Project Catalyst has progressed at an incredible rate, doubling in almost every dimension from fund to fund since its launch. By any metric – from numbers of votes cast, funding available, or simply participants in our innovation processes – Catalyst is emerging as an invaluable fulcrum for Cardano’s future growth. Now, at the end of Fund 4, Project Catalyst has already proven to be a powerful experiment in collaboration and decentralized innovation.

With this explosive growth come unique challenges. Project Catalyst has a growing number of commitments to increasingly diverse functional groups of people who contribute to this step-change in collective intelligence. Specifically, community advisors, funded-proposers, stake pool operators (SPOs), and toolmakers & maintainers, all of whom contribute to the success and growth of Project Catalyst, and the success of Cardano itself.

Bringing more value

This increased diversification brings additional value to Project Catalyst, since it enables the formulation of ever more ideas and proposals. Equally, it will make communication among all these groups harder. Every cohort will need their voice to be heard, and their ideas and concerns discussed at project level.

Simply put, these groups need representation and trusted leadership acting on their behalf. If such representation is lacking, or missing altogether, the impact of Project Catalyst would be greatly diminished. This is why we're introducing the Catalyst Circle.

What is the Catalyst Circle?

The Catalyst Circle is a “human sensor array” acting as the representative body for all the different groups participating in Project Catalyst. The Circle that monitors the current state and future plans regarding governance in Catalyst. It detects and discusses concerns, objections and opportunities arising within the Catalyst ecosystem. The Circle might discuss, for example, the definition of amounts allocated to challenges Fund over Fund; changes or conditions to incentive parameters; the Catalyst API, etc.

By recording meetings and capturing actions in a backlog accessible to all, this activity will provide a view into the hopes, wants, needs, and concerns of the community within Project Catalyst. The Circle is also responsible for determining its own future shape and defining the election processes for Circle v2.

The Circle exists to fulfill four key goals:

• To facilitate communication between the different functional groups
• To provide a heads-up when red lines are crossed within a certain group
• To suggest improvements on plans and processes that shape Project Catalyst
• To define the election process for Circle V2

Member duties and responsibilities

Like Project Catalyst itself, the Circle will also evolve over time. Initially, elected members will serve 3-month terms, and elections will follow to continue improving and iterating the process. For elected members, we have identified these initial duties and responsibilities.

Each member of the Circle should:

• Represent the community that selected them
• Exercise their own best judgement about matters that come before the Circle
• Familiarise other members with the projects, activities, aims, hopes, and concerns of their communities
• Periodically take the opportunity to introduce policy proposals into the Circle’s agenda for consideration
• Inform their communities about initiatives of the Circle

Each member also has the responsibility to:

• Regularly attend meetings every two weeks
• Maintain an agile backlog list to track issues between meetings
• Review and comment on agenda issues ahead of time
• Maintain awareness of the interests and concerns of their community
• Disseminate the Circle’s outputs transparently and accessibly
• Learn and practice effective meeting procedures
• Produce an election protocol document for the next elections
• Attend training sessions focused on inclusive and lean startup leadership techniques
• Provide feedback on the effectiveness of the Circle

Leading and adapting

We have just held the first election for Catalyst Circle members in both Western & Eastern hemispheres, to include community members who couldn’t attend the regular weekly Town Hall. Members will be able to set each meeting’s agenda and periodically introduce policy proposals into the Catalyst Circle for consideration. The ‘minimal functional group’ is the bootstrapping version, based on consultations with leaders within the Catalyst community and Governance Alive, an expert group in the field of novel governance structures.

As trusted best practice is established, the Circle might grow and divide. Maybe the future has many ‘Circles’? Ultimately, it will be up to members to advance our goal to legitimise decentralized governance, paving the way for an alternative to the status quo, and continuing to break new ground in building the future of blockchain governance.

The Project Catalyst weekly Town Hall takes place each Wednesday at 18:00 UTC. Everyone is welcome to join. To learn more and get involved, be sure to join the Project Catalyst innovation community and its dedicated Telegram channel.

Nexo kicks off a landmark collaboration with IOHK to fully integrate Cardano into its platform. This will allow ada holders to buy, borrow, lend, and sell crypto on the Nexo Exchange, while also earning up to 8 percent interest on their holdings, or accessing ada-backed credit. This partnership increases ada’s utility and enhances Cardano’s value and reach.

As we move towards the Alonzo upgrade, IOHK is establishing strategic partnerships with organizations like Orion and Nervos to expand the Cardano ecosystem. Now, we’re adding Nexo to our growing list of collaborators. Nexo is a leading institution for building value in the decentralized finance (DeFi) space. The Cardano integration comes from increasing demand from both Nexo clients and ada holders. Adding Cardano to Nexo’s Earn on Crypto & Fiat Suite and Instant Crypto Credit Lines™ brings their total serviceable assets to 20.

This is only the second time that Nexo has brought an asset on board via their new integrations system. The goal is to cater to client needs while fulfilling demand for exposure to cryptocurrencies. Increased interest in blockchain technology led Nexo to work closely with projects like Cardano, while making it easy for everyone to invest in both digital and traditional assets.

Antoni Trenchev, co-founder and Managing Partner of Nexo, says:

Blockchain organizations like Nexo and Cardano have a lot of potential to give each other a serious leg-up in digital finance and it thrills me to see that happening. Nexo’s business creates added utility for ada, reducing selling pressure, boosting its value, and creating an influx of users, including people who might just be starting out in crypto. Reciprocally, Cardano broadens our total addressable market and expands existing clients’ options when investing funds via our platform.

This falls in line with the vision of IOHK’s Chief Technical Officer, Romain Pellerin, who views interoperability as essential to mainstream adoption of cryptocurrencies and blockchain technology. He says:

Bringing Nexo into our growing ecosystem will give the Cardano community even more options and utility for ada. Working together with Nexo to make this process user-friendly for those who are new to crypto will only encourage wider adoption, and Nexo’s unique offering is a clear match for IOHK.

Nexo is a leading regulated digital asset enterprise with a mission to maximize the value and utility of cryptocurrencies. They provide instant exchange, trading, over-the-counter capabilities, and a spectrum of other services backed by custodial insurance and the military-grade security of the Nexo Wallet. Learn more about Nexo at their official website.

While blockchain industry growth continues to make headlines and cryptocurrencies have become a lightning rod for new investors, the road to true mainstream adoption continues. Market fluctuations, conflicting media narrative and a lack of understanding are partially to blame but one important hurdle has stopped many would-be crypto investors; digital assets are simply hard to buy.

Orion Protocol aims to be the first decentralized gateway to the whole digital asset market which aggregates liquidity across both decentralized and centralized exchanges as well as swap platforms. The ultimate goal is to create a one-stop-shop for buying and selling on the blockchain, pushing crypto towards mainstream adoption by providing a single, non-custodial point of access for crypto traders on all major exchanges. Furthermore, it is exploring a future where digital assets like NFTs can be accessed as easily as the traditional financial market. Ultimately, Orion seeks to bring together all markets for all investors. Once fully operational, accessing NFTs and cryptocurrencies will be as easy as buying stocks and commodities. 

Orion CMO, Timothea Horwell, joins us on this month’s Cardano360 show to share the company’s plans to integrate Cardano into their trading terminal. This terminal pioneers a way for all people to access major crypto exchanges without the difficulty of extensive know-your-customer (KYC) and anti-money-laundering (AML) checks. On top of making it easier to onboard new investors, Orion’s trading terminal also makes certain that investors are getting the best price across exchanges.

Later this year, Cardano users will be able to access Orion’s decentralized gateway to buy and sell assets on the wider crypto market. In the longer term, Orion is working to include both traditional financial and NFT marketplaces on its platform. Throughout this year NFTs have risen considerably in terms of value, adoption, and public understanding due to landmark digital art sales like Beeple’s ‘Everydays’ which fetched $69 million at auction. Ultimately, the need for a robust and scalable blockchain which can incorporate a rapidly advancing marketplace while incorporating traditional investors led Orion to IOHK and Cardano.

‘Scalability is of critical importance to Orion in order to achieve widespread adoption,” said Horwell.’ To become the single point of access to the digital asset market, we need a robust, scalable infrastructure that can effectively and efficiently handle the transactions that occur on such a platform.”

Orion’s one-stop-shop will debut in the near future. Meanwhile, you can learn more about them on their official website or hear more on our monthly update. Make sure to subscribe to our YouTube channel and join us tomorrow for the next installment of Cardano360.

As an ‘official’ Cardano’s wallet (alongside Yoroi’s browser and mobile offer) Daedalus offers a ‘window to the world’ of Cardano. While outwardly its UI may look just like an ‘app’, it is of course a full-node client. Every Daedalus instance is a live node connected to the Cardano network. Each instance executes the Cardano Ouroboros consensus protocol and plays its own part in the successful running of the Cardano network. This enables Daedalus to operate in a completely trustless fashion without relying on any centrally hosted servers.

It also makes Daedalus a highly complex product, since it integrates and is dependent on core Cardano components and the Cardano codebase. As well as a wallet, Daedalus is a ‘console’ for the Cardano blockchain.

Daedalus launched in 2017 with the Cardano mainnet launch. It offered a groundbreaking GUI wallet with presale redemption functionality since the first day of the Cardano network’s existence. Back then, it was common to launch a cryptocurrency with CLI wallets. Daedalus offered a graphical user interface (GUI) from the get-go and a much better user experience than the industry standard. It had its share of issues, of course, reflecting the immaturity and shortcomings of the early Cardano codebase. With the Byron reboot, we completely rebuilt the code. This had a corresponding impact on Daedalus, delivering a much more robust and reliable product.

Cardano has come a very long way since 2017, and especially since the Byron reboot. We have moved from a federated to a decentralized proof-of-stake system, with thousands of active pools run by a passionate community. We now have staking and delegation, with fully decentralized block production. We also launched our successful Daedalus Flight program, bringing new features to the mainnet early for power users to help us test and iterate. Most recently, we have added native token capability and Project Catalyst voting registration. Soon we shall enter the era of smart contracts. It's been an incredible journey and we’re just getting started.

This growing functionality on the blockchain has brought additional challenges, creating a product environment with a complex web of interdependencies. The corresponding technical and resource impact makes any fresh development especially challenging. So as we evolve the offering, it is increasingly important we focus on core capabilities, while also ensuring we get better at integrating the ‘voice of the customer.’

Surveying the community

Earlier this year, we reached out to the community with a comprehensive survey to help us map the landscape and chart our path ahead, both in terms of short-term improvements and longer-term product strategy.

In total, we have had 5,544 responses. We’re publishing the report here.

We encourage you to dive into the data. The results have provided us with some valuable insights, which continue to inform our strategic approach to product development. It shows a high level of satisfaction overall (average rating of 4.2 out of 5). The survey also identified some clear pain points. It was also clear that, while delegators are happy with their choices, the ranking system is a significant pain point for smaller stake pool operators.

The survey data also fed into a number of ideation sessions to follow up, dig deeper, and identify a number of specific areas for improvement. Top ranked in desirability were:

1. A simpler and easier-to-understand ranking system that is more inclusive and ranks most stake pools, and does not depend on the amount of stake to be delegated as an input.

a. The new ranking system will be configurable, allowing users to more easily balance their delegation choices between established, saturated pools (with predictable rewards) alongside less established, smaller pools with their potentially larger (but less reliable) rewards.

b. Encourage and promote community-curated SMASH servers to provide different criteria for selecting pools, e.g., small and promising pools, pools from developing countries, charity or mission-driven pools, green and eco-friendly pools, etc.

c. Looking at the feasibility of having importable, community-curated ranking calculations.

2. Delegation portfolios / multi-pool delegation – the ability to delegate a wallet to several pools and the ability to share delegation portfolios.
3. More information on delegation, and using Daedalus in general, through improved UX and content.
4. More detail on earned rewards, and improved graphical representation.
5. A complete display and export of earned rewards per epoch for tax and accounting purposes in both Daedalus and exportable CSV file.

Other changes suggested for the future include: enabling communications between SPOs and delegators; improved wallet creation and restoration with wallet fingerprints; more fiat/crypto conversions for displaying wallet balances; a mobile and light version; and better help. In the longer term, improvements being looked into include a multicurrency wallet; a better news feed; and more multilingual versions.

Community intelligence and insights

The survey results have been a valuable source of intelligence. All these suggestions have been taken fully on board and given due consideration. In recent months, the team’s focus has been on core native token capability, alongside functionality to support voting in Project Catalyst, hardware wallet support and more. And with Alonzo smart contracts around the corner, every team across the company continues to be very focused on core Goguen capability. However, the Daedalus team is now finalizing its approach to Daedalus enhancements with UX and UI specialists. This needs to be clearly set in the context of ongoing engineering priorities and work from the research team (to be shared soon) around elements such as rewards, fees, and parameters.

Given these interdependencies, some elements present significant challenges. Equally, we have identified a number of ‘quick wins’. We’ll be convening further consultation and ideation sessions in July this summer– including exploring ideas around a more collaborative development model – to sanity check a few of the quick wins and explore the more nuanced challenges with the community that Daedalus is here to serve.

Facilitating transactions in cryptocurrency platforms stumbles on the dual utility of the platform’s underlying asset. On the one hand, users can hold and trade it as part of their investment portfolios. On the other hand, it supplies the necessary “fuel” for processing transactions. This duality suggests that the system should have a mechanism for adjusting transaction costs, so they remain competitive and reasonable. Also, the bounded throughput of decentralized platforms per unit of time introduces another hurdle: the system should also allow the users to discover the correct price for timely transaction processing, depending on their individual needs.

Why not drop transaction fees altogether? Three reasons: One, transaction processing incurs costs on the system’s side (in terms of computation and storage). It is reasonable to allow transaction processors (stake pool operators, in the case of Cardano) to offset their costs. Two, even with a theoretically infinite capacity, it is important to prevent transaction issuers from saturating the network with worthless transactions. Three, it is appropriate to incentivize transaction processors to provide quality of service. A surge in demand should influence their payoffs accordingly.

Adding a fee to each transaction can address the above considerations.

Bitcoin and beyond

Bitcoin set out the first mechanism for pricing transactions in distributed ledger platforms. This mechanism resembles a first-price auction: transactions bid for a place in a block naming a specific reward, and block producers select the transactions that they prefer to include. Block producers also get rewarded with the right to mint new coins, i.e., their operation is subsidized by the whole community via inflation of the total coin supply. Inflation drops geometrically over time, and transaction fees become increasingly dominant in the rewards. This mechanism, while enabling Bitcoin to run for well over a decade, has been criticized for its inefficiency. Transaction costs have also risen over time.

In this blog post, we explore a new mechanism that builds on Cardano's approach to ledger rules and system assets, and complements the Babel fees concept. The objective is making fees fair, stable, and predictable over time. We describe the mechanism in the context of Cardano. However, it can be adapted to any other cryptocurrency with similar characteristics.

Introducing 'Stablefees'

The core idea behind Stablefees is to have a base price for transactions through pegging to a basket of commodities or currencies. Stablefees includes a native "decentralized reserve" contract that issues and manages a stablecoin pegged to the basket. A comparison in the fiat world might be the International Monetary Fund’s SDR, (established in 1969) and valued based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling. The stablecoin --- let’s call it "Basket Equivalent Coin" (BEC) --- is the currency used for paying transaction fees (and all other real world pricing needs of the platform, e.g., SPO costs).

In this system, ada will play a dual role: Reserve asset of the decentralized reserve, and reward currency for staking. It will also be the fall-back currency in extreme scenarios where the reserve contract is in a liquidity crunch. Before a transaction, the issuer will have to obtain BECs, either via other third parties or directly by sending ada to the decentralized reserve contract. On what basis will the reserve issue BECs? The reserve contract will also issue equity shares -we will call them decentralized equity coins (DECs)-, in exchange of ada. Leveraging the value of DECs, the decentralized reserve will often adjust the value of BEC so it is pegged on the underlying basket of commodities. In other words, DECs will absorb the fluctuations of ada vs. the basket to ensure that the real-world value of BECs remains stable (cf. the AgeUSD stablecoin design that has been already deployed and used on Ergo).

This trinity of coinage, issued natively by the system, will attract different cohorts. BECs' stability and liquidity might be attractive to risk-averse, transaction-intensive holders. DECs will offer the highest rewards if ada goes up, but also take the most significant hit when ada goes down. Long-term holders may find DECs more attractive. Also, since decentralized reserve prices these coins in ada, both BECs and DECs can facilitate participation in staking and governance. Returns can be issued at different rates, reflecting the different nature of each coin. Ultimately, rewards will always be denominated and payable in ada, which will remain the most versatile of all three coins.

Oracles

The centerpiece of this mechanism is an on-chain oracle that determines the price of the basket in ada. SPOs can implement this oracle in a decentralized manner. The reserve can offer extra rewards to all oracle contributors from the fees collected during BEC/DEC issuances. This will ensure two things: thousands of geographically-diverse contributors, and ledger rules calculating a synthesized exchange rate in some canonical way (through a weighted median across all price submissions in an epoch, for example). If oracle contributors manipulate their contributions, they can be held accountable by tracking their reputation and performance on-chain.

The pricing mechanism

How would one price transactions and reward block producers? Using the current approach in Cardano, each transaction will be deterministically mapped to a precise value denominated in BECs, using a formula determined by the ledger rules. The formula will take into account both transaction size and its computational requirements, and may also incorporate runtime metrics (such as the average system load). The resulting value will be the base fee guaranteeing that the transaction will be processed by the system. Given the base fee, end users will be able to apply a multiplier if they wish (which will be a value at least 1, e.g., 1.5x, 3x, etc.) to increase the fee and accelerate processing. This will become relevant at times of surging demand.

This approach has one advantage when compared with the first-price auction model: the pricing mechanism is continuously stabilized to a reasonable default value. Users perform price discovery in one direction only to accelerate processing, if required. Also, transaction issuers can store BECs to secure their future transaction-issuing ability without being affected by ada price volatility.

Stablefees and Babel fees

The Stablefees mechanism can be considered a natural extension of Babel fees ---spot conversion of BECs into ada by the decentralized reserve. Both mechanisms complement (and are compatible with) each other. Babel fees can be deployed together with Stablefees with just one change: Using BECs to cover Babel fee liabilities, instead of ada. This also means that fees will always be payable in ada (via a Babel fee liability convertible in ada on the spot). Hence, the whole mechanism is backwards compatible: it won’t affect occasional users who just hold ada and do not wish to obtain BECs.

A final point about diversity. While the above narrative identifies a unique and global BEC, the same mechanism can be used to issue regional BECs pegged to different baskets of commodities, which could possibly be weighted differently. Such “regional” BECs will be able to increase system inclusivity, while enabling SPOs to have more fine-grained policies in terms of transaction inclusion.

Stablefees 'lite'

The above mechanism requires a decentralized reserve contract and the issuance of BECs and DECs by the contract to buyers. A “lite” version avoids the reserve contract and directly adjusts the fee formula by pegging it onto the agreed basket of commodities through the price oracle. The resulting system denominates transaction fees nominally in BECs and immediately converts them into ada. The payable amount fluctuates, depending on the value of BEC. The mechanism is otherwise identical, also facilitating unidirectional price discovery through the multiplier. The only disadvantage is that a prospective transaction issuer has no access to a native token that enables transaction processing predictably; transaction issuers must pay fees in ada. Still, the fees will continuously adjust and remain stable via the pegging mechanism with respect to the basket. As a result, a transaction issuer will be able to organize their off-chain asset portfolio to meet their transaction needs effectively.

The road ahead

Our team is currently researching the granular details of the Stablefees mechanism. Once this research is complete, Stablefees can be integrated into Cardano to offer fair and predictable transaction pricing. Moreover, the price oracle and the global BEC (and regional variants, if included) will undoubtedly find uses beyond paying transaction fees, expanding the capabilities of decentralized applications in the Cardano ecosystem.