A new fund in Africa is investing $6m to finance the most innovative blockchain projects on the continent. The fund was created in recognition of the unique opportunities for innovation in Africa, which has the highest percentage of entrepreneurs of any continent. 

The fund focuses on blockchain technology because the lack of deeply embedded legacy infrastructure means that African governments and businesses have fewer obstacles to adopting next-generation technology than the West. This opportunity can potentially level the global playing field when it comes to offering game-changing blockchain-based products and services. 

The unique fund will offer capital to the most innovative African start-ups wishing to build on Cardano, the third-largest blockchain platform. IOHK will ensure successful projects benefit from teaching, financing, and sustained support in partnership with the fund.

IOHK works across the continent providing education and innovation in formal programming techniques. The company has a strong presence in Ethiopia – and is currently rolling out a system for verifiable education credentials to five million students and teachers in partnership with the Ethiopian government.  

Having been embedded in Africa for five years and in collaboration with investment and education companies on the ground, IOHK will be well placed to ensure that the projects most needed for the region’s development get the funding and support they require. 

John O’Connor, director of African operations, said: ‘Working with businesses in Africa I have encountered the most inspirational entrepreneurial spirit. At Input Output we believe in democratizing opportunity, which means giving equal access to funding to realize these innovative ideas, solving problems across the world.

 ‘This investment project marks a milestone in Input Output’s African development, enabling young ideas to flourish and capitalize on the opportunities provided by blockchain.’

At the heart of the potential of DeFi and RealFi is the use of blockchain-based peer-to-peer technology to build reliable and transparent financial products using oracles and smart contracts. During today’s Cardano Summit, we announced an exciting new strategic collaboration with Chainlink Labs that will help developers build smart contracts for Cardano DeFi applications.

Access to real-world databases will be supplied through Chainlink’s decentralized ‘oracle’ networks which provide tamper-proof, high-quality external data to blockchains, enabling ‘smart contracts’ to execute around datasets such as election results, sports stats, and cryptocurrency rates. Another example that might be quite useful is in the provision of weather data. Chainlink Labs works with several FinTech startups that are trying to enable parametric insurance in sub-Saharan Africa. Secure, verifiable and robust weather data is a key input required for such parametric insurance contracts.

Chainlink provides oracle services to power hybrid smart contracts on any blockchain. Chainlink oracle networks enable smart contracts to reliably connect to any external API, leveraging secure off-chain computations for feature-rich applications. Chainlink currently secures tens of billions of dollars across DeFi, insurance, gaming, and other major industries, offering global enterprises and leading data providers a universal gateway to all blockchains.

As the preferred oracle solution for Cardano, developers using the blockchain will be able to feed Chainlink’s institutional-grade data into their smart contracts – blockchain-based digital agreements that execute automatically once certain predefined conditions are met.

After market price feeds, support for other Chainlink decentralized services will follow: sports data for prediction markets, weather data for parametric insurance products, and verifiable randomness for gaming and digital collectables such as non-fungible tokens (NFTs).

This collaboration between IOHK and Chainlink Labs will give access to a wealth of secure data, helping DeFi achieve its promise of building a less costly and more inclusive global economic system. Initially, information feeds for real-time market prices will be linked to Cardano. Over time, additional data feeds on sports and weather will follow, for use with insurance, gaming, and NFTs.

IOHK Founder Charles Hoskinson said: “Oracles are essential to making real-world data accessible on Cardano and they support advanced smart contracts, such as DeFi applications.

“IOHK is committed to providing developers with the most secure and robust tooling for building useful solutions on Cardano, making it an easy choice to integrate Chainlink’s market-leading oracle solution.”

He added: “Not only will integrating Chainlink price feeds reduce the go-to-market time for Cardano developers, but it will establish a secure foundation for Cardano’s DeFi ecosystem, helping make Cardano more trusted by users around the world.”

Sergey Nazarov, co-founder of Chainlink, said: “We’re excited to leverage our extensive experience and expertise by establishing native support for Chainlink on the Cardano blockchain and supporting its next stage of growth into markets like DeFi and beyond.

“Similar to programming interfaces in web app development, developers building DeFi applications on Cardano will be able to plug-and-play Chainlink price feeds into their smart contracts to quickly gain access to high-quality, real-time price data on a wide range of assets while still maintaining robust security and uptime. Ultimately, this will empower developers on Cardano to build next-generation applications quicker and more securely.”

Niki Ariyasinghe, head of blockchain partnerships at Chainlink Labs, said: “We have a tremendous amount of respect for the Cardano ecosystem. Obviously for the technical team behind Cardano – IOG and so on – but also for the collaborative nature of the community as well."

Ariyasinghe added: "Cross-chain interoperability is another longer-term goal. This is really a framework for enabling bridges between different chains and enabling a multi-chain world. So this is something that we hope to collaborate on with the Cardano ecosystem as well.”

Strait Brands, an Australian luxury spirits company, is embracing a blockchain-first approach to managing its alcohol supply chain. Set to deliver four million bottles before the end of 2022, the business will build its production process around the Cardano platform. 

The partnership will see Strait Brands deploy a tamper-proof software system created by Input Output using Atala SCAN, which can record and store data securely and instantly verify the origins of products throughout the supply chain. 

Philip Ridyard, founder of Strait Brands, said: 'Strait Brands is embarking on large-scale international distribution and, conscious of the challenges the industry faces, we decided to take a blockchain-first approach to production, ensuring industry-leading levels of safety and verifiability in our supply chain.

'Input Output is an essential partner in Strait Brands' pioneering movements in the alcohol industry, protecting the integrity of Strait vodkas, gins, and our new super-premium range, Badger Head.'

Fraud is a growing problem for the alcohol industry. Counterfeited, mislabeled, substituted or diluted products worth upwards of $40 billion a year are making their way to consumers. 

Atala SCAN is reshaping the way the alcohol industry combats counterfeit products. By storing an authentic and secure record of ingredients throughout the production process, it can eradicate the possibility of either counterfeit or hazardous substances making their way onto the shelves.

SCAN is part of Input Output's Atala suite, which is already being used in the biggest blockchain partnership yet seen. The pioneering project with the Ethiopian education industry will provide five million pupils with instantly verifiable digital identities. These will be used to verify grades, monitor school performance and boost education and employment nationwide.

The Alonzo upgrade has enabled the deployment of smart contracts, decentralized applications (DApps), and other applications on top of Cardano. All this is hugely significant for Cardano, as it will open Cardano to a whole new developer community whose creative drive will boost Cardano's utility and adoption.

Any new application ecosystem presents an enticing smorgasbord of exploration. Equally, an emergent ecosystem faces two key challenges at the beginning: discovery and quality assurance. Users need to be able to find the products they want to engage with, and do so with the reassurance of a certain baseline level of quality.

The influx of new, third-party applications also poses the inherent risk of inappropriate or malicious material, or content that it's simply not up to standard. So addressing discovery and quality assurance issues is key to early ecosystem growth.

We’ll offer a deeper dive into this important topic this weekend at the Cardano Summit. There, we shall introduce a certification program to assess applications developed on top of Cardano. And also those on the upcoming dAppStore we are developing.

DApp discovery on Cardano

The dAppStore – and we’ll preview a prototype at the Summit – is where developers will be able to upload their DApps running on Cardano and make them available to others in the. The store will provide a trusted, and democratized environment for developers to publish their DApps without facing censorship.

The Plutus dAppStore specifically addresses two barriers to entry:

• There currently is no formal discovery process for a DApp. Almost all discovery happens through organic or word-of-mouth means, or through social media marketing
• For end users, there is no consolidated view of all DApps available in a given ecosystem

Users will be able to access the Plutus dAppStore using a web browser. Think of the Plutus dAppStore as a 'storefront' for Cardano. The store displays the range of things that you can do on Cardano. A certification program gives users assurance about the behavior of any apps that they use, through automated logic checks, manual smart contract auditing, and formal verification.

Any DApp can exist on the store, whether certified or uncertified, but we will provide users with clear information about a particular DApp's certification status. The dAppStore seeks not to act as gatekeeper (or judge) but rather to provide a platform for transparent user assessment.

The crucial role of certification

The dAppStore is a shopfront. But aside from community validation, it offers no ‘baked in’ assurance. So this is where the second element comes in. The role of our certification program is the prevention of code-level security vulnerabilities. We shall achieve this by deploying different levels of ‘defense’.

There will be several tiers. At the simplest level, automated logic checks will enable us to detect certain types of malicious code. For example, these will be able to check if the contract does not contain a way for locked up funds to be recovered. In a well composed contract, locked funds need to be retrievable.

Beyond that, manual smart contract auditing will help us verify any DApp’s integrity. Ultimately full formal verification will test the mathematical model to prove that a smart contract satisfies the formal specification of its behavior.

Of course, any certification program is only as good as those who implement and run it. For this reason, we are partnering with some of the leading names in the functional programming space, who you will meet at the Summit.

Building on a secure foundation: Cardano itself

This certification effort builds on a blockchain that already provides more assurance than others like bitcoin or Ethereum. For example, tokens are built into the architecture of Cardano itself, rather than having to be provided by contracts, such as ERC20 on Ethereum. This eliminates any issues created by copying and modifying a contract to implement a new token.

Looking at the foundation of the chain, the Extended Unspent Transaction Output (eUTXO) accounting model is a fundamentally simpler – and more secure – model for a blockchain. Smart contracts in Plutus are functional programs, and the simple and verifiable semantics of functional languages underpins what we do with both automated testing and formal verification. We want to build a more secure foundation than other chains. Plutus is a functional language.

Also, Marlowe, our special-purpose language for finance, guarantees certain properties by design. For example, no Marlowe contract will retain assets after the contract has terminated. That is a property built into Marlowe, which does not require extra checks to be enforced. Because of its design, Marlowe also allows tools to automatically check that contracts have certain good properties by verifying every possible execution of the contract, without having to run it; this is something that general Plutus contracts cannot do.

Certification in the context of the Alonzo hard fork

At the Summit we’ll show examples of automated testing of smart contracts, which are components of DApps, rather than full DApps.

In the longer term, we would like to see user-designed tools, the deployment of those tools to the store, and the evolution of the Plutus dAppStore to include new features such as upvoting, reviews, and even Atala PRISM integration etc., giving users the opportunity to feed back on the range of DApps in the store.

Through our work on the Alonzo testnets, the Plutus Pioneer program, and of course Project Catalyst, we have already seen a host of projects starting to build on Cardano. As these projects start to come to market over the months ahead, user discovery and user trust in those DApps will be key. We are working with an open, decentralized ecosystem, so the usual rules of caveat emptor and ‘Do Your Own Research’ will of course continue to apply. But helping drive higher standards in certification and assurance will be key to accelerating the growth of a successful ecosystem on Cardano and ultimately, the widest possible user base.

Simon Thompson and Fernando Sanchez also contributed to this piece.

Join us at the Summit on 25-26 September to learn more about this exciting new initiative and see a demo of the dAppStore prototype.

The Alonzo upgrade enables the creation of smart contracts, decentralized applications (DApps), and other applications on top of Cardano.

Alonzo marks a significant milestone in the Cardano journey, deploying base level scripting capability that will, in turn, enable further innovation and network development. It also starts the process of transforming a transactions & tokens based blockchain into a dynamic confluence of creativity, financial inclusion, and decentralized development.

Among the most exciting of the fresh developments enabled by Alonzo is Hydra, a key layer 2 solution to further improve Cardano's scalability layering a new protocol on top of the existing layer 1 blockchain.

Hydra: Cardano’s layer 2 solution

In a blockchain network, a consensus algorithm creates a secure and trustless environment by ensuring agreement on a transaction history. Cardano uses Ouroboros, an efficient proof-of-stake consensus algorithm, for this very purpose. But Cardano also, just like any permissionless blockchain, faces challenges when trying to scale to achieve the throughput required to support applications in the real world, including payment, identification, game, or mobile services. After all, the blockchain needs to reach global consensus on each and every transaction.

Cardano transactions incur fees. The people who run the network (in the case of Cardano, the stake pool operator community) need to be rewarded appropriately for the part they play, so fees need to be set at a sustainable level. Users want to pay fees they deem acceptable. In addition, the blockchain needs to be protected against Denial-of-Service (DoS) attacks, for example. Fees can therefore not be set so low as to open up undue risk – DoS events must be made prohibitively costly to a potential attacker. Storage is also a concern, as an ever-growing transaction history can lead to storage problems. Effectively, the most successful blockchains risk becoming ‘victims’ of that very success.

Hydra is a layer 2 scalability solution that seeks to address all these concerns and aims to maximize throughput, minimize latency, incurring low to no costs, and greatly reducing storage requirements.

Scaling isomorphically

So how does it do this? By providing more efficient means of processing transactions off-chain for a set of users, while using the main-chain ledger as the secure settlement layer, Hydra keeps security guarantees while remaining loosely coupled to the main chain. Not requiring global consensus, it can adapt to a broad range of applications. For example, Hydra allows Tx fees and minimum UTXO Value to be configured as low as 1 or 2 lovelaces, critical to microtransactions and the use cases these unlock.

Most importantly though, Hydra introduces the concept of isomorphic state channels: that is, to reuse the same ledger representation to yield uniform, off-chain ledger siblings, which we call Heads (hence the Hydra name, which references the mythological, multi-headed creature). Specifically for Cardano, this means that native assets, non-fungible tokens (NFTs), and Plutus scripting are available inside each Hydra Head. Isomorphism permits a natural extension of the system, rather than a bolted-on one.

Many of the transactions currently handled by the main-chain or application running on the main chain can benefit directly from Hydra, because it understands just the same transaction formats and signatures. This greatly lowers the entry barrier to Hydra for existing and potential new customers, who can reuse Cardano's tried-and-tested infrastructure for building wallets and applications interacting with the layer 2 system. Also, a Hydra Head can be created without initial funds on a receiving party’s side, which allows for a smooth user experience.

Developing a proof of concept

We have already implemented the basic Hydra Head protocol as a proof of concept hydra-node. A developer preview will be ready by the time of the upcoming Cardano Summit. This will enable developers (or anyone interested) to run one or more hydra-nodes online, opening a Hydra Head with a limited number of participants, and feeding transactions to it. Users can expect to see a working prototype over a dedicated testnet, plus early benchmarking figures and documentation in this GitHub repository. There likely will not be any user-facing components (wallets, user interface, etc.) available just yet.

It is also important to make a point about transactions per second (TPS), too often rather clumsily used as the sole measure of ‘success’ when it comes to scalability. Some people tend to rate a network on the basis of its maximum throughput measured in throughput (TPS). While this is a reasonable measure for ‘legacy’ systems where there is high predictability and conformity (e.g., the VISA network) it is a less useful metric for distributed systems. Instead, our initial focus is on latency (the time that elapses until a transaction is confirmed) as another, more practical way to measure speed of blockchain transactions. On the mainnet, minimum latency is 20 seconds (one block). This is the starting point. In a layer 2 system like Hydra, it is possible to achieve confirmation times of less than one second. Terms like ‘one million TPS’ have been used before. It is a bold number, and while this remains as an aspirational target, the ultimate goal of any system is the flexibility to grow capability with demand. Throughput measured in TPS per Hydra head is secondary, and mostly limited by the available hardware. In principle, by adding increasing numbers of Hydra heads to the system, arbitrarily high throughput can be achieved by the system as a whole.

Hydra's evolution over time

In the short term, we will keep developing the hydra-node and the Hydra Head protocol until it becomes a solid and stable foundation for the community (and us!) to build real-world applications. These new apps will benefit from fast settling and low-to-no-cost transactions. We are also actively developing other key features, including the support of multiple heads per node, persistence, and Head protocol extensions

In the medium term, say 6-12 months, progress will greatly depend on the results of our research and experimentation, plus feedback from the developer community. We are researching ways to interconnect multiple Hydra Heads to increase the “reach” of our layer 2 solution, for example, and also testing different methods to make it easier to integrate and use Hydra. One of the most exciting visions for the long term is the development of ‘Virtual Heads’ by running the Hydra Head protocol inside Hydra Heads, thus fully utilizing the isomorphism of our Layer 2 solution. Herein lies true, theoretical limitless scalability.

Flexibility is key to scalability & growth

The overarching concept for Hydra is the provision of a pioneering layer 2 scalability solution suitable for Cardano, a third-generation, UTXO-based blockchain capable of supporting smart contracts. Hydra will drive down costs while increasing throughput and maintaining security.

Hydra replicates the main chain's functionality while minimizing friction for users, but still allows the flexibility of having a different fee / cost structure and timing constraints on the layer 2. Any successful ecosystem balances the needs of all users. We want this ecosystem to serve the needs of individual consumers, enterprises, professionals, and the growing list of DApps and their developers.

With the Alonzo hard fork, Cardano will start on a new journey as a smart contract platform, enabling technologies like Hydra, which in turn will dramatically improve Cardano’s scalability, and thus further its adoption.

At the Cardano Summit 2021, taking place 25-26 September, we’ll talk more about Hydra, its progress to date, and goals for the future. Make sure you join us! And you might also like to check out this video explainer.

Matthias Benkort, Arnaud Bailly, and Fernando Sanchez also contributed to this piece.