Driving Blockchain Technology: Cardano Foundation’s activities part 4

Learn how the Valentine hard fork and CIP-1694 contribute to operational robustness and decentralized governance

An operationally resilient blockchain ensures the safety, availability, and trustworthiness of its network. It has the ability to endure disruptions, maintaining data integrity and consistency even in the face of unforeseen events. It also meets not only business standards but also regulatory needs. Likewise, resilience strategies such as redundancy and monitoring improve
network stability and user confidence.

As a public, permissionless blockchain that utilizes proof of stake (PoS), Cardano’s network security increases as on-chain participation grows. The more unique stake pool operators (SPOs) that operate the desired number of pools, the more resilient and decentralized the network becomes, as each such entity independently participates in the creation and validation of the chain’s blocks.

Through delegation, community members further diversify the entities responsible for securing the Cardano network. For example, ada holders can delegate across multiple, diverse pools instead of allocating their stake with only a few SPOs, a situation that could allow for the greater influence of nefarious actors.

Part of the Cardano Foundation’s work within operational resilience focuses on decentralization and providing various experts across the ecosystem with ways of contributing to the network’s future. For instance, the Cardano Improvement Proposal (CIP) program allows the technical community to propose new features and help shape the network. Additionally, the Developer Portal assists all those building on the network as well as technical newcomers, bringing more people on-chain and into Cardano's technical ecosystem—ultimately increasing the operational resilience of the Cardano infrastructure. At the same time, the Foundation’s Integrations Team provides technical support to third-parties during infrastructure upgrades, contributing to seamless transitions.

A Hard Fork for Interoperability

The aptly named Valentine hard fork happened on 14 February and marked the beginning of an important chapter for Cardano. With the implementation of the Valentine Standards for Efficient Cryptography (SECP) upgrade complete, Cardano's capabilities for cross-chain interoperability will expand due to cryptographic updates. Public key cryptography, a cornerstone of blockchain security, involves intricate mathematical methods that generate unique digital signatures to validate the authenticity of digital documents and assets. While Cardano relies on the Edwards-curve Digital Signature Algorithm (EdDSA), a significant sector of the blockchain landscape often employs the SECP elliptic curve, utilized in the Elliptic Curve Digital Signature Algorithm (ECDSA) and Schnorr signatures.

Traditionally, when Cardano developers needed to engage with other blockchains that utilized ECDSA or Schnorr signatures, the process was arduous, time-consuming, and expensive, exposing potential security vulnerabilities. The introduction of the Valentine (SECP) upgrade addressed these challenges directly. By integrating a built-in function that accommodates both ECDSA and Schnorr signatures, the upgrade streamlined the process, rendering it fast, straightforward, cost-effective, and fortified against security threats. As a result, Cardano now supports a new era of interoperability, ensuring developers more familiar with alternative ecosystems can easily build on the network.

Like in any hard fork preparations, stake pool operators (SPOs) carefully executed critical scripting adjustments to start the process. Projects also completed backward compatibility as these third parties utilize Cardano components when interacting with the blockchain. Whether using wallets, nodes, or the Cardano Rosetta application programming interface (API), this compatibility check proves essential to safeguard processes and ensure they remain unchanged after the hard fork. For example, the Cardano Rosetta application programming interface (API) is an open standard designed to simplify blockchain deployment and interaction. Specific implementations of the API ensure developers can use external applications to interface with different blockchains similarly. Given the vital role of this infrastructure, a hard fork must not interrupt such functionality.

For this reason, the Cardano Foundation’s Integrations Team informs exchanges and other third parties of technical updates and anticipated mainnet upgrades ahead of time. In the lead-up to the Valentine upgrade, the team again educated exchanges on the impending hard forks, equipping them with the knowledge to navigate the new features and successfully execute required upgrades.

Notably, certain exchanges operate autonomously, managing their unspent transaction output (UTxO) and address management code. The Integrations Team offers comprehensive guidance for these entities, ensuring smooth software updates. Additionally, the team coordinates efforts with exchanges reliant on Foundation-maintained components and libraries, ensuring they are well-prepared for upcoming hard forks. Throughout this process, the Integrations Team tracks the progress of each exchange's upgrade status. They also provide technical assistance as needed, evaluating the readiness of the Cardano Node and downstream components.  

Blockchain standards for governance

Envisioned as a key component of the Voltaire era, CIP-1694 presents a formal document outlining on-chain governance specifications comprising Cardano native tokens, new on-chain improvement standards, and proposed protocol changes. It adopts a process similar to a request for comment (RFC) from the internet, starting with drafts that individuals, small groups, or large organizations alike can initiate. These drafts would then undergo a collaborative review, refinement, and revision by the global Cardano community to enhance their completeness and accuracy, encompassing technical as well as community-driven topics.

Named after Voltaire's birth year, CIP-1694 marks the advent of Cardano's Voltaire phase and looks to play a vital role in shaping the governing bodies of the Cardano protocol. These would include the Constitutional Committee, Delegated Representatives (dReps), and SPOs, while also encompassing the formulation of voting policies and governance specifics. The implementation of this governance structure would occur gradually, unfolding in stages to increase complexity. However, not all decisions would be immediately delegated to the community, and a gradual timeline for the complete process remains in the works.

Presently, the proposal's experimental nature invites active discourse and deliberation among diverse stakeholders in the Cardano community, ranging from developers and ada holders to academics or stake pool operators. This ongoing engagement reflects an evolving, collaborative process that continues to drive refinement.

The Cardano Foundation contributed to CIP-1694 in multiple ways. Matthias Benkort, Technical Director of Open Source Development, acted as a CIP editor, with others involved in SPO poll planning and execution. The Foundation also continues to work on  a stake-based voting solution that IOG will leverage for polling events related to CIP-1964. Moreover, as part of the discussions, the Foundation got involved in several workshops worldwide in the first half of 2023:

• •In March, the Foundation’s Markus Gufler, Technical Community Lead, and Matthias Benkort traveled to Denver to participate in the CIP-1694 workshop organized by IOG.
• •In June, Jeremy Firster, Global Head of Enterprise Partnerships, Andrew Charalambous, Community Manager, and Benkort attended EMURGO’s CIP-1694 workshop in Tokyo.
• •The Foundation similarly organized a CIP-1694 in Zug, Switzerland. Nicolas Cerny, Community Manager, caught up with IOG’s Addie Girouard to review some of the event’s highlights and main takeaways.

During these events, Cardano community members joined representatives from the Cardano Foundation, IOG, and EMURGO to discuss the on-chain, decentralized governance mechanism for Voltaire.

Testing on-chain governance

The Foundation designed the recent SPO poll as a way of testing a potential governance mechanism. Polls could act as a reliable yet simple form of enabling the Cardano community to collectively make important decisions regarding network upgrades and protocol improvements. Like CIP-1964, on-chain polls rely on the decentralized and democratic nature of Cardano's governance model.

The infrastructure introduced during Shelly built the foundation for decentralization, establishing a delegation and incentives scheme that encourages participation while deterring dishonest behavior. Voltaire will leverage this functionality and transition to a fully decentralized, self-sustaining network—a system where those maintaining the infrastructure and participating in on-chain delegation play a critical role in both the chain’s operational resilience and the actual decision-making process. As a first step, the Cardano Foundation invited SPOs to participate in a poll experiment conceived to ensure all involved parties had a voice in the procedures.

The on-chain poll built on the mechanisms proposed by the Foundation in CIP-0094 and asked SPOs for their stake-weighted opinion on potential changes to parameters, providing the Foundation with valuable insights into the community's needs and preferences. Additionally, it applied action 7 of the governance actions detailed in CIP-1694.

When the Voltaire implementation is complete, such polls could become considerations for delegated representatives (DReps) who would have an influence proportional to the amount of support they received through delegation. Binding votes would complement these polls, allowing the Cardano community to make critical decisions on multiple proposals. The Foundation’s first on-chain poll for SPOs represents a step in this direction, testing the system while ensuring it is calibrated to generate robust proposals.

To account for potential complications while running simultaneous contributions and collaborations, the initial phase occurred in a testnet environment. With the testnet poll complete, the mainnet poll inquired about the k parameter and its interaction with the absolute ada value for minimum pool cost, using for that straightforward multiple-choice questions. Specifically, there were six options, four of which addressed two variables:

• •Keep k at 500 and minPoolCost at 340 ada.
• •Keep k at 500 and halve minPoolCost to 170 ada.
• •Increase k to 1000 and keep minPoolCost at 340 ada.
• •Increase k to 1000 and halve minPoolCost to 170 ada.
• •I would prefer to abstain.
• •None of the above.

The Cardano Foundation designed the poll to consider the perspectives of the entire Cardano community, hoping to trigger debates, contributions, and collaborations. The on-chain poll results are as follows (by stake pool):

These results highlight the need to generate active participation in decision-making, especially because the Voltaire phase represents active, informed, and conscious participation at multiple levels of the Cardano ecosystem. All voices must be heard on the road towards a truly self-sustaining, genuinely decentralized network. For this reason, after the poll’s conclusion the Foundation has carefully considered and responded to the Parameter Committee’s Recommendation in PCP-001, agreeing with their recommendation.

Governance also underpins the ongoing Cardano Summit Hackathon, for which submissions concluded on 18 September. The Summit Hackathon focuses on issues specific to the governance phase of Cardano, providing participants with an opportunity to showcase their work and develop their skills. More specifically, the Hackathon will challenge participants to develop projects that promote transparency in governance, contributing to the operational resilience of the network. The Cardano Foundation thanks all participants for their submissions, and we look forward to the winner's announcement during the Summit’s Gala Awards Dinner in Dubai.