This article gives an overview of the strategy IOHK’s blockchain engineers have adopted for decentralization.
Proof of stake
In September 2017, IOHK released Byron, the first version of the Cardano blockchain platform. Byron is the core group of consensus nodes currently responsible for creating blocks on Cardano mainnet. These core groups of consensus nodes have been controlled and run in a centralized setting by three entities: the Cardano Foundation, Emurgo, and IOHK. The next objective for Cardano is decentralization. This is when control of the network will be handed over and run primarily by the stake pools. To achieve this transition, IOHK has built a class of protocols that will implement a proof of stake on the Cardano mainnet.
Implementing proof of stake is the purpose of Shelley, making the transition from a static, federated, and centralized network into a non-federated and decentralized network.
As part of the run-up, the Rust-based Incentivized Testnet (ITN) was launched in December 2019. This has been a great success because of community participation. At present, there are just under 1,000 stake pools active on the testnet, with 40% of the ada in circulation staked by 20,000 users.
In essence, the ITN is a full version of Shelley in that it is decentralized and running its own cryptocurrency. It was built as a pathfinder for the Haskell development team and has provided valuable insights for Shelley and helped answer questions such as: How much ada is staked? How many stake pools? How will the network perform?
Life after Shelley
Moving to the decentralized Shelley takes us into the second era of Cardano’s development. Work on the next three eras – Goguen for smart contracts, Basho for scaling, and Voltaire for governance – is already well underway. In fact, the next few months will see a speeding-up of progress with all these streams being worked on in parallel. Plutus and Marlowe for smart contracts were demonstrated almost 18 months ago and developers have been getting their teeth into those platforms; the Hydra protocol is already showing how it can run many versions of the consensus algorithm in parallel, so greatly speeding up transactions, and stake pool operators are already discussing governance.
The switch from Byron to Shelley through the use of hard forks gives us a methodology and the tools for making future transitions between eras smoothly and quickly. And the enthusiasm from ada owners and the community has demonstrated the potential for both Cardano as a platform and the ada cryptocurrency – the suggestion last year that there could be 1,000 stake pools was greeted with skepticism. We look forward to continuing our work with you in an exciting year ahead for us all.