Ouroboros Genesis presented at flagship conference
IOHK research on proof of stake appears at CCS in Toronto
18 October 2018 Jane Wild 4 mins read
A third major paper from the Ouroboros line of research was presented at a leading computer security and cryptography event yesterday, a recognition of the contribution the work makes to the field of computer science. The paper, Ouroboros Genesis, was presented by researcher Christian Badertscher at the 25th ACM Conference on Computer and Communications Security, held in Toronto this week. The conference is five days of presentations, workshops and tutorials for hundreds of delegates, who are information security researchers, industry professionals, and developers from around the world. The annual event, organised by the Special Interest Group on Security, Audit and Control (SIGSAC) of the Association for Computing Machinery (ACM), is a forum for delegates to come together for discussions and to explore cutting edge research.
This year CCS sponsors included the US government agency, the National Science Foundation, and major global technology companies such as Baidu, Cisco, Samsung, Google, Facebook. The hardware wallet maker, Ledger, was also present. CCS is the highest rated computer security and cryptography conference according to Google Scholar ratings, meaning that collectively, the papers selected to appear at the conference are more cited by academics than papers for any other conference.
IOHK’s paper appeared in one of the two sessions that were dedicated to blockchain, with a total of six papers on the subject overall. These included a paper on what will happen with blockchains such as Bitcoin as rewards get smaller and the potential problems that stem from that. Scalability was in focus too, with a paper on scaling blockchains through sharding and another on state channel networks.
Using Ouroboros Genesis, new users joining the blockchain will be able to do so securely based only on an authentic copy of the genesis block, without the need to rely on a checkpoint provided by a trusted party. Though common in proof-of-work protocols like Bitcoin, this feature was previously unavailable in existing proof-of-stake systems. This means that Ouroboros can now match the security guarantees of proof-of-work protocols like Bitcoin in a way that was previously widely believed to be impossible.
Aggelos said: “Ouroboros Genesis resolves an important open question in the PoS blockchain space, namely how it is possible to securely connect to the system without any information beyond the genesis block. This is a significant step forward that enables a higher degree of decentralization that seemed unattainable for PoS protocols before our work.
“Our security analysis is also in the "universal composition" setting that provides, for the first time in the PoS space, a modular way of building secure applications on top of the ledger.”
Christian said: “It is exciting to present Ouroboros Genesis at a top security conference and very rewarding to see how theoretical research can make a significant impact on practice. Avoiding the need of a trusted checkpoint, and still being secure in a setting with a variable level of participation, has been a challenging problem to solve in the PoS space.”
Published on May 3 this year, the paper’s full title is Ouroboros Genesis: Composable Proof-of-Stake Blockchains with Dynamic Availability. The research team was comprised of Christian Badertscher, Peter Gaži, Aggelos Kiayias, Alexander Russell, and Vassilis Zikas.
Cryptocurrency is one of the most discussed topics of the moment, and whatever people think about it, they all want to know what’s next for the technology. An audience that was no different was at Google, where Charles Hoskinson was invited to talk about Cardano and the future of cryptocurrencies. At the meeting, held at Google’s London headquarters last month, Googlers around the world dialled in to hear the presentation and put questions to IOHK’s chief executive, and to Duncan Coutts, IOHK Director of Engineering. As you might expect from a company that has laid much of the ground for today’s technological landscape, Googlers asked some of the most incisive and informed questions Charles has had on his speaking tour this year. After a brief introduction from Charles on IOHK and Cardano, the floor was opened to questions. Cardano development raised much interest, and Charles explained how its consensus protocol, Ouroboros, uses staking as a means to encourage people to join and help run the network. Development milestones were in focus too, such as one expected in July, when a test network will be opened to developers who want to play around with smart contracts on the IELE virtual machine. Later this year, full decentralization of the network is expected, as part of the Shelley phase of development, and Charles explained the background to all these topics.
There followed questions about how developers could get involved with Cardano, and about the K framework, which is part of IOHK’s test smart contract capability; how cryptocurrencies will cater for privacy, and of course, about where cryptocurrencies are headed. After the session, Googlers were kind enough to take the IOHK team up in the glass lifts to the top of the building and on to the roof, to enjoy the spectacular view across London.
Read the conversation, below.
Q. I have a question about Ouroboros and staking: is the number of tokens on offer sufficient to convince people to join the protocol and help run the network?
Charles: We published a preliminary monetary policy. The ceiling is 45 billion tokens and the current number in circulation is 26 billion so we have a little bit of room to work with inflation there, plus there's transaction fees as well to subsidise transaction validation.
First, Proof of Stake (PoS) is an extremely cheap protocol to run, especially Ouroboros, if you compare it to mining. The odds are that the operational costs will be so much lower that you really don't need to pay as much. But it's a broader and more abstract question: how do you handle fees and incentives and stake pools and delegation and then get all those incentives engineered in a way that you have reasonable game theoretic reasons to believe that the system is going to behave as intended? That's a really hard question. So we have two individual work streams. One is led by Elias Koutsoupias, an algorithmic game theorist at Oxford and a Gödel prize winner. He's working on the incentives question, trying to create models and understand inaudible first example – if you want to delegate and run a collection of stake pools, how many ought there to be and what are the economics of that?
Then, the other side is, if I'm going to try to convince people to delegate, they ought to get a reward, so how much should that be? And then you have to do some empirical calculations – what is the operational cost of the network? You don't want to pay too much more inaudible but you also want to pay enough to incentivise people to run 24/7 nodes to maintain the system. It's an interesting question, but with the inflation that we've proposed we have more than enough wiggle room to work with. Not only will people participate, they'll probably make windfall profits relative to operational costs, given the way these markets work.
We opened up registration for stake pools last month and were looking for 100 applicants for a beta test, but got 1,500 applications – 15 times more people expressed interest than we expected.
As with all monetary parameters in a beta system, these things can be adjusted depending on facts and circumstances, but the reality is that the driver here is the price of the underlying asset – the token – and markets tend to converge on that. The short answer is, it's probably going to work out; the long answer is that we're probably not going to have the right model to begin with. We're either going to underpay or overpay and it's qualitatively going to be pretty obvious, based on participation of the network. The odds are that we’re probably going to overpay in terms of rewards.
Q. On all the projects that you are driving, are there specific milestones that will for sure be completed this year?
Look at cardanoroadmap.com, for Cardano-specific projects. Month by month, it gives an update on where we're at. We also do weekly reports and we try to be as transparent as possible about where we're at. Our goal is to release the next major version of Cardano some time this year, called Shelly. We are working really hard towards that. It might slip, but the odds are that it won't. It's a difficult project. Shelley is true decentralization of the network. At the moment we're running our proof of stake protocol in a forced delegation model. So all the PoS mechanics are there and the stake rights have been delegated to nodes that IOHK and two other entities control, so it's a federated network. We did this because we're not insane. You don't go and invent a protocol in the academy, turn it on and say 'Good luck everybody'. Instead, you have training wheels on your bicycle. You say, 'Let's launch this system in a federated format and gradually decentralise the system once we have momentum and assurance that what we've done is correct'. And also when we've trained up hundreds of people to run stake pools and participate in the staking process so there's a bit of redundancy and a much more natural unlocking of the system. So, over six to nine months, that process will continue and hopefully all the Shelly mechanics will roll out.
In parallel, we are releasing testnets for smart contracts. The first one will be released at the end of the month, and this is done with something called the KEVM. We worked with Runtime Verification at the University of Illinois Urbana-Champaign, and they took the operational semantics of the Ethereum Virtual Machine and wrote them in a meta language called K. What the K framework allows you to do is implement a correct-by-construction version, just from the semantics of the virtual machine. So it's really cool. What we were able to do is actually take the K semantics, build a VM, connect that to a fork of Ethereum and we're now turning that on at the end of the month to test that this framework is working and you can run smart contracts on it. We also have another virtual machine that we built specially for Cardano, called IELE. And those semantics are publicly available in GitHub. We have a paper that we are submitting for peer review. That testnet will launch some time in June or July – that gives people who live in the Ethereum world and write smart contracts the chance to play around and deploy code on our system and look at our gas model and get a better understanding of how our system works. And then, over time, testnet iterations will occur and eventually we'll pull these two systems together.
One of the architectural features of Cardano is the separation of accounting and computation. With Ethereum they are bundled together, your peanut butter is in your jelly. And that's fun from an implementation standpoint; it's simpler to maintain, but it creates a lot of problems. If you screw up parts of your computational model you'll also inadvertently block your ability to spend money. Also, computation carries a much higher liability than accounting does. For example, Bitcoin versus Ethereum in terms of transactions. In Bitcoin, if I send Jane a transaction and Philipp a transaction, buying a laptop from Jane and weapons-grade plutonium from Philipp – the miner in the system would have no way of differentiating between those two transactions, they're fungible. We don't know the actors, they are just transactions. But if we're running code, you might be able to differentiate between Crypto Kitties and Silk Road. There is some precedent if you look at Tor exit nodes having legal liability and being arrested for trafficking, child pornography or copyright violations. Computation, if you can discover the difference between what Jane and Philipp are doing, has higher liability. In our view, architecturally, it's a good idea to separate them and it also gives you a lot of flexibility because you can have multiple computational models, like we're backwards compatible with Ethereum and we had a different model and we have a functional model and you can do a lot of cool stuff with that. The downside is that you have to maintain the state of many ledgers at the same time and you also have to figure out how to move value between the ledgers, which we're going to do because of our interoperability mandate. We decided to take this on but it adds complexity to the system, a lot more work to do. That will be gradually rolled out in stages through testnets and it's quite a bit of work.
Duncan: There's the compartmentalization aspect of it. Ethereum is monolithic, it bundles together all of the features, so if one thing breaks the whole thing breaks. If there's some fundamental flaw you haven't found, not only have all your ERC20 tokens gone but so has ether itself. There's no compartmentalization between those things. But if you have, in essence, a Bitcoin-style simple settlement layer and then you do your EVM stuff and equivalent to EVM on different blockchains that are linked you can move money between them but they're otherwise compartmentalized. If for some fundamental reason there's a flaw found in the EVM that destroys that, well, that's very sad but it doesn't destroy the settlement layer. That's a big advantage. And it means, as Charles says, you can add new ones of these things that can be somewhat experimental because that lets you evolve the system a bit.
Charles: We wrote, I think, the first formalization of sidechains. There was a sidechains paper written in 2017. So what a sidechains transaction is for those who don't know it, I like to call it interledger transactions. So you have a source ledger, a destination ledger and an asset. So basically what you're trying to do is initiate a transaction, where the destination ledger can answer two questions about the transaction. One, is that the asset does exist from the source ledger, and two, that the asset from the source ledger has not been double spent. The foundational question you're asking is how much information does the destination ledger need to possess to be able to validate that transaction and verify those two questions? We wrote a model, first for proof of work, called ‘Non-interactive Proofs of Proof of Work’ that explains how to do this, and now we've extended that model to Ouroboros and the proof of stake world and we have a paper that we've just submitted that contains details on how to construct these types of proofs and what these transactions look like. There are still questions about how large the proofs are going to be, relative to the size of the ledger, and there are questions about validation time, and also generality. The proofs we scoped work with our particular consensus algorithm, but we'd like to make these things work for all ledgers, not just a particular type of ledger, so there's a lot of work to be done there. But it's the first time it's been formalized. The concept has been enumerated in a paper that was written in 2014, by a competitor of ours called Blockstream, but they didn't write a proper academic paper and submit it for peer review. That's considerably harder, there's a lot more to think about when you're rigorous about these things. In the long term, it's a great thing to think about for scalability and interoperability, and also testing because you can now deploy versions of your chain with different parameters and it's easy to move value between them and you can let people vote with their feet.
Q. How will Cardano overcome the first-mover advantage of Ethereum? Do you see multiple smart contract platforms co-existing in the space or will there be one prominent winner?
So how many Java, C++ or Go developers are writing code on Ethereum? You can't, Ethereum doesn't support any of these languages. They can't even run a single viral app on the platform. If you look at the top 10 languages, none of them works on the system, so, by definition, all those developers aren't developing for the system, they have to go and learn new tools and new stuff. With Cardano, first off, we're backward-compatible, 100%, we're running an EVM. So you can take your Solidity code and your Web 3 stuff and all the things you've come to know and love about Ethereum, and you can run it on my system, and it's faster, cheaper and safer to run it on my system because we have a better consensus model. Second, through our work with the University of Illinois, through Runtime Verification – Grigore Rosu and his team – we're working on something called semantics-based compilation. Should this be successful, we can take any K-defined system and translate it to run on our machine. All you have to do for a new language is just write the semantics in K, one time, and then K framework takes care of the rest of it. It's a hard, high-risk, high-return project, but at the end of the day, we will end up one way or another supporting mainstream languages. Part of it is backwards compatibility, part of it is supporting mainstream languages, part of it is recognising that the vast majority of real applications aren't running on Ethereum at the moment. The other thing is that smart contracts are not monolithic and you write and run your entire application on a blockchain and the reality is you have to add a server-client component to it. Let's think of it like a poker game, maybe you trust random number generation to the server, but other things like player matching and account managing, these things are almost certainly not going to run on your blockchain, you're dumb if you're going to do these types of things. They're probably going to run on some sort of server back-end. It's more of, I treat a smart contract as a computational service. So it's silly to say, 'Oh well, only one platform and one token's won', it's akin to saying Internet Explorer's won and we all have to be Active X developers, god help us. I'm not loyal to IE, or Amazon Web Services. Rather, I have to ask, what's the cheapest, best, most secure environment for me to run my computation in for my users? Our strategy is be backwards compatible, support more languages, especially mainstream languages in a better way, have a better user and developer experience, and be smarter about the ecosystem in which these contracts live. So we make it easier for the server to come into play, to use multiple ledgers and have a good app platform to deploy these types of things on, and we'll definitely get a lot of growth there.
The other thing is that very few people today write smart contracts. They play with these things, but very few people are smart contract developers. If 99% of developers aren't in the ecosystem, how can you say a person has first-mover advantage? It's nuts.
Q: In 2014 I played around with the K framework for a university project, but I found it to be extremely slow.
Charles: Yes, because there is a K to OCaml back-end, but we're building a K to LLVM back-end, which should be about 100 times faster.
Q: But is that enough? Because it was outright impossible to run a reasonably large project with thousands of lines of code.
Duncan: This is one of the problems that Grigore is trying to solve. As you say, executing the operational semantics directly is very slow. Runtime Verification are basically trying to do a compiler approach, which they believe will be fast.
Charles: It's still a big unknown, exactly how much performance is necessary – and can we get within an order of magnitude of handwritten code? One proof of concept is the testnet that we're launching at the end of this month running a version of the Ethereum Virtual Machine built in K. You can run smart contracts on the KEVM and compare them to an Ethereum testnet and see the performance delta between the two. But it's also important to understand that the open source K framework components that you use and the version that Grigore uses are different. Grigore built a second set of software for his private company, Runtime Verification, that he uses for contracts he's had with Boeing and Nasa, and I think that's about 100 times faster than the one that you used. But even so, there's still a big performance delta that needs to be ameliorated. We have quite a large team, there's 19 people involved in that contract. Some of those people are allocated specifically for performance. Now let's say that we can't quite bridge that performance, there's probably a lot of things we could do to cheat and improve things a bit, including handwriting certain things, or abandoning semantics-based compilation for more traditional techniques. But it's still a big unknown. This is also why we have a multi-computation model, so in addition to the IELE framework and the K framework, we also have an alternative approach called Plutus.
Charles: And performance should be equivalent to Haskell, because they share a common core.
Duncan: Right, and the Haskell code will be run through the Haskell compiler.
Q: How can a software developer that is excited about your project get best involved with it? Do you have any plans for educating developers or creating developer-relation type of roles at IOHK?
Charles: I really admire what you guys did with Dart. I love the developer experience effort that Google put into it and there are things to take from that.
It's difficult with a cryptocurrency that is very rigorous in its approach. You're starting with white papers written by cryptographers and the notion of formal specifications and you're trying to implement these and prove correctness, to figure out: when and how do you open that project up to successfully collaborate with one-source developers? We are hiring people specifically to work with the exterior community and try to communicate how we are running a project and how we are writing things and how we welcome third-party contributions. There is a lot of technology in our stack, we're making material enhancements to K, so anyone who wants to contribute there definitely should. We have Electron in our stack, so we are using Chromium and Node.js for our wallet front-end so there's a lot of things going on there with the Daedalus wallet, and we'd love contributions there. And, of course, there's the Haskell back-end. We are reimplementing some of that back-end in Rust, and experimenting with Rust and web assembly in the browser, so a Chrome-based wallet. So there's a lot of tech there and it depends on the core competency of the person and what exactly they'd like to contribute. We have yet to build an easy-to-use, formal external process, to make it friction-free for external developers to come and assist us and it's going to be a high priority in the second half of this year to figure out how we do that.
Another thing is that if an open-source project is to be successful, especially with these types of protocols, we do need competition. When I was running Ethereum, multi-client models were very important for us, so we ended up implementing Geth and the C++ client. And then, later on, Gavin Wood split off and created the Parity client for Ethereum. Now, this was great because it really forced us to specify the protocol properly, and we could no longer say, 'Well, the code is this specification,' because you're inaudible of ambiguity there. So we worked hard at proper documentation, and we'd like a similar environment to materialize, and it would be great to see some alternative projects grow. But at the moment, the best you can do is go to our forums, go to our GitHub repository, and you can, of course, open issues and email our developers. And if you're really interested in making open source contributions, we'll try to find a way to integrate you. And long term, we'll have a formal process for that's really easy for people to connect with. And also, again, it's depending on the particular level you want to contribute to. For example, we do formal specification verification work, so if you're an Isabelle or Coq developer and you want to work with us, that would be great. If there's like five people there, we'd probably be able to do that, right? But, levity aside, it would be fun to find people there. And other things, like if you want to build applications in our system. We are launching testnets soon, so it would be much appreciated for people to write software to deploy in our system and try to break it because that helps our system get better. So that's the best non-answer to your question that I can give!
Duncan: At the moment, our code is all open, it's on GitHub. This is one of those projects that's open source but not yet open, collaborative. It's not easy at the moment for us to collaborate with people because we're not yet using GitHub with its issue tracker; we have a private issue tracker at the moment, for example. So this is one of the things where we aim to get there, for there to be documentation that's easy for other people to look at and understand and make contributions and for us to accept. So the goal is to get there, but we are not there yet. You can go and read all the code, but you can't see what the open tickets are, the documentation's a bit patchy. So that is where we'd like to get to, to be able to direct people and accept contributions from anyone really.
Charles: We are going to try to annotate a lot of the design decisions in the system. For example, we recently released a formal specification for our wallet back-end. I think it's the first time it's ever been done for a UTxO wallet, and we're going to create YouTube lectures, going through section by section on that and putting it up specifically with the aim of educating developers how our design decisions work and what the system's all about. So as we specify each component of our system, we're going to try to do that. We have an internal department called IOHK Education, led by a mathematician named Lars Brünjes that specializes in that, so over time, you should see more accessible documentation materialising. Hopefully, that will encourage people who have the capacity to contribute to come in. We are also discussing how we open up our issue tracker. We made the decision to have a private issue tracker in the beginning because there's a lot of, usually, security concerns or open discussion about what direction to go in because the protocol is still very young. So we just figured, I'll just leave that all private and not worry too much about it. But we do have a moral obligation, as an open source project, to try to get project management and issue tracking into a more open domain. So there is a lot of open discussion about that. And once those things get into the open domain, it will considerably easier for open source contributions to occur.
Q: We have another question on privacy. Are there any plans to implement private transactions in the style of Monero or Zcash?
Charles: Yes, so Monero uses a primitive called ring signatures, and Zcash uses a snark primitive. So privacy is a complicated topic because you're actually talking about three things. You're talking about the privacy in terms of linkability, so, if I look at a transaction or an address, what's the probability that I can relate it to a known identity? So basically, go from anonymous or pseudonymous to known, the linkability dimension of it. Then there's the obfuscation of amounts. So you might not be able to easily connect the addresses or transactions to people, but if it's a public ledger, you could certainly see what's the most expensive transaction, and it creates kind of a priority cue for deanonymization. Say, 'Ah, well, there's a $10 million transaction that happened today, let's go and find who has that with a wrench to rob him’. And then there's the network side of things, so can you obfuscate the use of the protocol or try to prevent people from being able to understand what you're doing with the protocol? So there are existing solutions in all three of these. Like ring signatures and Zcash cover the first category. Confidential transactions, for example, covers the second category. And the third are covered by technologies like Dandelion. So first, you have to understand that privacy is a spectrum, and also, it is one that carries considerable regulatory discussion. For example, Japan just announced that they're probably going to de-list all the privacy coins. So if we wish to be in the Japanese markets and we were to embrace Monero-style privacy, there's a very low probability that Japanese exchanges will list Ada, which is a high priority for us.
On the other hand, privacy is a moral right. If you don't have privacy in your system, you're basically creating a system that your entire financial history is publicly known back to the beginning of time, since the system's inception, which is dystopian to the max. So the best way of resolving this is to develop out some really good privacy options and implement them as improvement proposals, and then take advantage of the governance part of the system. So when voting is available, we can actually have alternative proposals and say, 'Well, if you wanted to have ring signature style privacy with the whole banana, here's how we would do that.' And how much public support do we have for that among Ada holders? And, basically, have a referendum and see which one wins out, and then you can see where in the spectrum you fall. But the important thing is, people need to be informed. If you maximise privacy, you will inadvertently make the protocol illegal within certain jurisdictions and limit market access within certain jurisdictions. If you make the protocol more open, you are inviting more dystopian people to track what you're doing and use it against you. So we'll let the community decide that, but we do have active research. For example, on Dandelion, we've been funding that team at UIUC, and they're creating a version of Dandelion that will come out this year. We also have had discussions with people who have been formalising the Monero cryptography primitives and trying to make them more efficient and better bound to security and better bound to privacy. There's one project out of UCL that was done by Sarah Meiklejohn, and there was one out of China that was done, some professors in Beijing and a few other places – I think it's called RingCT 2.0. So there's certainly a lot of good tech, and we know how to implement that technology, but it's now mostly in the hands of a social phenomenon rather than someone like me making that decision on behalf of the ecosystem.
There's another thing that's seldom mentioned, which is the idea of backdoors. We used to live in the inaudible debate, or, either you give an unlimited-use private backdoor to a trusted actor like the FBI, or you don't. But there can be a spectrum with these things. For example, we can put a backdoor in the system, but it has to be constructed with mono-cryptographic primitives, and the use of it requires majority consent of the system, and it's publicly known if it's used. So would you be willing to invest in a currency that says only a certain group of people, if they come together and they have near-universal consensus inaudible and you know that they've used it, and it can only be used on a particular person instead of the entire system, is that a reasonable compromise? So I think that more-nuanced discussion has to be had, and there is certainly a lot of tech that's being developed to accommodate these types of things. In fact, the inventor of the Snark, Eli Ben-Sasson, has recently started a for-profit company, and he's developed technology like this to augment Zcash to be able to provide these types of backdoors which are auditable and publicly verifiably when used and, in some cases, one-time used, depending on how they're deployed. So we'll certainly be a member of that conversation, and eventually, we'll settle on something, and it's inaudible of how much privacy's required. Closely related to it is also the place of metadata and attribution. So under what contexts should you attach mandated transactions, and how do you do that, and how do you share it? This is really important for compliance. If you look at exchanges, they have KYC (know your customer) and AML (anti-money-laundering) reporting requirements, and because of that, they've inadvertently become data custodians where they hold tons of personally identifiable information about their customers. They don't want to hold it, but they have to because of the law. It would be much better having a minimum viable escalation model where you are allowed to have a challenge-response type of a query where you ask questions about your customers, like, are you a US citizen or not? And you can get some verification of that. But you don't have to have that data necessarily.
The example I like to use is that, in the US, you have to be 21 or older to drink. How we usually verify that is we look at your driver's licence. And because I see that document, I know your address, I know your driver's licence number, I know exactly how old you are and how fat you are, how tall you are, the colour of your eyes, the colour of your hair. That's a bunch of information you don't need to know, but you inadvertently know because of the way that you've done verification. It would be much simpler to be able to just ask a query: are you over the age of 21? And have a response of 'yes' and know that that response is correct. Then I've learnt nothing about you other than that particular question, and we leave it at that. And the proof itself is the sufficient burden for the merchant. So we're certainly involved in that conversation. We have a lab at University of Edinburgh that studies these types of things, a privacy and verified computation lab. It's led by a former Microsoft person, Markulf Kohlweiss, who worked on the Everest project and other things. And privacy is in the remit of the lab, so we'll come up with some options, and then we'll democratically validate those options. And whichever one the Ada holders have decided, we'll implement into the system. And by the way, this takes time, several years.
Q: We actually have a couple of submissions on future outlook. I'm going to read off this. What do you think is the next big thing in the crypto space, outside of your own roadmap? For example, let's say Hashgraph? And related to that, after scalability and sustainability, which do you think will be the next challenge? And what do you think will be your next big ticket, either in the crypto space outside of your current projects, such as Hashgraph?
Charles: I think the magic is that there are a lot of concepts that have been sitting on the academic shelf for 25, 30 years, or emerging trends that we're seeing in hardware or software that can now be dragged into the cryptocurrency space. I'll give three examples: one is multi-party computation; two is trusted hardware; and three is a lot of PL programming language concepts. So in terms of multi-party computation, these protocols or the concept of multi-party computation have been known about since the 1980s, but only recently have the protocols become efficient enough to run on consumer hardware. So, for example, let's look at poker, that's kind of the canonical example. This is a perfect example of something that you probably don't want to run in an Ethereum-style virtual machine. You're not talking about poker games with 100,000 players; you're talking about poker games with five players, 10 players, 15 players, so you don't have a very large set of people. And, really, what do you care about in poker? That people can cheat, and that at the end of the game I'm going to get my winnings and losses. That's basically it. And you don't particularly care if that data gets committed to the blockchain. Why should it be there? It's a game. We're using blockchain as a broker and a payment system, so we're using it to find each other and to make sure that we get paid, but outside of that, what I really care about is I played the game. I don't particularly care about the metadata, or if I do, there's a way of capturing it that's far more efficient. So if you look at the Ethereum-style solutions, they say, 'Oh well, who cares? We're still going to write it as a smart contract and all the same, your poker game, even though you're only playing with five people, is the business of every single person on the entire network and competes for resources with every single person.' So I think there are much more intelligent ways of doing things off-chain, and multi-party computation provides an avenue for that, so we're exploring it. But then, there are also projects like Enigma, out of MIT Media Lab that are exploring these ideas as well. And so I'm really excited to see the intersection of MPC multiparty computation and blockchain, and I think you can do a lot of cool things, not just poker but things like decentralised exchange or even general-purpose computation.
Trusted hardware is really cool too because it's the closest thing we have to magic. And I think it's the only way we have for offline, off-chain payments. So let's say you live in Africa. I was just in Rwanda and I was just before that in Ethiopia, and it would be really crazy for me to go around Addis Ababa and say, 'I'm going to solve all your problems with my magic internet money which requires you to be online all the time to use, when you don't even have a stable internet connection.' They'll just look at me like, 'Okay, crazy white person. Go away.' So the reality is that it would be nice to be able to have a trusted enclave that you can store the private key within that enclave so that you get certain guarantees like the balance associated with that key is correct, you haven't double spent it, and when you transact it, you can move the private key from one enclave to the other and then get a proof that it was destroyed on the enclave that you had. Now, if you can do this – and trusted hardware can potentially allow you to do this – then you can transact offline. Because what I can do is just walk over to someone who has a cellphone or a hardware device and tap it with my hardware device, and, basically, we just move the private key from one device to the other device and transmit over a proof of destruction, and suddenly, they've just got paid. Now, from the blockchain's perspective, no transaction has happened. It's basically like staying the same; nobody knows that you've swapped the private key. But from the person who's received that perspective, they've just been paid as if I've handed them $20. And none of this had to sync, it's just all offline. So that's really exciting me because that extends cryptocurrencies into an environment that they're not meant for and allows us to do things in the maximal privacy because you don't even know if your transaction's happened, that's the most private way of doing a transaction, and there are all kinds of things you can think about. You can even extend that to an offline ATM, for example. So if you can pay people offline, why can't you have an ATM that's offline and it can dispense cash and so forth? So trusted hardware, I think, is pretty magical, and there's a lot of other things you can do with that. But we have a lab that is looking at these things, and there are companies like Rivetz, for example, and Intel's involved with a protocol called Sawtooth, which is associated with the Hyperledger project, and the range of solutions from IOT (internet of things) all the way down to attestation of data and so forth. So that's exciting to me.
And then in terms of PL concepts, and Duncan can probably elaborate better than I can on this, but what excites me the most is this idea of making formal specification sexy. There are some projects historically that have had huge impacts, but they've been extremely time consuming and incredibly expensive. Like seL4, for example, which was a microkernel that was verified. I think it took like 10 years or something like that?
Duncan: Not quite that much, but it was a lot larger.
Charles: It was like five years, or a big chunk of time, and then millions of dollars were spent on it. So when you talk about formal verification software, you tend to have this vision that you're Nasa or you're SpaceX or you're Boeing and you have massive budgets and thousands of engineers, and you have horizons of time that almost any rational person wouldn't invest in normal consumer software, like five years, 10 years, 15 years and so forth. If you look at the smart contract, the smart contract is a small piece of code. Of all canonical examples you'll be able to pull in Solidity, they're not very large, they're like several hundred lines of code, and they have usually pretty well-defined business requirements backing smart contract. So you can have a reasonable discussion about the semantic gap between what you intended on doing and what you actually ended up doing. So this is probably the perfect example of where you'd want to use some form of formal specification approach and verification approach to verify correctness. The other thing is there is high assurance in that if you get them wrong, hundreds of millions to billions of dollars can be lost, and also, you kind of have a very well-defined environment that these things happen to be executing in, so it's like the perfect storm for formal specification and verification. So I'm very excited about where we can take older techniques, modernise them and drag them into our space in a lightweight way.
Duncan: And if we're successful, that not just having everybody write Solidity programs, then we can start with smart contract languages which are amenable to formal analysis because they're designed with it in mind, based on proper PL research rather than just Solidity, which was accidentally designed.
Charles: Right. And also, what's nice is that competition is really brewing in this space. Tezos, for example, with Michelson, and I think it's Liquidity is the name of the language there, and they're definitely pushing hard. Simplicity is another language that's being developed by Blockstream, by proper PL expert Russell O'Connor. And there are other examples in the spaces, end protocol is one, using concepts from F. There was an attempt to port Idris to run on Ethereum, and there's been some formal verification work that's occurring around Ethereum, particularly by a guy named Yoichi Hirai using Lem and a few other things. So there's definitely some effort that's been put into this, and that's really exciting. If you study PL, these techniques tend to be on the fringe, and they tend to be isolated, small groups that work on these things, and nobody pays much attention to them, and when they do, they usually roll their own solution and it's proprietary in-house or it's for a particular project, and then you move on after it's done. The fact that we're now trying to take specification verification concepts and bring them into the mainstream and make them accessible to everyday programmers is a really new concept, and that's really exciting, and I think it bodes incredibly well for software correctness. And I'm really excited about where that can go. So those are the three things: multi-party computation, trusted hardware, and PL stuff.
In terms of things like Hashgraph, you asked about that, there's a lot of hype, guys, about DAGs (directed acyclic graphs) and hype about 10,000 transactions or 100,000 transactions per second, and my opinion is, most of this stuff is junk, either because it's been deployed in a very unrealistic environment or because it doesn't have a proper trade-off profile or because the protocol was designed without any Byzantine resistance or... you know, you have Byzantine actors or the protocol fails. And I'm very sceptical. There are some real protocols that do shard and have great performances, like, for example, OmniLedger is one and Thunderella is another, and these are protocols built within the academic world by academics, based on protocols that are already proven, or at least have some peer review behind them. So without a doubt, such things can exist, but usually when it's happening with things like IOTA, which is based on a technology called Tangle or Hashgraph, is you see a wave of hype come along. The ICO comes, pots of money get raised, and then people psychologically buy into it, and no one really bothers to check if what they've implemented is right or wrong. The other thing is, you don't really need to build a system where one chain runs 100,000 or 200,000 transactions per second; to be frank, you're doing it wrong. Because even if you have that raw processing power, how do you move all that data? You need a network player to do that. And second, where do you store all that? If your security model is everybody has a copy of the blockchain and you're running 100,000 or 200,000 transactions per second, how big do you think your blockchain is going to be in a year? And so, yeah, Google can store it, or the NSA (US National Security Agency) can store it; pick which one you want. It's either California or inaudible, you know, which facility you want your blockchain in. But you necessarily federate the network when you demand this type of performance.
So to me, it makes a lot more sense to have a multi-layered model where you have lots of sidechains. You have overlay protocols, things like payments channels or state channels, and you try to keep your transaction rate within a reasonable envelope. What I am excited about though is the notion of data sharding. I'd like to see ways of breaking up a blockchain and storing it like you would a torrent or storing it like you would a decentralised database. And there are some projects like Siacoin and Filecoin and others that are incredibly well funded, and they have real computer scientists behind them. In fact, Sia, for example, their core paper was given the best paper award at the Eurocrypt conference. They beat our paper; I was pretty upset about that. But that's a high bar compared to where we were just two or three years ago with the first wave of those technologies, like Storage and MaidSafe. That's my long-winded answer. Next question.
Q: I think it's a shorter question. You guys are focusing on the development of the platform, obviously, and making it available for developers as soon as possible, but do you think it might be beneficial to team up maybe with some sort of a real world project to be implemented as a new test case, as a proof of concept, let's say, of scalability of Cardano, and implementing that application as just basically a showcase?
Charles: Yeah. It's kind of like we're building the Xbox. So the question is, what's our Halo?
Q: Yeah, exactly.
Charles: What are our games? What is the catalogue? So we do have a business development arm, and we also have a partner called Emurgo, which is a venture fund in Japan that seeks out projects to deploy on Cardano that will act as these proofs of concept. And we've had some degree of success. We haven't been looking, but we've seen that there's an overwhelming demand for pilots. I was just in Ethiopia and talking with the Ministry of Science and Technology, who we signed an MoU with, they have a very strong desire to do supply chain management on blockchain for coffee production. Now, this is a really big market. There are a million and a half farmers, there are massive amounts of stuff going on in those supply chains, so that would be a great stress test for the platform. But then, there's an open question: what ought to run on the main network and what ought to run on a private permissioned ledger? Hyperledger exists for a reason, and IBM is not dumb. They created a really good product to service the needs of the enterprise. So part of Cardano's remit is not just to look at what should run in a single universal environment that's maximally decentralised, but ask, what can you deploy in a private setting? The canonical example I like to look at is the exchanges. So if you right now look at the way that exchanges handle tokens, basically, they have an address, you send your Bitcoin to that address or your Ether to that address and they have some sort of storage policy between hot wallets and cold wallets. They try to arrange it in just the right configuration, so even if the hot wallet's compromised, the majority of funds stored there aren't lost, which is fine but it's not optimal. It would be much better if you used a sidechain transaction and you sent your token to a private ledger. Because you're already trusting the exchange with your money, so you're not really getting any extra security by being on the main network; you're actually losing security because what you're doing is saying to the exchange, 'You can't put in proprietary business logic to better protect my tokens.' Like, for example, the ability to reverse transactions and so forth in the event that the system gets compromised.
So part of Cardano is to study the relationships between permissioned ledgers and permissionless ledgers and then find linkage points between these two things. So for high-stress applications, things that are ... let's say supply chain management in the coffee industry when you have a million farmers and hundreds of thousands of transactions every day and bloats and tons of data and IOT components putting sensor data on, it makes no sense in hell to run that thing on a big network and have it compete for resources with everybody else. It's just not economically viable. It makes a lot more sense to just have the washing stations and the government and other people run consensus nodes and have a permissioned ledger there and then create some sort of linkage between the two systems. If anything, you hash the ledger regularly and store it on the main ledger; that can be an example of that. So you kind of have your cake and eat it too. You have a blockchain-esque environment, you get the timestamping, you get the automobility, you get the immutability and the record within the reason of decorum, but then you also get very low-cost operation and predictable performance of operation and a much easier time custom-tuning the ledger towards your business logic in your system. So we are looking for pilots like that, but we're also looking for smart contracts to come on to our system, and when Plutus is fully available, we'll be pushing like hell to get lots of people to come and do things. The advantage that we have, because we chose Haskell as our code basis, we kind of work with everybody in the Haskell space. I take it there's like, what, four or five major Haskells that we don't work with at this point. We work with Tweak and FP Complete, and Well-Typed and others. So we kind of know everybody there, and we have a very good brand footprint in the Haskell space. So once Plutus is available, there's going to be probably a large group of Haskell developers who are curious to be able to write smart contracts in a language like Plutus. So that will create a wave of innovation.
We can also spark innovation by creating cohorts of people that are trained developers in our system. So we have an education arm, and we do classes. We did one in Athens, we did one in Barbados, and we're soon doing one in Ethiopia. By the way, that class will be all-female developers; the government requested that. And we teach them Haskell and smart contracts. So once they learn these things, the target platform, they'll write software for us on our system, and they'll write lots of prototypes and so forth. So it's a collection of these types of things. Some of the things you need to do to brand and showcase the system, but they don't necessarily need to be run on the main network, they should be run on permissioned ledgers. Some things you do need to run on the main network, and you have to also have channels of them with which to attract developers to your system, and we have been pursuing that as a company, and our partners have also been pursuing that as a company. But it's important to point out there's overwhelming demand; there are lots of people who want to be doing things with us, and we have to tell them ‘no’ because we don't have the capacity at the moment.
Q: I'm curious ... this is kind of a fuzzy area, but what do you see as the role of cryptocurrency in society? Right now, there's so much talk of 'Lambo' and 'to the moon', and a lot of what's going on is purely speculative work. Are we going to have our grandmothers using this on a day-to-day basis? Is this going behind the scenes? What do you think?
Charles: Well remember, not too long ago the internet revolution was treated the same way. People were making fabulous amounts of money from vaporware products, and the market collapsed. But on the ashes of that, you got the Googles and the Facebooks and the YouTubes and so forth. So cryptocurrency technology, when you decompose it into its fundamental components, is a discussion about trust and coordination, identity, reputation, the representation of value and the movement of value. These are the core components of cryptocurrency technology. So if you look at society and markets, all of these things require an opinion on how these things ought to fit together. Now what ends up happening is, you look at the default configurations we have, almost always there is some sort of middle-men of necessity, not of desire. You don't put Bob in charge, make him the gatekeeper, because you like Bob and he happened to have built the business around it, and because his business is operating well, it becomes a core component of the way the market structure works. A great example would be eBay. Nobody really likes eBay, but eBay is eBay, you kind of have to deal with them. So you need a marketplace, you need a reputation system, you need a way of organising your buyers and sellers, you need a payment system and so forth, and eBay happened to be the winner of that fight, now they have a monopoly and they just kind of run that. Similarly, with YouTube, there's more than one person, sorry guys, that have some issues with YouTube and getting demonetised and so forth, and maybe you guys feel you're doing a good job – some people don't, but no matter what, YouTube's YouTube, it's just of scale. Uber's another example of that.
So there are hundreds of these things that when you start really looking carefully, you notice, in the flow of money, in the flow of commerce, in the flow of insurance, in the flow of commodities in every facet of life. So what cryptocurrency tech is all about is saying, can we reinvent this marketplace where we can get rid of that central broker and directly connect the buyer and seller, allow them to somehow coordinate, somehow trust each other and have a successful commercial transaction? Now a lot goes into that. You need to have things like reputation, you need to have things like insurance, you need to have a payment system, you need to have a value stable currency, which we still don't have, you need to have credit, you need to have the ability to do settlements that you don't even have the full amount of money for – it's called eventual settlement, where I'm going to pay you but I don't have the money on hand to pay you quite yet. It happens quite a lot in the world. You need to have an invoicing system. You need to have lots of stuff. But just because we don't have all the basic components doesn't mean there's no merit to the system. It's just like with the internet, you needed to have the cookie, you needed to have the certificate, you needed to have the browser, you needed to have good web languages, you need to have high-speed internet to be able to get things quickly to people. Eventually, you needed to have mobile internet and so forth. But once these infrastructural components got put in, the internet got great and changed our lives. And so, I view cryptocurrencies much the same way.
Now there is the natural question to ask of where does the token fit in all of this? Because everything that I've mentioned doesn't really require Bitcoin; it just requires protocols and rails and so forth. So what the token acts as is some sort of incentive mechanism for people to maintain these particular types of systems. It's not necessarily what the instrument of value's going to be. The token just decides who gets to be in control at the end of the day, especially in proof-of-stake systems; it's very explicit in this respect. I think any of the proof-of-work systems are eventually going to die out because they're not sustainable or competitive in the long haul, but on proof of stake the token's about who gets the vote, who gets to decide who's in control. And I think what's going to end up happening is you're going to have the liquification of value and the tokenization of value, and we're going to converge to a universal wallet notion. So in life, you have lots of stores of value: you have commodities and you have stocks and you have bonds, you have real estate. I have a lot of airline miles; I'm saving up enough to buy a jet. I travel 200 days a year; I've been to 63 countries, so I'm a pretty tired guy. We have currencies, you have whatever, you have hundreds of these stores of value. Now, we tend not to look at them as the same thing. We tend to look at them as silos, right? My gold is not the same as my airline miles. Why is that? They're just value, they're just wealth, and you put them all together, that's the portfolio of your wealth. So the capstone I think of where the cryptocurrency movement is going is to remove the walls between these tokens of value and give you ways of representing them that are interoperable with each other. So you can turn your gold into silver. You can turn your silver into currency, turn your currency into airline miles. And because all the payment systems are now programmable, thanks to you guys and many others, the merchant gets paid whatever the hell the merchant wants to get paid, now. So I can walk over to Starbucks, and I can have my house tokenized, and I can sell it. There's a market maker that lives in between that, and I sell one-millionth of my home and I can buy that cup of coffee, somebody bought that from me and the merchant gets paid in dollars or pounds.
So that's where I think this is all going, that it's going to have this ecosystem of tokens that live. The tokens that are connected to the command and control of the protocols I think will survive because they become basically like a prediction market in the sense of the utility and value of that protocol to society. It's almost as if you could tokenize BitTorrent or something like that and say, 'Okay, here you go. This is the value of BitTorrent to society.' And that's one thing, but then you're going to have tokenization of concepts, you're going to have tokenization of stores of value. And that's what you're going to end up spending on the system. So those can be government-issued, they can be synthetic in that you somehow create a value-stable cryptocurrency, they're called stable coins and they're traded as if they're dollars, even though they're not issued by a government. They can represent loyalty, you can be selfish, like you can organise your labor as an engineer and say, 'I can take 40 hours of pre-paid labor, and people can buy it on the open market.' You can do all these types of things. That's where we're going, I think, with this entire system. And that's really cool to have a single unified global market, you have a much finer-grained way of handling trust and coordination, having universal identity and reputation space, so people can get backed and get into the system. You can know how to do business with your counterparty in a safe way, and then to have value become liquified and fluid. Now, who's going to win that fight? I have no idea. I'm betting on myself, you know, with my protocol, but I'm not insane enough to believe that we'll probably universally win, nor should we. It should be diverse inaudible.
Q: Great, Charles. Well, this has been very informative. Thank you so much for joining us at Google today and taking time out of your busy schedule.
Charles: Oh, one thing I forgot to mention, real quickly, we're passing out these flyers. We don't have them in your offices. Unfortunately, Richard hasn't mastered teleportation yet.
Richard: We have a little meetup going on tomorrow – The Symphony of Blockchains(/projects/symphony/ “Symphony of Blockchains”) that we mentioned to you. If any of you guys on the screens are coming to London tomorrow, we'd love you to come and join in if you've got free time tomorrow afternoon. Charles will be talking, Lars Brünjes as well on the delegation scheme, and we'll also be showing some art. Free bar, so come and join us if you can.
Charles: And I want to explain real quickly that IOHK has a secret third division. So we're an engineering company and a science company; we're also a design company, and our head of our design office is right there. His name is Richard Wild. So it was really important to me that in addition to getting the science right and getting the engineering right that we actually find ways of representing and visualising what we're doing. So it's not just good enough to write code, the code has to be alive. You have to see it and be able to touch it. So our art department tries to visualise things. And so, we started with Bitcoin and we said, 'How do we visualise a block explorer?' So block explorer just tells you the history – what's in this block and how many transactions were in it, how many fees were paid, etc. Wouldn't it be so cool to put that into a three-dimensional, navigable art piece that's on our website and eventually VR'd and you can walk through it and so forth? It makes it far more accessible to the general public because these concepts, as much as I happen to love them, are really boring. But if you have a piece of 3D art, then you can put that in a gallery and people can see this. And also, it gives you a visual way of representing things. Like, we asked a question of, what is a healthy network? Before Bitcoin Cash came, we had a big crisis in Bitcoin where every block was full, you had to wait hours for transactions to be able to confirm, sometimes days, fees were very high, it cost you $25 to buy a cup of coffee in some cases, so it's not a very healthy state of affairs. So it would be nice to visualise that. You could just look at a blockchain and say, 'Boy, it's a red day. It's not a good day. Normally we have green days, but, no, this is bad. Bitcoin's not healthy right now.' So it would be really cool to do that and allow people to be inspired and understand that.
Also, when we talk about concepts like IOTA or Hashgraph, which are directed acyclic graph-based structures versus a blockchain-based structure, how are they different, conceptually speaking? It's one thing again to talk about the graph theory, it's another thing to actually show people a picture or show people a model. And so, all the art we do is interactive. We use Three.js and WebGL and these types of things. So if you go to our website, you can see some of the art we've done, including the Symphony of Blockchains. And the event we're having today is the first of its kind, and certainly not the last. And there are goals to build up a large portfolio of art. And eventually, we're going to try and create incentive systems for the general public to be able to create these types of things and be able to make money from it and so forth. So you're all welcome to come. Free beer and interesting people to meet.
Q: Great. Thanks a lot Charles.
The above is an edited transcript of the discussion at Google’s London offices on May 14, 2018.
Ouroboros Praos presented at leading cryptography conference, Eurocrypt
Proof-of-stake protocol offers same security guarantees as Bitcoin
17 May 2018 Jane Wild 4 mins read
In the area of blockchain research proof of stake has long posed many questions for cryptographers and the subject has been of primary importance for IOHK researchers over the past two years. Professor Aggelos Kiayias, Chief Scientist at IOHK, has led work with a team of cryptographers to formalise a family of protocols called Ouroboros. It is a great distinction for their efforts that their paper describing the protocol was accepted to Crypto 2017, the foremost cryptographic event, and another paper was heard this month at sister event Eurocrypt. Eurocrypt is the flagship European conference of the main international community of cryptographers, the International Association for Cryptologic Research. About 370 delegates from countries worldwide arrived in Tel Aviv, Israel, to hear cutting edge research being presented from across the spectrum of cryptography. In all, there were about 70 presentations across four days.
This year, blockchain was more prominent than it had ever been at Eurocrypt. There were four papers presented during a dedicated blockchain morning session on the second day. The following day there was a talk on the 30-year history of cryptocurrencies, given by Matthew Green, a cryptographer at Johns Hopkins Information Security Institute. Three best papers were selected for an award at Eurocrypt, and one of them was on blockchain, Simple Proofs of Sequential Work by Bram Cohen and Krzysztof Pietrzak.
Academic interest in the area has nowhere near matched the rapid proliferation of blockchain projects during the past few years, and the increased focus of cryptographers at events like Eurocrypt brings a welcome professionalisation to the industry.
To be heard at the conference, papers must be submitted for consideration in a process called peer review. This notoriously tough sifting process can typically involve three or four people reviewing the paper, and it passing a programme committee of three dozen or more people, to ensure it makes a novel contribution to the scientific literature that advances computer science. Most papers are rejected. A double-blind admission procedure where both authors and reviewers are anonymous adds objectivity.
The novel feature of Ouroboros Praos is that it is the first proof-of-stake blockchain to be able to scale for widespread use and provide security against adaptive attackers. These are attackers that can instantly corrupt protocol participants, and the only restriction is that only a minority of the total stake can be in corrupted hands. A Distributed Denial of Service (DDoS) attack is a real-world example of such an instant attack.
Ouroboros Praos offers the same security guarantees as Bitcoin in that it can withstand attacks from stronger adversaries in harsh network conditions, such as where an attacker has some control over network delays affecting messages sent by all participants.
No other proof-of-stake protocol that has been peer reviewed at this level can provably offer this level of security guarantee under these conditions.
Peter Gaži, who presented: “Eurocrypt is one of the premier venues for presenting cryptoglogic research and it’s an honour for us to present our work here. The fact that we were invited serves as evidence the broader academic community is showing more interest in this topic.”
Aside from Peter and Aggelos, the other researchers on the Ouroboros team are Bernardo David, Alexander Russell, Roman Oliynykov, Christian Badertscher, and Vassilis Zikas. The previous Ouroboros paper, first in this line of research, is the first proof-of-stake protocol to be provably secure and peer reviewed at a leading cryptographic event. Ouroboros has a real-world implementation in Cardano, the top 10 cryptocurrency built by IOHK.
Cardano is a project that is unique in its vision, scope and design, and its world-class team is working at the frontier of computer science. As development progresses we're contacted on a daily basis by people from all around the world who want to learn more, and so IOHK was pleased to make its first trip to Germany recently to talk about Cardano. Dr Lars Brünjes and Dr Philipp Kant are senior members of the Cardano team and they were invited to the monthly Hamburg meetup Blockchain Mania last month to give a technical talk. Lars is Director of Education at IOHK and leads work on incentives, a key part of Cardano, while Philipp is Director of Formal Methods, the robust development approach that is the gold standard for IOHK development.
In the year since this Hamburg meetup launched its audience numbers have blossomed from 20 to well over 100 under the direction of founders Omri Erez, an android developer by background who now has a blockchain startup, and Kiriakos Krastillis, who is Head of Software Engineering at PwC Digispace in Hamburg. The crowd was keen and knowledgeable, including entrepreneurs and developers (and some Haskellers). They wanted a deep dive into technical aspects of Cardano, with a Q&A after each presentation.
Philipp took the audience through an introduction to Cardano, highlighting a few of the key features in development. Plutus and the IELE Virtual Machine are essential components of smart contracts, while sidechains will help the system scale. A treasury will secure future development by giving users a mechanism to decide upon and pay for changes. At the heart of Cardano is Ouroboros, the algorithm that underpins the Ada cryptocurrency. Developed by a team of researchers led by Professor Aggelos Kiayias of the University of Edinburgh, Ouroboros is the first proof-of-stake algorithm to be provably secure and was accepted to the leading cryptography conference, Crypto 2017. It is an efficient alternative to the energy-intensive proof-of-work protocol that underpins Bitcoin.
Producing excellent research is the first objective. The next is to take that cryptographic research, which is expressed in academic language, mathematical formulae and proofs, and turn it into another language – Haskell code that a computer can understand. Additionally, the research papers will not account for factors that arise during real-world operation, issues relating to databases or networking for example.
Turning the papers into machine-executable code is a lengthy and precise process, and one it is highly desirable to conduct carefully. IOHK is adopting formal methods in its development process to create software that is robust and reliable. This is an approach used in areas such as medicine and aerospace, where improperly implemented code could result in casualties. In the area of cryptocurrency, we've repeatedly seen flaws in code exploited and losses in the hundreds of millions of dollars.
The process of moving from paper to code is done in a series of small steps, rather than any big leap, Philipp explained.
The first step is transcribing the paper into an executable specification, and further steps refine this specification, adding all the necessary details.
Attention is paid to each design decision, and each step can be tested to make sure the code is correct. IOHK does this by using psi calculus. This is a family of process calculi that is a toolbox we are using to formulate Ouroboros Praos. We can embed psi calculus into Haskell, which allows us to run simulations and export code to a proof assistant such as Coq or Isabelle so proofs can be checked.
It is important that we have a good handle on the performance of the system. Before the launch of Cardano, Philipp oversaw benchmarking, tuning the parameters of the system to ensure it could perform well under various conditions. While this process is helpful to ensure the system is set up in a way that ensures stable operation, it is preferable to have a method for predicting the performance early on.
To achieve this, we use the Delta Q formalism, where each atomic operation carries is assigned a probability distribution for delay and failure. Those can be combined, either through simulation, or algebraically, to determine the expected overall performance of the system. Adding Delta Q annotations to the executable specification right at the start of the development process will show performance impacts of design decisions, and also provide a baseline for the benchmarks: instead of just measuring the performance, and trying optimisations to improve it, we can compare the results of benchmarks against a prediction, and tell whether we have a performance bug. If we additionally measure the Delta Q of individual parts of the program, we can even see which parts behave unexpectedly and should be optimised.
Incentives are core to the design of Cardano and the related topic of staking has been one of the most keenly discussed among the community. Lars is leading work on Incentives, and the team includes Professor Aggelos Kiayias and Professor Elias Koutsoupias, at Edinburgh and Oxford universities respectively. Lars explained how well-designed incentives shepherd users through the system and encourage them to make choices that are not only in their best interests but lead to the smooth operation of the cryptocurrency as a whole.
In Cardano it is important that stake holders are online so they can be part of the election for who gets to create the next block in the blockchain, and to create that block if they win. The incentive for taking part in Cardano is Ada, as a reward for being part of the process and creating a block. By comparison, in Bitcoin's proof-of-work system, stakeholders compete to solve cryptographic puzzles, with one winner taking a reward for creating a block. However, in Cardano, users may not have the time to be online or take part in the election process, so they can delegate their stake to others who can do it for them. Those who do take part then pay a share of the reward back to the users who did not participate. Simply holding Ada gives you stake, and if you delegate your stake, you still retain the monetary value of Ada and can spend it as you wish.
Lars explained that about 80% of stake should be delegated to stake pools, that optimally number about 100. Stake pools must be online, and provide infrastructure for the network in the form of relay nodes. The leftover 20% of stake would belong to small stakeholders who either participate on their own or decide not to.
There are three types of address in staking, each associated with two cryptographic key pairs: one for payment, one for staking. A base address has a staking key linked directly to it; a pointer address links to a delegation certificate on the blockchain, and an enterprise address is for exchanges, who may not use the funds entrusted to them to stake.
Delegation of staking rights from one staking key to another is done by means of a delegation certificate, which can be published on the blockchain as part of the metadata of a transaction, in which case a pointer address can refer to it. Such a published certificate is called a heavyweight. In case of conflicting certificates, later in the blockchain wins. The fees for creating a heavyweight delegation certificate are the transaction fees for the contained transaction. A lightweight certificate is not published on the blockchain, but instead included in block headers to prove staking rights for the address that was elected slot leader. It also contains a "serial number" to break ties.
To set up a stake pool a registration certificate is created and embedded in a transaction that pays the pool registration fees to a special address. The certificate contains the staking key of the pool leader. People wishing to delegate to the pool must create (heavyweight) delegation certificates delegating their stake to that key. And using combinations of base and pointer addresses and "chains" of delegation certificates, a large number of scenarios can be covered, including: regular user wallets; offline user wallets with cold staking; wallets with enhanced privacy; staking pool wallets, and enterprise wallets for exchanges.
Transaction fees are an important part of Cardano's incentive scheme. When Ada is sent, a small fee is paid for the transition, to validate it. These fees help prevent Distributed Denial of Service (DDoS) attacks by imposing a financial barrier for any adversary intending to flood the network with spam transactions. The fees also provide funds for Cardano's incentives.
Incentives are distributed each epoch, the operation of Cardano's Ouroboros algorithm being divided into epochs that each last five days. Transaction fees are collected for the blocks created during each epoch, pooled along with Ada from monetary expansion, and the total is distributed to stakeholders, according to the stake they own.
For more details on incentives, transaction fees and staking, Lars' presentation is available in full: Incentives in Cardano.
Follow IOHK online for more details of progress on Cardano development, and watch out for a forthcoming video from the first Cardano developer meetup in London.
Cardano’s goals for Africa and the developing world
Charles Hoskinson addresses packed crowd at LSE
24 February 2018 Jane Wild 6 mins read
The London School of Economics has a long history of links to Africa. Founded in 1895 four years before the outbreak of the Boer War, the school launched into the debates of the era. Some of the first leaders of newly independent African nations studied at LSE and its progressive and anti-imperialist stance saw the school play a part in the anti-apartheid movement. With that history, the university was an apt location for Charles Hoskinson to introduce Cardano’s next steps - for its technology to serve the developing world, starting with Africa. The talk, organised by the Cardano Foundation and the LSE blockchain association at the school’s Saw Swee Hock Centre, was twice oversubscribed.
Before the doors opened on Tuesday evening there was a buzz of anticipation in the long queue of hundreds of people, mostly in their twenties and thirties.
To the packed crowd, Charles set out the vision for Cardano that will begin to unfold in Africa this year.
"You have to go to talk to people in the countries you want to help. The only way you are going to the change the world is you have to go there. You’re not going to be the one doing it, you have to be humble enough to let the people there do it."
Using a model already tested during the past year with pilot courses in Athens and Barbados, IOHK will bring skills to the region. Training in the programming language Haskell, in which Cardano is built, will be provided to budding developers. At the end of the course they will either be hired to contribute to Cardano, or will plough their talents back into the local economy. As an example of IOHK’s approach, the Barbados course was held in association with the University of the West Indies and was the first time that Haskell was taught in the country. The classes were even attended by Professor Philip Wadler, one of the creators of Haskell, who is helping to develop Cardano.
"The next class will probably be done in Ethiopia, we are already in negotiations to do that," Charles said. "You have to create a base of people in the country who have an incentive to care and actually understand how the tech works."
Just as important will be to engage local government and explore opportunities for working together. Pilot schemes using Cardano could test potential applications, for example relating to land registry, identity, or voting.
The key to enabling blockchain use in Africa is to run successful trial projects, showcasing blockchain technology as a cheaper and more efficient method of doing things. "A proof of concept can show why it’s faster and better. It can show it can be rolled out, show people can make a lot money from it, then everyone says ‘me too’, and competition drives a tsunami wave of people in, including my blockchain competitors," Charles said.
There was a powerful case for blockchain in Africa, he argued. Blockchain technology has great potential to unlock the wealth of countries through the tokenisation of natural resources, labour or property. "Tokens aren’t just good for CryptoKitties, it turns out you can do real things with these platforms, so let’s go try that."
"If you count the locked up liquidity in these countries it’s in the trillions of dollars. It’s a great paradox that there’s tremendous potential value in places and if only it could be accessed and given to the people in some fair way then poverty would melt away and these would become some of the wealthiest countries."
It would not be easy, but blockchain adoption would inevitably take place, Charles said. Local politicians would have to receive a financial incentive to support the technology, perhaps through a pre-mine. Then there are other hurdles to cross in Africa, such as patchy internet coverage that hampers connectivity to the blockchain. To address this, IOHK is exploring satellite coverage and estimates the cost at $50 to $100 million. Trusted hardware offers a second solution, by allowing offline, offchain transactions through Bluetooth that can register on the blockchain when connectivity is regained.
Another hurdle is to provide points where local currency can be cashed in or out. To this end, IOHK is looking at how a network of ATM terminals could be installed at affordable cost and which can operate off grid. And finally, a longheld aim of cryptocurrency has been to develop a value stable currency, which is pegged to fiat such as the dollar, and offers businesses stability and protection against the price volatility of cryptocurrency. Charles announced that IOHK was starting a research agenda into value stable currencies, and although there would be "no silver bullet", he promised a series of experiments and hard work on the subject.
"So that’s what Cardano is doing for the developing world," said Charles. "We have a moral obligation to try and explore this tech and get it to as many people as possible."
The talk was followed by a wide-ranging question and answer session, with questions on everything from the future of blockchain in China, to transaction fees on Cardano, to establishing regulated cryptocurrency businesses.
The audience had a mix of backgrounds, from serious Cardano fans who had watched hours of videos online, to the cryptocurrency curious.
Timo, 27, is a student from Salzburg at Regent’s Business School in London. Having been interested in cryptocurrency for more than a year, he says he’d watched Charles’s Ted talk, seen his interviews and and then bought Ada. "The project is very serious compared to others, it’s evident from the team, the web presence and the many interviews Charles has given."
"Blockchain is the most revolutionary technology since the internet," said his friend, Thomas, 23, from Antwerp, who first learnt about cryptocurrency last year from his father during a marathon three-hour, late evening conversation. "That sparked my interest, and I then came across Charles’s videos and found him a brilliant mind. I like the approach that Cardano is taking to tackling the problems blockchain is having right now - it’s also academic and involves people from universities, there is objective option there."
Others were there to find out more about cryptocurrency. Ana, 24, is a postgraduate student of law at LSE who came along to the talk. She is interested in writing her dissertation about smart contracts because she sees blockchain as an newly emerging discipline within law. "I want to understand more about blockchain," she said. "The legal aspect is very interesting and there are a lot of issues to tackle. For example, is it legitimate to have contracts that self-execute, if you don’t have a court or a judge involved?"
More information is coming soon on IOHK and Africa strategy, and will be outlined by the Director of African Operations, John O’Connor.