This month, members of the team are in Africa, meeting entrepreneurs and politicians across the continent. Here are some edited parts of a speech by IOG chief Charles Hoskinson at a recent event in Cape Town.

This is a long tour. We’re starting in South Africa and working our way all the way up to Egypt. We call it the pan-African tour. You know, we’re really passionate in this company. There’s brilliant people who work at IO and they come from all around – 56 countries, 576 employees. 

The heart of the company has always been changing the systems of the world, improving them for everyone, everywhere. You see, blockchain technology is really a larger conversation. It’s about how the world globalizes. How do we make decisions about how we’re going to come together and operate in the 21st century? In prior centuries we stood on the moon, built all kinds of amazing things like planes, trains, and airplanes, and horrific things like nuclear weapons. But there were winners and losers. There were hierarchies. Some people were on top. Some people were on the bottom. We just accepted that as the status quo. 

The 21st century may be the first where we have one global community where everyone in the world – regardless of where they happen to be born, the language they speak, color of their skin, their gender – lives pretty well. Now to get there, we have to have great technology. We have to have cultural changes. We have to kind of grow up a little bit as a species. But most importantly, we have to have the right systems and the right incentives behind the systems. 

The blockchain industry is basically the Swiss army knife of systems and incentives. It touches everything. It touches voting, it touches property rights, it touches something as fundamental as identity. Who are you? Are you a good person? And it asks philosophical questions about who should be the custodians of these things. Should it be a government, a transnational body, a private company like Facebook or Google or Microsoft or Apple? Or should it be something else? The power of decentralization is it gives you a paradigm, if you do it right, instead of ‘Don’t be evil’ – it’s ‘Can’t be evil’. It actually gives you the ability to have inclusive accountability. What’s that? If you don’t trust me, you can verify yourself. So when you vote, normally you trust your government to count that vote, right? Well, wouldn’t you like to be able to check the vote yourself? That’s a pretty fundamental thing, a pretty simple thing. 

You know, the US recently lost another war. And many billions of dollars worth of military hardware disappeared. So if I go to the Pentagon and say, ‘Hey, can you give us some records on all that stuff that just disappeared?’ ’Oh, we lost them. So sorry.’ When it comes time to pay taxes, though, the US authorities can always find my records. Go figure. 

I can’t check any of the data. I can’t check the records. Something so simple as that, in a modern hyper-connected society, 2021. The most powerful country, or so it claims; the richest country, or so it claims; certainly the largest debt country – and it just loses records. Wouldn’t it be nice to live in a world where anything someone tells you you can check it yourself and know that it’s true? Whether it be a credential, your vote, or your money. All these things – work your way through. That is what our industry promises. We’re after inclusive accountability, resilience, decentralization. We’re after rules, terms, and conditions that do not require nation states or corporations to play nice. You just simply can do it yourself. 

Why is this IOG team in Africa? Well, Africa is a really special and interesting continent in that it’s going through a massive upgrade. There are no allegiances to the systems of the past because those systems haven’t historically worked out so well here. So that means over the next 10, 20 years, every single thing – from how compliance works to how stock markets are going to work to how national ID works to how academia is going to work – is up for change. And as an entrepreneur and an innovator, that’s where you want to be. You don’t go where the ball is right now. You go to where the ball is going to be.  

If the whole world is globalizing and changing, you want to be where all the systems are going to change first, because if you get it right, more wealth will be created here over the next three decades than in Europe, the United States and China combined. That’s just how it is. It’s why the US got on top in the 20th century. It just simply had a better system than the competitors. And everything resets when you have technological change. We now live in a global economy. People from Africa are going to be on equal footing with people in Europe and America if we do things the right way. And then it’s a meritocratic race, and I’m going to bet on the people who are tougher, more resilient and more entrepreneurial 10 out of 10 times. They’re going to win – it’s just that simple. 

So IOG has a pan-African view as a company. We started in a pretty difficult country to do business in, Ethiopia, and you know what? Everywhere we looked, we saw well-educated, well-intentioned people who really did want change. And they worked with us. Sometimes the system worked against us; sometimes it worked with us. But everybody remembered why they were there. And it was the privilege of my career to announce a deal of five million people that could grow to 20 million, that could grow to a national ID system of 110 million in just a few years, and that could grow into a voting system, a payment settlement system. It can grow to anything. It’s kind of like the stem cell: once you’re in, you’re in, and you can keep navigating and growing. And then how do we take that to Kenya, to Nigeria? That’s 400 million people – more than the population of the entire United States – within grasp in five to 10 years.

What’s most extraordinary is that this will transform the lives of people. Now, boring work has to be done, dry presentations given about credential this and verification that. And they’re very necessary. But at the core of all of that are people. And a lot of people right now live a life where no matter how hard they work, they can’t prove that they worked hard. No matter how good they are, they can’t prove they’re good. So what does that translate to? It translates to lack of  foreign direct investment. It translates to a hard time getting a job. It translates to high interest rates, sometimes 40% per month. But when these systems come in, they can prove basic things. And people get the job. The interest rates fall. It translates to a mass uplifting of the people of the nation. And when that happens, everybody’s going to want it. And if everybody wants it, everybody’s going to get it. 

The smart cow effect

You see, that’s the key. It’s the ‘smart cow’ effect. I’m a rancher in addition to a technologist, and one of the things you learn when you rear animals – in my case bison – is that if one of your animals is particularly smart, they influence the whole herd. They go and figure out how to open up the fence. Once one cow can get out, every other one can, and you just wake up and they’re all gone. Similarly, one country changes the way identity or voting works, and that’s all it takes: every other country will change very quickly, including my own. 

In America we’re kind of the original rebels. In fact, Europeans were really terrified of us in the 18th century, 19th century. We had this whole revolution thing. We got pretty good at killing kings. But somewhere along the way, we went from revolutionaries to a situation where it takes two years to get a permit to build a fence for my farm. Something went wrong, you know? And there are a lot of people in the United States that like change too. In the state of Wyoming, we passed 26 pro-cryptocurrency laws. A massive number of companies have come to Wyoming. We have Dao standards decentralized autonomous organization standards, asset clarification standards. The economy’s growing by leaps and bounds. A $4 billion company, Kraken, moved in. All this amazing progress. 

Meanwhile, in Washington, the treasury department does everything in its power to try to kill our industry. They say it is threatening. A $2 trillion industry just pops up in its backyard and the US government is trying to kill it. So how do I change that? Well, I can go beg Goldman Sachs to do it, but they’re not going to. No. However, I can try to change things here in Africa. And that smart cow effect might work just as well in influencing the United States as it does elsewhere. You see? So you create the change that you want. 

Never be cynical, never be hopeless. If you want to change the world, go and change it. Years ago I was poor. I went to Japan, started Cardano. And no one took me seriously. I said, ‘We’re just going to build this blockchain and then go to Africa and talk to heads of state and change the world.’ And they’re like, ‘Yeah, OK. What qualifies you?’ ‘Oh, I’m just a math dropout guy. But don’t worry, it’ll all work. It’s totally legitimate.’ 

Eight years later we’ve got an army of millions of people and billions of dollars. And we’re meeting three heads of state on this tour. We just got it done one step after another. And I’m not special. I’m just kind of an asshole who’s resilient as hell. And that’s OK because there’s a lot of assholes who are resilient as hell in this audience too. All you gotta do is be passionate. That’s it. That’s the point. And this is probably one of the most passionate, resilient continents in the world. There are no people tougher than Africans. It’s true. Nobody is tougher. So if you’re going to bet on the future of changing the systems of the world, this is where to be, with Africans – as long as you give them the technology. 

Blockchain is as much your technology now as it is mine. We’ve written 120 papers and none of them is patented. They’re all open source. You get to use it as much as I do. You know how much do you pay for it? Nothing. They’re royalty-free. We’ve written over a million lines of code for Cardano. It’s all open source. It’s your code as much as it is my code. When somebody gets a decentralized digital identity (DID) it belongs to the person. When you get a Microsoft credential or a Google ID or an Apple ID or a Facebook ID, it belongs to Mark Zuckerberg, Larry Page, Apple. When you get a DID it belongs to you. And you can take it anywhere. The minute we start closing more deals across the continent, the credentials of all those kids in Ethiopia will be interoperable with the credentials in Zanzibar, Burundi, South Africa. So when you travel, you take ‘you’ with you, and you can’t be shut out of ‘you’. Simple concept, right? You did the work – you should own it. 

And it’s the same for business registration and all kinds of things. And that’s what’s so cool about Prism Pioneers and Catalyst. If this sounds like a good idea, and you’re an entrepreneur, then build a business on top of that infrastructure. And there is $1.4 billion available to go and build businesses on top of that. Pretty simple, right? And if your business works and it’s built on open DNA, then people can’t be locked out. That means everybody can build together. We create one global community where everybody’s equal. That’s the dream, and it’s why we’re here.

What excites me is what you do with what we’ve built. Because the things that we have provided, or that are coming out this year and next year, really can be used to run countries and businesses. And that’s not a joke. They could process millions to billions of transactions. It does all the things you’d ever want. And I’m excited about the prospect of living in a world that’s just a bit less cynical, a bit more fair, a bit more honest and a bit more open for everybody. So thank you for coming. I appreciate it. 

Hoskinson then had a Q&A session with two South Africans, Simon Dingle and Joshin Raghubar. Dingle is a fintech entrepreneur and author of In Math We Trust and Beyond Bitcoin. He tweeted recently that when people realize what Cardano is, it’s going to ‘melt faces’. Raghubar is the founder of iKineo Ventures and chairs Africa’s largest nonprofit tech incubator, the Bandwidth Barn. Hoskinson also took questions from the audience. The topics covered ranged from computer games to synthetic biology.

On games:

Some players of games like EverQuest, World of Warcraft, Skyrim, and Diablo 2 have devoted more than 10,000 hours of their life to them. That’s like what you do to become a mathematician or a doctor. You have lifelong skills. And the minute the server goes down, all of that progress just disappears. 

In the new generation of games that are coming you have the ability to save that state and make it portable. So what you do in game A can be taken to game B and C and D. There’s some ‘permeance’ there. 

And then, with the NFT revolution, it eventually becomes a market item that you can sell and trade.

On the need to create jobs in Africa:

In demographic terms, Africa is the youngest continent. In Ethiopia 70% of the population’s at or under the age of 30. If you give them internet and a great education, then suddenly you’ll have an incredibly entrepreneurial group because they don’t tolerate the status quo. You say, well, how will we create jobs for all these people? Well, they’ll create them for themselves. 

Technology and the metaverse:

I believe that things like synthetic biology, the internet of things, and artificial general intelligence – if they’re pushed through – will create tens or hundreds of millions of jobs. Ten years ago no one had a concept of the metaverse, and then Ready Player One comes out and we’re like ‘Oh yeah, we get it’. Probably 100 million people will have jobs inside the metaverse by 2030 or 2035. There’s no geographic bias to that. Most of them will probably be in Africa, Southeast Asia, and South America.

Biotech, evolution, and the blockchain:

I have a biotech company that does anti-aging regenerative medicine. It’s still in silent mode. Right now I’m negotiating with Colossal. It has just announced a project to bring the wooly mammoth back by 2027, and my ranch is the perfect place to do it. They have artificial wombs and the whole genome of the wooly mammoth, and they’re going to clone one.

What’s interesting about the intersections of synthetic biology and biotech and blockchain is there’s a lot of open questions. Who owns the mammoth genome? And then what happens when your mammoth has babies? Who owns that DNA?

It’s the same question in NFTs. You issue an NFT and someone buys it and sells it to someone else. There’s the artist who created the NFT. Should that be perpetual or at some point should that decay? The very same set of questions could be reapplied to synthetic biology for designer organisms, de-extinction efforts, and so forth. 

There’s a huge problem with poaching in Africa and other places. There’s mass extinction, especially in Madagascar. Ethiopia has lost 80% of its biodiversity in 100 years. It’s crazy.

How does a nation state create a strategy for de-extinction or for preservation of animals? Well, the same technology that could be used to bring the mammoth back could be used to bring those lost species back. How you create an economic system that prioritizes that is also a blockchain question. It’s an incentives question. So I think what our industry can do for the emergence of the biotech stuff is helping sort out some of the difficult questions about ownership of things, the transfer of things, the prioritization of things, as well as alternative funding models. 

Health data, privacy, and the vaccine:

As consumers we’re shedding all of this data and we don’t own any of it. It’s used in making decisions about our lives and we’re excluded from the process. That’s OK when most of society is still on paper and not digitized, but it’s dystopian when everything gets digitized.

The concept of self-sovereign identity is really the skeleton key because the data is not just data: it’s data plus metadata plus identity. So the identity really establishes the use policy of how it is shared, how it is revoked, and who controls it. Usually identity is the provenance of states and data is the provenance of private industry. It’s very siloed. And you can’t build one of these systems without the other. DIDs are pulling all these pieces together in a very clever way. And it puts the individual, the owner, at the center instead of the government or the enterprise. And then, people actually have to include you in the conversations about how your data is used.

Israel got first access to Pfizer because it had something to offer that other nations couldn’t. Countries like Germany were offering huge prices, but Israel said, ‘Well, Pfizer, if you had access to the medical records of every citizen of our country, wouldn’t that be interesting to you? Millions and millions of people. That’s like the world’s largest clinical trial.’ Because all the medical records of the country had been centralized it was easy for them to do that.

The hard question of governance:

I think as an industry we have a pretty good sense of what we need to do for scalability. It’s just a question of trade-offs and philosophy. I think, out of necessity, interoperability will come either as a network effect or through a collection of industry-wide efforts like Hyperledger and W3C stuff. 

The decentralized government is really hard because humans have never built a government that works. No one’s happy with their government everywhere I go.   

It’s a great transition: turning Cardano from this amazing academic – now amazing commercial – project to a self-governing, self-evolving organism that is led by its users.

This is a devil of a problem. Some people believe you can do it on- chain; others say you can’t. It would disappoint me if we hadn’t made progress by 2030. Now progress doesn’t mean you solved it. Blockchains are moving from homogeneous systems to heterogeneous systems. Design mirrors biology; design mirrors life. You need cell differentiation, you need eyes cells and ear cells. Analogously, a blockchain is useless if you don’t have heterogeneity because you need to interface it with medical records and voting systems and telecommunication applications, and every transaction and user is different.

High assurance is paramount when developing and working with smart contracts. You want to be confident that the source code is of a high quality, that the contract is secure and will behave as it should, and that it utilizes good properties and behaviors in the process. Certification ensures that security checks are performed prior to any deployment, and that smart contracts can be continually audited as they are updated. It provides benefits to both smart contract developers and end users, helping protect user funds and project reputations alike from coding errors or exploits.

At September’s Cardano Summit 2021, we laid out our plans on the introduction of new levels of certification for decentralized applications (DApps) running on Cardano. This certification program will provide levels of quality for DApps and their internal smart contacts.

This initiative has been led by Professor Simon Thompson, technical project director at IOG, and Shruti Appiah, head of product at IOG. It will help us comply with the best practices we’ve seen around the industry. We are working with Runtime Verification, Tweag, Well Typed, Certik, and others to roll out this new certification program that will link in with the new dAppStore, also unveiled in prototype form at the summit. This will be released in conjunction with the new light wallet.

What are the different certification levels?

There are three levels of certification, each of which is complementary to the others, rather than being progressive in terms of assurance and auditing purposes.

Level one: Automated tooling

This certification level gives continual assurance about a range of properties for smart contracts. It covers the discovery of different types of issues or bugs and is characterized as low cost, low effort, accessible to everyone while providing a substantial level of assurance.

It can be applied repeatedly and automatically, so each time there is a release or a sub-release of an application, we can test to ensure that the application still has the properties that we expect.

Level two: In-depth audit

This level involves looking at the technology and processes that led to it being produced. It is characterized by the fact that it involves a manual audit and verification of smart contracts within the DApp itself.

The testing is performed at a much more in-depth level and involves more manual effort that can address a DApp in its entirety, even if it is written in a variety of languages.

Level three: Formal verification

This level is more specialized where we aim to provide full assurance of critical aspects of applications through formal verification of smart contracts. Formal verification involves ensuring that a smart contract serves the specific business or technical requirements defined at the outset.

What kind of assurance can we expect?

Certification will ensure the correctness, compliance, and consistency of requirements by both application developers and auditors. It will also guarantee the absence of common security vulnerabilities and provide a level of robustness, reliability, and maintenance of DApps deployed on Cardano. While certification will be strongly encouraged and the store curated accordingly, it will not however be mandatory or act as any kind of ‘gatekeeper’ thus maintaining a balance between the need for user assurance and decentralized principles.

By auditing the specifications and design and ideation phases, you can present evidence to the community and guarantee that things will work as expected. This evidence includes documentation of requirements to a detailed level, thereby creating a reference point for the future.

Certification status in the dAppStore

We plan to integrate this certification with the new dAppStore that we are building to provide cryptographically secure non-fungible tokens (NFTs) that give evidence of the levels of certification that we will guarantee. The dAppStore will be part of a light wallet that IO is developing, and users will be able to access the light wallet and dAppStore using a web browser, and in the store to view the certification status of each DApp as they browse through the categories and individual applications. Making the relevant certification status visible to users during the selection process will offer reassurance on quality and safety for users in their choice of DApps.

To learn more about our dAppStore plans, you can watch a concept walkthrough on the dAppStore summit video.

What is next for certification?

Professor Thompson says:

We want to build support from the industry for emerging standards of certification. In the longer term, we will work with our partners and others to articulate best practices, which may involve forming an umbrella industry body to define new standards and practices for this domain.

We also plan to work with our ecosystem of partners to support certification of the first DApps on Cardano; one of a number of DEXs looking to launch on Cardano this year SundaeSwap also announced their plans at the summit to certify.

It is still early days. There are some technical challenges that we are busy working through about how we support versioning of DApps, how they will be packaged, and how to make them available to automated tooling. However, we are very excited about this journey with our partners and the general community to deliver a secure platform and applications built on top of it.

To learn even more about certification levels, and meet some of the partners on the program, make sure you watch the [https://summit.cardano.org/sessions/smart-contract-certification-the-why-and-how) from the Cardano summit.

Imagine buying a bottle of super premium spirits. Scan it with an app on your phone, and you know for certain that it is a genuine product, never opened or tampered with, and every ingredient can be traced to its source. All this without needing to trust the retailer or anyone in the supply chain.

That’s authentication security, and it will soon be a reality for customers of Strait Brands, an Australian producer of international award-winning spirits since 2006.

At the Cardano Summit 2021, IOG's Dan Friedman talked with Philip Ridyard, Strait Brands founder and MD, about using Atala SCAN for blockchain-based supply chain accreditation. Based in the Tamar Valley in Tasmania, Strait Brands is partnering with Input Output to embed Atala SCAN into their production and distribution processes. Watch the full interview.

Philip’s experience exporting to Asian countries has shown him the prevalence of counterfeiting and substitution in those markets. In the alcohol industry alone, counterfeited, mislabeled, substituted, or diluted products worth upwards of $40 billion a year are making their way to consumers. After ten years of searching, Philip has found the ideal solution in the immutability and auditability of blockchain technology, and ideal partners in the people of Input Output like Dan Friedman.

As Philip says, ‘For the launch of a super premium brand, to have super premium authentication and traceability is absolutely paramount.’ This authentication allows Strait Brands to offer not only the taste and texture of the product but the whole intellectual package that makes up the value offering. That includes the geographical location of Strait Brands in Tasmania, the pristine spring water, the agreements with local growers, the responsibly sourced ingredients, and the custom bottles. There will be four million bottles with Atala-compatible stoppers produced locally and distributed worldwide.

This partnership is timed to coincide with the coming release of a super-premium range to be known as Badger Head. The name comes from Badger Head Road, where the distillery is located, and from the term used by the British to describe the local wombats. The packaging includes a wombat motif.

Strait Brands is even planning a special Cardano-themed limited edition matched with CNFTs. More details of this will be announced soon!

Cardano is designed to serve millions of users in a globally distributed way. As with any other decentralized blockchain, this means that we need to produce a predictable and consistent supply of new blocks that collectively grow the chain and transparently record transactions between users. In order to ensure that new blocks are propagated across the network as a whole in an effective and secure way, it is important that the system consumes computation, memory, storage, and network resources efficiently.

Flexibility is key, so an important feature of the Cardano protocol is that it has been architected with true scalability in mind. This isn't just about the longer-term ability to provide the infrastructure into a truly global, fully decentralized operating system; its parameterization approach is also designed to flex and adjust to pricing fluctuations, network saturation, or increased demand, for example. A number of protocol parameters are provided that allow the system behavior to be tuned without the need for a hard fork. Even then, more significant upgrades that do require this can be deftly managed using our hard fork combinator technology (HFC). Together these are significant differentiators for Cardano which give us robustness and reliability today, and highly agile upgrade paths as the network grows and usage evolves.

Cardano’s roadmap was also conceived in a series of stages that would take us step by step toward our ultimate destination. Byron was about basic transactional capability within a federated network. This gave us the ability to start building a community and partnerships while working on the next stage. The Byron reboot gave us the firm foundations to build out further capability, while Shelley introduced stake pools, further expanding the community and introducing 100% decentralized block production.

This year, we have introduced a number of new, highly-anticipated features. Since early 2021, with the Mary era, Cardano has supported multi-assets and non-fungible token (NFT) creation on the ledger. With low fees and no need for smart contracts, we have seen an explosion of activity in this exciting area. September’s Alonzo upgrade has brought support for Plutus smart contracts that enable the development of a wide range of decentralized applications (DApps). It's relatively early days for smart contracts, but with dozens of projects working on DApps and a number getting close to the deployment stage, things will soon start to accelerate. These new capabilities influence how the ledger processes new scripts and transactions, and place new demands on the available resources. As activity grows, our architecture will allow us the agility to flex and adapt as required.

Network capacity

Networking lies at the heart of all Cardano operations. The Cardano network distributes transactions and blocks across globally distributed nodes that produce and verify the blockchain. This is called data diffusion, and it is essential to provide the needed information to nodes for the consensus algorithm to make its decisions. These decisions drive the chain forward, as a consensus between the nodes ensures that all transactions are verified, validated and thus can be transparently included in a new block.

Cardano is based on the decentralized Ouroboros Praos consensus protocol. Cardano smoothly transitioned to Praos from the previous federated Ouroboros Classic protocol via a series of changes to a protocol parameter d. Ouroboros Praos establishes enhanced security guarantees and has been delivered with peer-reviewed research papers presented in top-tier cybersecurity and cryptography conferences and journals.

Networking performance impacts how fast the system works as a whole. This includes such measures:

• throughput (volume of data transferred)
• timeliness (the block adoption time)

These two requirements are in tension with each other. We can maximize throughput when the generated blocks are most efficiently used. This, in turn, implies sufficient buffering to hide latency, which mitigates the consequences of a globally distributed system.

More buffering can often imply better block (and network) utilization, but it comes at the cost of increased delay (time to adoption in the chain) when the system is heavily saturated.

Block budget

To understand how fast transactions and scripts can be executed on Cardano, we should first define the notion of the block budget. The overall size of a block is currently limited to a maximum of 64 KB, representing a balance between ensuring good network utilization and minimizing transaction latencies. A single block may contain a mixture of transactions, including ones with Plutus scripts (smart contracts), native tokens, metadata, and simple ada transactions (payments). Similarly, a single transaction is currently limited to a maximum of 16KB. This ensures that a single block will always contain multiple transactions (at least 4, but generally many more), so improving the overall transaction throughput.

Block time budget is another property that is a fixed amount of time available to process all the transactions included in a single block. This is divided between the time that can be used for Plutus script execution and the time that is available for executing other transactions. This property ensures that transactions with Plutus scripts cannot monopolize the available time budget, and it will always be possible for the system to process simple payments in the same block that contains Plutus scripts. The total time budget for producing each block (including networking costs) is set to 1 second, with a budget of approximately 50 milliseconds available for Plutus script execution. In practice, this is a generous allowance – our benchmarking has shown that many real scripts will execute in 1 millisecond or less on a reference system.

The block time budget is currently set to 1 second. For security reasons, the Praos consensus protocol selects only a small fraction (one in 20) of the blocks that could potentially be added to the chain. For the current protocol parameters, the maximum transaction throughput (for simple transactions) is then approximately 11 transactions per second (TPS). Obviously, different transactions will vary in size and have different effective payloads. A single transaction could finalize an entire Catalyst voting round, for example, transferring millions of dollars of value.

As discussed above, each block is filled with a number of transactions that have been submitted by end users from wallets, the command-line interface (CLI), etc. These transactions are kept in a temporary in-memory holding area (the mempool) until they are ready to be processed and included in a block. Pending transactions are removed from the mempool as a block is minted, and new transactions can then be added to the mempool. By using a fixed-size mempool, we avoid the possibility of nodes being overloaded during high-demand periods, but this means that it may be necessary for a wallet or application to re-submit transactions. The mempool size is currently set to 128 KB: twice the current block size. This has been chosen based on queuing models.

Stretching the network

Ouroboros is designed to handle a large volume of data as well as transactions and scripts of different complexity and size. At present, and with current parameters, the Cardano network is utilizing on average only around 25% of its capacity. Of course, the most efficient scenario is that Cardano runs at or near 100% of its capacity (the network is saturated). While many networking solutions would suffer under such conditions, both Ouroboros and the Cardano network stack have been designed to be fair and highly resilient even under heavy saturation. Benchmarking analysis shows that under 200% saturation, the overall performance is still resilient and there are no network failures. Even while stress testing under 44x, the total available network capacity also shows no failures (though some transactions may be slightly delayed). The network is designed to work this way, using backpressure to manage the overall system load. So while some individual users taking part in a large NFT drop may experience longer wait times for their transactions, for example, or may need to resubmit the occasional transaction from a large batch (or spread the drops over a longer time period), this does not mean that the network is ‘struggling’. It actually means the network is performing as intended. We call it ‘graceful degradation’ and you can read more about it in the network design paper.

Wallets

Wallets act on behalf of end-users to submit payments and other transactions to the blockchain, and to track the blockchain status. One of the key services that a wallet provides is to submit transactions on the user’s behalf, confirm that they have been accepted onto the blockchain, and retry them on their behalf if the submission has not succeeded. That is, the wallet should take into account the effects of backpressure in the network as it becomes saturated, as well as other network effects (temporary disconnection, possible chain forks, etc). Wallets may be either:

• Full-node wallets (as Daedalus), which use local computing and network resources to run a node that connects directly to the Cardano network.
• Light wallets: these, in contrast, use shared computing and networking resources to serve a number of end users.

During periods of high demand (e.g., an NFT sale), both types of wallets may need to retry transactions. Since they share resources among many users, light wallets may need to temporarily scale the available computing and networking resources (including replicating endpoints) to ensure that user demand can be met. This demand-scaling is similar to the requirements that are placed when a company releases a popular new product, for example. In contrast, full node wallets may be essentially unaffected. Transactions may be slightly delayed, but each wallet will have the dedicated resources that are needed to retry the submission, including its own network connections. Similar principles apply to DApp providers – where specific network endpoints are provided, the system resources should be scaled to meet the demand.

Process optimization

We naturally welcome the innovation (and the dialog) that we are currently seeing in the NFT community. To improve the user experience, it is necessary to optimize development procedures so that the process of NFT creation, for example, works well even when causing system saturation. Many NFT creators are using batch minting for greater efficiency, for example.

We would encourage creators to look at how they can continue to optimize their own efforts in order to minimize network congestion. We’d also encourage everyone to join the Discord discussions as part of our Creator community and we’re making our engineers available in order to find the best matching solution to a particular case.

As well as the flexibility afforded by parameter adjustments – which can be made within an epoch if required – in the medium and longer term, further options will come into play. Hydra allows multiple operations to be run in parallel, which grants enhanced scalability. Its state-channel solutions increase the system throughput, also reducing the demand for on-chain execution. However, while Hydra helps with multiple scalability use cases, it doesn’t specifically address NFT creation efficiency. As Cardano continues to mature and grow, we will continue to look at how we optimize the network and manage the network capacity. As I recently talked about in our October mid-month update, as the network starts running at a higher capacity, we’ll be able to tune those Cardano parameters as needed. For example, reduce the block time budget, optimize the size and execution time of Plutus scripts or lower their execution cost and improve throughput.

Join our Discord community today to find out more and to discuss all things Cardano with our dedicated community.

Thanks to Neil Davies and Olga Hryniuk for their additional contributions and support in writing this post.

At first glance, the deal between Cardano and Oasis Pro Markets announced at the Cardano Summit may sound like a specialist application of blockchain technology to the rarefied world of finance – of interest to bankers, perhaps, but not to the person on the street. But it could turn out to be a game changer for millions of people throughout the world.

Many countries struggle to fund large infrastructure projects such as bridges, dams, and rail networks, while their best and brightest citizens go and live elsewhere, their only contribution to their home country now the monthly cheques they send back home.

If you know anyone who sends money to their family in another country, then you have encountered the world of remittances. Although made up of small sums, it amounts to a huge well of money. Whole nations are kept afloat in this way, with remittances accounting for well over 30% of GDP in some cases.

Since 2020, as countries such as the UK have cut back their aid budgets, global remittances have actually exceeded the value of foreign direct investment (excluding China) and government aid from richer countries combined. It is a situation that Nick Cafaro, IOHK product manager, describes as ‘pretty astonishing’.

‘This means, for the first time in the 21st century, foreign workers abroad are sending money back home in amounts greater than all the investment coming from countries and corporations into those lower and middle-income countries – as well as the total amount of official aid.’

Yet that huge sum of money, much needed as it is, can only do so much good back home. ‘The government is unable to pool all that capital and put it towards big infrastructure projects that might benefit wider sections of the population,’ Cafaro said. ‘And the money coming in is not distributed evenly and so can actually increase inequality within countries.’

A third downside to this situation, Cafaro added, was that for remittances to continue people had to keep moving abroad to work, abandoning their family and wider community, ‘something that none of us really want to happen’.

A better way

Imagine a way of harnessing these funds so that they make the biggest impact where they are needed. A way that could actually raise the standard of living in the target country, and potentially stem the ‘brain drain’ of talented people from poorer to richer countries. Imagine that your solution also provides a return on investment for the person working overseas.

Blockchain can make this possible.

Countries typically fund infrastructure projects by issuing debt – sovereign bonds, as they are known. Sovereign debt is one of the bigger, more intimidating beasts in the capital markets zoo, and it is not one that most retail investors would be comfortable approaching. When a bond is issued by a sovereign nation, banks often form syndicates to buy up the entire issue. They want it for themselves because sovereign debt provides a fixed income at a low risk. Also it’s a regulation-heavy area of investment, so you need a huge amount of expertise to take part. It’s nice work if you can get it.

In the increasingly decentralized financial future, this massive class of debt and the huge pot of remittance money will be brought together. The relationship between Cardano and Oasis Pro Markets is a big step in that direction.

Cardano had wanted to form such an alliance for some time, and chose Oasis Pro because of its blockchain-first platform and regulatory expertise, said Cafaro, announcing the deal at the Cardano Summit last month.

‘The networks that are run by these syndicates of banks... are not capable of handling that type of deal flow, so you need to figure out how to connect those tens of thousands of individuals to the issuer through a single platform. The good news is that the Cardano blockchain is a great tool to solve this type of problem.

As Nick Cafaro, Product Manager at IOHK said:

We just had to find a partner to bring this “real fi” product to the Cardano blockchain. It had to be a company with expertise in capital markets and blockchain, and with all the right regulatory permissions in place.

Enter Oasis Pro Markets, Pat Lavecchia, the financial company’s chief executive, said: ‘We’re very much looking forward to a long-term partnership with Cardano and IOHK, providing democratization of financial services to a variety of countries utilizing our best-in-class technology – our matching engine or exchange, depending on the country and regulatory environment.’

He added that as well as providing greater access to the sovereign bond market for small investors – ‘the citizenry and diaspora of these countries’ – the initiative would provide ‘efficiencies and cost savings’ to the issuing governments.

Lavecchia described the Oasis Pro approach as ‘digital cash for digital securities’, which in effect meant using stablecoins and also potentially CBDCs, depending on different countries’ regulations.

‘Sovereign debt is a security that in the blockchain area could actually be fractionalized, and that fractionalization is tied very much to its democratization. It helps risk management for the issuer [and] increases the investor base, which in turn should improve liquidity as well, seamlessly. The digital exchange trading systems and order-matching engines that we’ve developed are the transition point from the legacy solutions . . . to the blockchain, and the benefits are enormous.’

According to Lavecchia, the issuer benefits in several ways. Because of anti-money laundering provisions, the issuer can ‘know at any time what institutions or individuals own their sovereign debt’. Governments no longer have to track down investors’ addresses and mail out their interest payments. ‘All that asset servicing is a tremendous time waste and unnecessary. The blockchain solves that issue. We estimate that the savings are anywhere between 25 and 50 basis points [0.25-.5%] of the issue amount.’

The issuing country can also benefit from smart contract innovations. ‘The smart contracts are embedded in the security itself and contain the terms of the security – for instance the principal and interest payments, the default provisions, if any, or any other actions or protections that are incorporated, not only for the investor but also for the issuer, the sovereign nation. It eliminates poor documentation and also reduces settlement times, which are currently between two and 10 days. Utilizing the blockchain and digital cash, that settlement time is reduced to almost zero.’

Once a country is set up with the Cardano/Oasis Pro system, it can expand its financial dealings to other asset classes such as equities, asset-backed securities, and other kinds of project finance, said Lavecchia. ‘This technology is available today and we have it with IOG ready to launch across the spectrum. In five to ten years this is going to be ubiquitous, so the sovereign nations that work with us today are going to be significantly ahead of the curve.’