researched protocol.

The mechanisms of the peer-reviewed papers are currently being implemented in test networks. For example project Jormungandr, Cardano’s RUST implementation.

In one of these test networks, some independent stake pool operators have decided to combine the key performance indicators and telemetry values of their nodes.

For this report, the individual views of the nodes were superimposed in order to provide a comprehensive picture of the processes in test operation.

The following graphic shows 4 epochs and almost perfect block synchronicity of the 12 nodes.

Note:The genesis configuration of this test network specifies epochs of 30 minutes duration with a slot duration of 5 seconds, which corresponds to 360 slots per epoch. About 75% of the pools of this test network report their telemetry data for this analysis. They are distributed over the entire globe (Australia, Africa, Europe, America) and maintained by completely independent operators.

Slot leader election

Ouroboros has some special features to meet the safety requirements. These include that not every slot has to be filled with a block, and there can be several selected leaders (producers) for the same block. (watch this explanatory video)

The steady but not always constant block progress – as intended by the protocol design – can already be seen in the diagram above.

Let’s first look at the characteristic slot-leader schedule of a single pool (green line in the next graphic): At the beginning of each epoch (0), some slots are assigned to the stake pool according to its stake weight. Nobody else knows these schedules.For this common measurement, the pool announces its next planned block (1) and waits until the time comes.As soon as it has reached the time and created the block, the line jumps to the next (2) and then the next (3) assigned slot.

Many pools acting as a team

The next graphic superimposes the assigned leader slots of all the participating stake pools. The random principle and the stake weight determine how many blocks are assigned per epoch to each pool.

After the node has created its last block in that epoch, its curve goes back to zero, until the beginning of the next epoch, where the Ouroboros protocol again ensures the allocation of the slot leaders.

Multiple slot leaders

If we look at the lines in detail, we can see one of the special features of the Ouroboros protocol: It is quite possible that multiple block generators are intended for the same slot and generate a block.

For example, you can see it on the two red circles when two lines hit a slot at the same height and then jump to different next slots.

When multiple blocks are created for the same slot, whichever one is first received by the next slot leader (publicly unknown) – wins.

Watching it live

The following graphic normally shows the processes described above in real time, just as they really happen in a Jormungandr test network.

If the above iframe does not load the content in your browser, try to open the graph in a new tab.

Since it is a test net and changes and updates are made over and over again, it can sometimes display no or unusual values.

Credits and honest thanks to all who contributed their skills, time and node metrics: Priyank, Psychomb, OldCryptoGeek, Papa Carp, Alfie, Dmitry, Mark, Redoracle, RC, Mask, Consuman and all I forgot to mention.

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Markus / Mar 09, 2019

preparing a rock

some basic setup

reconfigure keyboard

in case you use an international keyboard use the following command ( a simple console based UI)

dpkg-reconfigure keyboard-configuration

networking

In order to let the device run under his own fixed IP in your LAN change from default DHCP to a static setup

sudo nano /etc/network/interfaces

add the following lines by adapting address, netmask and gateway to your LAN requirements, and by assuring that it’s outside of an existing DHCP-pool.

# Ethernet adapter 0
auto eth0
allow-hotplug eth0
#no-auto-down eth0
iface eth0 inet static
address 192.168.1.100
netmask 255.255.255.0
gateway 192.168.1.1
dns-nameservers 8.8.8.8

now check internet connectivity

ping 8.8.8.8

WiFi

To get Wi-Fi working simply use nmtui, a simple console based UI  from the commandline

fresh updates

get fresh packages from internet

apt-get update

(un)required services

you can disable the graphical UI to free up resources

sudo systemctl disable nodm
sudo reboot

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Markus / Feb 28, 2019

Ouroboros 101 – Understanding The Protocol

Ouroboros is the fundamental protocol of Cardano which enables the decentralized public blockchain and thus cryptocurrency to function.

By deliberately bringing together a combination of peer review, formal verification, and functional programming languages, a specification-defined cryptocurrency, one that’s provably secure in fact, was born. This contrasts greatly with the likes of Bitcoin for example, as those are merely implementation-defined, which means they do not have anywhere near the same level of assurance when the code is released.

With that, below we will cover the different versions and variants of Ouroboros starting from the high-level scientific research and formal specification, through to the implementation in program code, and all the way down to the final roll-out phases.

Each Ouroboros version had its beginning in a scientific study, and was peer-reviewed at the world’s most prestigious cryptography conferences.
The corresponding part will be handed over to the software development department as soon as the result can be evaluated as safe according to theoretical and scientific standards.
Finally, finished programs are rolled out into the test network and then into the operative Mainnet.
So over the years different Ouroboros versions and functions have been developed.
The first “Classic” version showed that with “Proof of Stake” you can achieve security features comparable to Bitcoin. This was implemented in a federated test and main network and put online in September 2017.
This is the so-called Byron phase, in which transactions were already possible, but at the same time further research and improvements followed.
For example Prhaos to provide security against deliberate corruption of adversaries, or BFT as a deliberately simple intermediate step to Shelley and Ouroboros Genesis, which enables new or offline parties to safely re-join and bootstrap their blockchain from the genesis block without any trusted advice
The results of this research are now in the implementation phase, which will take place in parallel in Haskell and Rust in order to implement the Test- and Mainnet in 2019.
There will be a short BFT transition phase with planned hard forks before the decentralized Shelley phase begins.
The research department is already working on the next new components to gradually complete the Cardano protocol. For example Ouroboros Crypsinous, the first formally analyzed privacy-preserving proof-of-stake blockchain protocol, or Hydra and Philos.
And that sumarizes the Ouroboros protocol and all of it’s developments. Stay up to date for more Protocol details by subscribing to our newsletter, Twitter or Telegram channels.

Photo credits to Jonathan Francisca

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Markus / Feb 10, 2019

Light Wallet Vs. Full Node Wallet

IOHK, the R&D company behind Cardano, created the Daedalus wallet for anyone and everyone to manage & transfer their ADA. On the other hand Emurgo, the company which drives adoption of Cardano, has also created their own wallet called Yoroi. If you are new to the ecosystem the question bound to come bubbling up in your mind is, “But what are the differences between the two?”

Both wallets follow the Cardano Blockchain rules/protocol, yet they are still quite unique. The biggest difference that any user will notice is that Daedalus is a full node while Yoroi is a light client. A full node contains a full copy of the blockchain, while a light client instead references someone else’s full node.

The following slideshow explains the difference, while also providing a more general overview of how the wallets work.

In contrast to a full node, a light wallet allows a users to transact on the blockchain without needing to download it themselves. This increases the usability significantly for the first-time user.

Both types of wallets are extremely useful and target different kinds of users. For the majority of people just getting started, a light wallet is the best place to begin. You’ll hit the ground running and have the simplest first dive into Cardano.

Furthermore, if you wish to continue finding out about all of the different available wallets, check out the Cardanowiki which maintains a list of ADA-compatible wallets.

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Markus / Feb 01, 2019

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Robert / Jan 09, 2019

What Is A Paper Wallet?

If you are new to cryptocurrencies the vast array of new vocabulary which you need to learn can seem overwhelming. To combat that, today we are going to be covering what a Paper Wallet is and how you can make your own.

A Paper Wallet is a cryptocurrency wallet which is printed onto a piece of paper and thus has never been live. This means that the wallet has never been imported into a wallet such as Daedalus or Yoroi, which is connected to the internet, and thus it is considered as a form of cold storage. This is much safer as the risk of a hacker being able to physically acquire the piece of paper you print out is nil, while the chance of them being able to steal your private keys from your hot wallet on your computer is actually above zero.

This obviously still leaves the option of a burglar physically stealing your paper wallet, however this is still much safer, especially if you take extra precaution with the physical storage of your paper wallet. As such many people opt to use paper wallets for storing their coins long-term, especially if hardware wallets are not available.

So then I’m sure you’re wondering, how does one make a Cardano Paper Wallet? For the rest of the post I’ll take you step by step in creating your own.

First thing’s first, you need to have the Daedalus Wallet installed. This is the official full node wallet developed by IOHK which supports the creation of Paper Wallets. Once installed, Daedalus will sync the entire Cardano blockchain which may take some time depending on your computer and internet speed.

After your wallet is synced with the network, you will be greeted with a screen with several options. Instead of selecting any of them we are going to click on the second button on the left side-bar:

This opens up the “Create A Paper Wallet Certificate” screen which explains how the whole process is going to work:

Proceed forward by clicking the “Save PDF file for printing” button. Once you save the file you can open it up and check out how the paper wallet looks:

Rather gorgeous if I do say so myself. Now print out the paper wallet and verify that you have done so by checking the boxes below and pressing “Continue”:

You will then be brought to the “Complete Your Certificate” screen as shown. Make sure you copy down these 9 words onto your Paper Wallet by hand and double check to see that what you wrote is readable and correct. Though this may seem like a hassle, this is a security feature so that even if someone were to acquire the pdf which you originally printed out, they would still be missing the final 9 words which you wrote in by hand.

Then the “Verify Certificate” screen will pop up where you need to enter all of the 27 recovery words from your Paper Wallet to verify that you have copied them down correctly.

Once you have continued, the finish screen will pop-up. Here you will find a link to check the balance of your paper wallet (may be a good idea to bookmark this link especially if you are not too tech-savy), the public address of your wallet, and a QR code of the address as well. When you are done proceed and click “Finish”.

There you have it, you have finished creating your Paper Wallet! If you wish to deposit ada to the wallet simply send it to the wallet address shown on the final screen or use the QR code. (both of which are also printed onto your Paper Wallet too) Alternatively you can also use a free app like Papware to scan the QR-code and keep the public address saved on your smartphone. This lets you keep track of your balance at the tap of a button while keeping all of the benefits of using a Paper Wallet.

If you ever wish to withdraw from the Paper Wallet you must import the wallet back into Daedalus using your secret 27 word phrase. This will give you full access to your funds to do whatever you wish with them. However, do remember this then makes your wallet “hot” again. If you wish to “cold” store your ada once more after withdrawing from the wallet, then you will have to proceed in creating a new Paper Wallet using the same process again and depositing your remaining ada into the new address.

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Robert / Jan 03, 2019

How Do Plutus Smart Contracts Work?

You may know of the new functional programming language that IOHK released at the end of last year named Plutus, however few have heard of the Plutus Platform.

The Plutus Platform in a nutshell is the developer’s toolkit for writing smart contracts in Plutus. Normally when you write smart contracts on other blockchains you run into the problem of having a sub-par experience switching between very different programming languages to manage off-chain with on-chain code. Furthermore you tend to have to deal with the testnet and all the slowness and hassle that goes along with that. Instead of all of that, the Plutus Platform unifies and simplifies the whole experience.

In short the Plutus Platform is made up of 3 parts:

Haskell libraries for writing off-chain codePlutusTx library for writing on-chain codeA ‘Mockchain’ for testing smart contracts without even the need of a testnet

With all three of these put together the developer experience for writing smart contracts is severely improved and streamlined. This is why IOHK is dedicating the time and effort in moving forward in this direction, and with time it will only get better.

Now that you have a general overview of the Plutus Platform, in the whiteboard video below I go over in much more detail how the smart contracts themselves actually work in a nutshell:

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