<aside> 💡 Cardano’s Extended Unspent Transaction Output (EUTXO) offers greater security allowing for smart contract execution cost to be predictable and provides benefits of scalability by enforcing more parallelism. Through Haskell, Cardano’s smart contract languages, Plutus and Marlowe, can offer a high degree of formal assurance. Cardano blockchain network’s two layer structure can avoid congestion and high transaction fees. Also, delegation mechanism allows every ADA owner to participate in the consensus and reap the rewards. As competition among chains has become very intense in recent years, interoperability is getting more important to attract more active developers to the chain. So far Ethereum has far and away the most builders, with nearly 4,000 monthly active developers, followed by Polkadot, Cosmos, and Bitcoin. Cardano increased the number of developers by 90% in 2021 and stood at over 350 monthly developers. Once full EVM compatibility is implemented in the chain, chain architecture and stability in terms of transaction fees and speed will become more important in attracting more developers and users. ****
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Cardano is, like Bitcoin, an Unspent Transaction Output (UTXO)-based blockchain, which is different from account-based blockchains like Ethereum in the way the bookkeeping, i.e. recording the state and transitioning from one state to another, is handled. In an UTXO based ledger, coins are stored as a list of UTXOs, and there are no accounts or wallets at the protocol layer. Each UTXO has a quantity and a criteria for spending it. In each transaction, existing UTXOs are consumed and new UTXOs are produced in the network. Each UTXO can only be consumed once, and as a whole. In an account based ledger, coins are represented as a balance within an account instead of having each coin be uniquely referenced. Accounts can either be controlled by a private key or a smart contract.
Because of the difference in the bookkeeping, while UTXO transactions specify the resulting state exactly, i.e. we know what the result will be when we apply the transaction, transactions in an account based system rely on existing state. UTXO based blockchain, on the other hand, enables parallel transactions and encourages scalability innovation because it is possible to process multiple UTXOs simultaneously.
Cardano implements an innovative Extended Unspent Transaction Output (EUTXO) model, which is introduced by the Alonzo upgrade to support multi-assets and smart contracts. EUTXO inherits the per-branches design of the UTXO model, where one branch is a sequence of transactions that requires a sequence of validations. To split the logic across different branches and enforce more parallelism, EUTXO provides benefits in terms of scaling and is essential to build DApps and other solutions using multiple UTXOs. EUTXO offers greater security allowing smart contract execution cost predictability and, as a result, offers a different approach to parallelization.
👉 More about transaction fee of the blockchain and comparison across chain are explained in Ch.3.2. Fee and Speed of Transaction.
Smart contracts on the Cardano network are written using Plutus scripts, unlike smart contracts on Ethereum which use Solidity. While Cardano primarily uses Haskell, it also has Plutus that is optimized for smart contracts; its code can be used for powering both on-chain and off-chain functions. Marlowe is a supplementary programming language for users that aren’t programmers. It is designed to allow subject matter experts to create and test smart contracts without the need to learn complicated coding languages.
Haskell has its roots in both academia and the study of logic, and also in earlier iterations of functional programming languages, which is well-suited for high-assurance code and programs that require a high degree of formal verification. Plutus and Marlowe are offered as a set of libraries for Haskell, leveraging existing Haskell documentation, toolkits, and a highly-professional community to provide a base from which to build secure and enterprise-grade smart contracts. Therefore, through Haskell, Cardano’s Plutus and Marlowe smart contracts can offer a high level of assurance from the beginning.
Cardano's blockchain network is divided into two layers: the Cardano Settlement Layer (CSL) and the Cardano Computation Layer (CCL). The CSL is used for ADA transfers, while the CCL supports smart contract functionality for developers to create programs. Having separate rooms for different activities streamlines operations in both layers. The ability to upgrade one room while leaving the other one untouched, or to perform two upgrades with independent attributes at the same time, is a major advantage. In contrast, Ethereum processes both ETH transactions and smart contracts in the same layer, which often results in congestion and high transaction fees.
Delegation is especially useful because it allows the Cardano blockchain to scale even in settings where the set of stakeholders is highly fragmented. Delegation mechanisms can allow stakeholders to delegate their "voting rights," i.e. the right to participate in the committee that implements the leader selection protocol at each epoch. As in liquid democracy, stakeholders have the ability to revoke their delegated appointments when they wish, independently of each other. Since not everyone has the time, knowledge, or resources to run a stake pool, ADA owners could delegate their stakes to a preferred pool and let operators maintain their own stakes on their behalf. This allows everyone to participate in the consensus and reap the rewards without having to keep a node online continuously.
👉 More about Cardano’s consensus mechanism and reward mechanism are explained in Ch.2.1. Consensus Mechanism: Ouroboros.
🔗 https://iohk.io/en/blog/posts/2021/09/10/concurrency-and-all-that-cardano-smart-contracts-and-the-eutxo-model/
🔗 https://docs.cardano.org/plutus/eutxo-explainer
🔗 https://jcliff.medium.com/intro-to-blockchain-utxo-vs-account-based-89b9a01cd4f5
🔗 https://www.coindesk.com/learn/cardano-vs-ethereum-can-ada-solve-ethers-problems/