Ouroboros - a brand-new, proof-of-stake consensus algorithm - is the solid backbone of the Cardano blockchain. Cardano’s native virtual currency ADA is referred to as “stake,” and instead of miners (as in Bitcoin) there are ADA “stakeholders” in the Cardano ledger. Cardano’s PoS system uses a randomized process to elect a stakeholder to produce a block, based on the weight of the stake recorded in the ledger. A block of time in the Cardano blockchain is an epoch and the individual units of time within an epoch are slots. Not all stakeholders have the expertise to produce a block if elected, so, stakeholders can pool their resources by delegating their stake to stake pools. The managers of these stake pools, known as stake pool operators, manage block production during slots where stake delegated to them is elected by the Ouroboros algorithm. These rewards are then automatically shared to the stakeholder.
In a DPoS system, stakeholders vote on who is responsible for producing blocks. This is different to Cardano PoS, where stake is delegated to stake pools rather than used as a voting mechanism. The voting power of each person is weighted to the number of cryptocurrency a person owns. These block producers are responsible for grouping transactions into a block and broadcasting it to the network. These block producers receive rewards for progressing the network. DPoS is designed in a way that block producers who fail to perform their duties can be voted out as delegates in elections. A DPoS system relies on a fixed amount of delegates to be voted on, meaning there is a set amount of parties allowed to progress the network.
This is vastly different to Cardano, as network simulations on the Cardano blockchain have shown that Cardano’s blockchain can effectively operate with as many as
1,000 running pools which ultimately creates a more distributed, decentralized, and secure network. EMURGO’s in-house developed
Seiza Cardano Blockchain Explorer, fully compatible with Shelley, will show the story behind Cardano’s evolution to a fully decentralized blockchain with staking pool data of these pools.
Both Cardano PoS and DPoS systems require synchronizing with the blockchain in order to participate. In a Proof-of-Stake system, a long-range attack can potentially take place when a bad actor silently produces a very long chain that forks from the blockchain far in the past, resulting in confusion when nodes (servers running a copy of the blockchain) are presented with a chain that is potentially even longer than the real one. Cardano’s solution to this is known as
Bootstrapping From Genesis, in which the chain which is
densest is always chosen. This is the chain with the most level of participation and transactions. This will be introduced into Cardano with the launch of the
Shelley mainnet.
