Cardano 2023: The Future of Smart Contracts, Scaling, and Governance

Cardano is a blockchain platform that seeks to provide a safe, scalable, and long-term infrastructure for the development and execution of decentralized applications (dApps) and smart contracts. It is a third-generation blockchain project that combines cutting-edge research and engineering approaches to create a strong and functional blockchain ecosystem.

Charles Hoskinson, a co-founder of Ethereum, and his firm, IOHK (Input Output Hong Kong), established Cardano. The project began in 2015 with the goal of overcoming the constraints and issues that existing blockchain systems faced. Cardano’s devotion to a scientific method and peer-reviewed research is one of its distinguishing traits. Cardano’s growth is fueled by a strong emphasis on formal techniques and academic rigor. The platform includes insights and advances from a variety of academic areas, such as mathematics, cryptography, and computer science.

Cardano works in two layers: the settlement layer (which includes Cardano’s own money, ADA) and the computational layer. The settlement layer handles transactions and the transfer of ADA tokens, whilst the computational layer allows smart contracts to be executed and decentralized applications to be deployed. Cardano employs Ouroboros, a proof-of-stake (PoS) consensus process that maintains the network’s security and integrity. Ouroboros splits time into epochs and slots, and stakeholders (ADA holders) contribute to the consensus process by delegating or operating a stake pool. This technique intends to give a more energy-efficient and scalable alternative to systems like Bitcoin’s energy-intensive proof-of-work (PoW) consensus.

Cardano’s development follows a planned roadmap with different phases. The first phase, Byron, concentrated on laying the groundwork for the network and delivering basic functionality. Shelley and Goguen, the succeeding phases, added decentralized staking and smart contract capabilities, respectively. Additional additions, such as the Voltaire phase, which focuses on governance and sustainability, are planned as part of the ongoing development.

In this article, we will explore what Cardano has planned for 2023, including its upcoming upgrades and new projects that will expand its functionality and reach.

Goguen: Smart Contracts

The Goguen phase is one of the most anticipated milestones in Cardano’s roadmap. It marks the introduction of smart contract capabilities to the platform, enabling developers to create and deploy dApps that can leverage the power of blockchain technology.

Smart contracts are blockchain-encoded self-executing agreements. They can facilitate various use cases, such as decentralized finance (DeFi), gaming, identity management, supply chain management, and more. Smart contracts can also enable automation, transparency, efficiency, and trust in transactions and interactions.

Cardano’s smart contract platform is based on a novel programming language called Plutus. Plutus is a functional language that is designed to be secure, reliable, and expressive. It is based on Haskell, a well-established language that has been used for decades in academia and industry. Plutus allows developers to write both on-chain and off-chain code in the same language, simplifying the development process and reducing errors.

Plutus also supports interoperability with other languages and frameworks through sidechains and EVM compatibility. Sidechains are parallel blockchains that can communicate with the main chain without compromising its security or performance. EVM compatibility allows developers to deploy existing Ethereum smart contracts on Cardano with minimal modifications.

Cardano’s smart contract platform also features Marlowe, a domain-specific language (DSL) that enables non-programmers to create smart contracts using a graphical interface. Marlowe is designed for financial contracts, such as escrow services, swaps, options, crowdfunding, and more. Marlowe allows users to define the logic and parameters of their contracts using pre-defined templates and components. Marlowe also provides tools for testing, simulating, and verifying contracts before deployment.

The Goguen phase is expected to be completed by early 2023, after several testnet releases and hard forks. The first testnet release was Alonzo Purple in August 2021, which enabled public testing of smart contracts on Cardano for the first time. The second testnet release was Alonzo Red in October 2021, which introduced improvements in stability, performance, usability, and tooling. The third testnet release was Alonzo Black in December 2021, which added support for NFTs (non-fungible tokens), oracles (data providers), stablecoins (pegged cryptocurrencies), DEXs (decentralized exchanges), lending platforms,
and more.

The final testnet release will be Alonzo White in February 2023,
which will enable full smart contract functionality on Cardano.
The mainnet launch will follow shortly after, with a hard fork
called Vasil. Vasil will mark the completion of the Goguen phase
and the transition to the next phase, Basho.

Basho: Scaling

The Basho phase is the fourth phase in Cardano’s roadmap. It focuses on improving the scalability and performance of the platform, enabling it to handle increasing demand and complexity.

Scalability is one of the main challenges faced by blockchain platforms. It refers to the ability of a system to accommodate more users, transactions, and data without compromising its speed, security, or cost. Scalability is often measured by three metrics: throughput (the number of transactions per second), latency (the time it takes for a transaction to be confirmed), and capacity (the maximum quantity of data that may be kept on a blockchain).

Cardano’s scalability solution is based on a concept called Hydra. Hydra is a layer-2 scaling technique that leverages the existing stake pool infrastructure to create parallel processing channels called Hydra heads. Each Hydra head can process up to 1,000 transactions per second, effectively multiplying the throughput of the network. Hydra heads can also communicate with each other and with the main chain, ensuring consistency and interoperability.

Hydra also enables fast finality, meaning that transactions can be confirmed within seconds, rather than minutes or hours. This improves the user experience and reduces the risk of double-spending or censorship. Hydra also reduces the storage and bandwidth requirements of the network, as only a fraction of the data needs to be stored on the main chain.

Hydra is expected to be implemented in stages throughout 2023, after extensive testing and optimization. The first stage will involve launching a testnet with a limited number of Hydra heads, followed by a gradual increase in the number and functionality of Hydra heads. The second stage will involve integrating Hydra with Plutus and Marlowe, enabling smart contracts to run on Hydra heads. The third stage will involve enabling cross-chain communication and interoperability with other blockchains and systems.

The completion of the Basho phase will significantly enhance Cardano’s scalability and performance, making it one of the most advanced and capable blockchain platforms in the world.

Voltaire: Governance

The Voltaire phase is the fifth and final phase in Cardano’s roadmap. It focuses on establishing a decentralized and democratic governance model for the platform, ensuring its long-term sustainability and adaptability.

Governance is the process of making decisions and implementing changes in a system. It involves various aspects, such as who can participate, how proposals are made, how votes are cast, how consensus is reached, how funds are allocated, how disputes are resolved, and more. Governance is essential for maintaining the security, stability, and innovation of a system.

Cardano’s governance model is based on a project called Catalyst. Catalyst is a decentralized treasury system that allows stakeholders to propose and fund projects that benefit the Cardano ecosystem. Catalyst operates through three main components: IdeaScale, FundX, and Voltaire.

IdeaScale is an online platform that enables users to submit ideas, discuss them with other members of the community, and refine them into feasible proposals. IdeaScale also provides tools for collaboration, feedback, evaluation, and ranking of ideas.

FundX is a funding cycle that occurs every six weeks. During each cycle,
stakeholders can vote on proposals using their ADA tokens. The proposals
that receive the most votes are funded from a pool of ADA that is reserved
for Catalyst. The funded proposals are then executed by their respective
teams, who report on their progress and outcomes.

Voltaire is a voting system that enables stakeholders to participate in
decision-making and shape the future direction of Cardano. Voltaire allows
stakeholders to vote on system upgrades, parameter changes, protocol
improvements, and other important issues that affect the platform.
Voltaire also incorporates mechanisms for delegation, representation,
accountability, transparency, and dispute resolution.

Voltaire is expected to be fully implemented by late 2023,
after several iterations and improvements. The first iteration
was launched in September 2021, with Fund3 as the first
funding cycle that used Voltaire for voting. The subsequent
iterations will introduce additional features and enhancements,
such as quadratic voting (a voting method that balances
the influence of different stakeholders), liquid democracy
(a hybrid model that combines direct and representative
democracy), adaptive quorum biasing (a technique that adjusts
the quorum threshold based on voter turnout), stake-based
voting (a voting method that weights votes according to stake),
and more.

The completion of the Voltaire phase will mark the culmination
of Cardano’s roadmap and its transition to a fully decentralized
and self-sustaining platform.

Additional Projects

In addition to its core roadmap phases,
Cardano has several other projects that aim to expand its functionality
and reach. Some of these projects are:

• Project Catalyst: As mentioned above,
  Project Catalyst is a decentralized treasury system that funds projects
  that benefit the Cardano ecosystem. Project Catalyst also serves as a platform for innovation, collaboration, and experimentation.
• Marlowe: Marlowe is a domain-specific language (DSL) for writing smart contracts on Cardano. Marlowe allows users to create and execute financial contracts without coding skills, using an easy-to-use interface and a library of pre-built templates. Marlowe also has a web-based platform called Marlowe Playground, where users can test and simulate their contracts before deploying them on the blockchain.
• Atala PRISM: Atala PRISM is a decentralized identity solution that enables users to create and manage their digital identities on Cardano. Atala PRISM allows users to store and share their personal, academic, and professional credentials in a secure and verifiable way. Atala PRISM also enables interoperability with other blockchains and legacy systems, opening up new possibilities for identity-based applications and services.
• Cardano Foundation: Cardano Foundation is an independent Swiss-based organization that oversees and supervises the development of Cardano. Cardano Foundation’s mission is to advance Cardano’s vision of creating a more inclusive, fair, and sustainable world through blockchain technology. Cardano Foundation supports the Cardano community, fosters partnerships and collaborations, and promotes education and adoption of Cardano.