<aside> 💡 Cardano is currently powered by technology proven by 147 academic peer-reviewed papers; Ouroboros is an example of technology that has been proven and implemented through this rigorous process. Although Cardano is in a slightly earlier stage of development than other chains and has not been exposed to security checks by a large number of users, there are, so far, no known critical security incidents or network oligopolistic tendencies which could affect the security of blockchain and are usually observed in other chains.
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One of the Cardano chain's security strengths is that it employs a scientific peer review process before releasing any new product, service, or update. This ensures a higher level of security than the level most other cryptocurrency projects offer. Cardano is currently powered by technology proven by 147 academic peer-reviewed papers. Ouroboros is one example of technology that has been proven and implemented through this rigorous process. It has the same security guarantees as PoW consensus mechanism. The detail of Ouroboros consensus mechanism and its advantage are explained below.
In PoW mechanism, the first one who solved a hash puzzle is selected as the winner. The randomness of the winner was achieved because there is no real strategy to solve the hash puzzle; one must simply try random nonces and re-compute the hash each time with a different nonce. Therefore, the winner of solving hash puzzle is random. Although one can improve its chances of winning by investing more computing power, i.e. buying a better computer to compute hashes faster, it is unlikely that one has much more computing power than all the others combined.
In PoS consensus mechanism, in contrast, the winner is selected randomly in proportional to the amount of valuable assets staked on the chain. A fundamental challenge for PoS mechanism is to simulate a fair randomized leader(winner) election. Randomness is critical for maintaining the security of the chain because it prevents the prediction of the next leader. Ouroboros utilizes a simple secure multiparty implementation of a coin-flipping protocol to ensure the randomness. In a regular interval called epoch, a set of randomly selected participants form a committee which is then responsible for executing the coin-flipping protocol. The outcome of the protocol determines the set of elected participants that will execute the protocol in the subsequent epoch, as well as the outcomes of all leader elections for the epoch. This election process produces the unbiased randomness for the leader election, which distinguishes the Ouroboros from other PoS algorithms.
The update of Ouroboros Praos further strengthened its security by employing private leader selection and forward secure, key-evolving signatures. It ensures that a strong adversary cannot predict the next slot leader and launch a focused attack. Ouroboros Chronos achieves secure synchronization of clocks via a novel time synchronization mechanism and thereby independence of external time services, which makes the ledger more resistant to attacks that target time information.
👉 More about the difference between PoW and PoS is in Ch.1.1. Proof of Work vs Proof of Stake.
The ledger maintains a single chain rather than a full tree of blocks. As in the case of Bitcoin and Ethereum, Ouroboros consensus algorithm employs longest chain rule in case a participant observes two different chains. The rule states that the longest chain among all published blocks should be treated as the ledger. Thus, participants should build a new block and append it to the longest chain that they currently know of. It provides a straightforward guarantee of honest chain growth.
In Ouroboros PoS setting, because the collections of epochs are assigned to participants at once, a group of malicious participants can manipulate the timing of “chain update” broadcast messages for honest participants. The adversaries may freely generate multiple blocks associated with the slot and strategically broadcast the generated blocks to honest participants. The blocks could even be committed to distinct prior blockchains. In typical PoW settings, in contrast, adversaries are constrained to make decisions in an online fashion and cannot freely generate multiple blocks. The update of Ouroboros Genesis, improved upon Ouroboros Praos, adapts one of the latest cryptographically secure PoS protocols with a novel chain selection rule. The rule enables new or offline parties to safely (re-)join and bootstrap their blockchain only from a trusted copy of the genesis block without the need for trusted checkpoints or assumptions about past availability.
The incentive structure of the protocol, i.e. reward mechanism, is also important to mitigate the certain types of attacks such as block withholding and selfish mining. Ouroboros employs a novel reward mechanism for incentivizing the participants to the system which is proved to be an (approximate) Nash equilibrium.
During each epoch, rewards are distributed amongst all stakeholders who have delegated to a stake pool, either to their own stake pool, or another pool. Rewards come from transaction fee and reserve, that is the difference between the total supply of ADA (all ADA currently in circulation plus ADA in the treasury) and the maximal supply of ADA that has ever been recorded. Basically the more stake delegated to the pool, the more rewards the stakeholder receives with the cap of the relative pool saturation size. The rewards are also adjusted for pledge influence rate and pool performance, and are distributed amongst the pool operator and the people who delegated part, or all of their stake, to the pool.
The core idea of the reward mechanism is to provide positive rewards for actions on the protocol that are not deterred by the coalition of parties to the protocol. By doing so, it can be shown that, under the plausible assumption that certain protocol execution costs are small, it is equilibrium for rational players to follow the protocol faithfully.
👉 More about Cardano chain including ledger model, development language, and factors related to scalability is explained in Ch.3.1. Ledger Model, Language And More.
🔗 https://docs.cardano.org/core-concepts/ouroboros-overview#gatsby-focus-wrapper