Cardano misses another deadline and continues to run on three servers

  • by

Cardano is postponing the Shelley update again. As a result, the cryptocurrency continues to run on the servers of two companies and a foundation – which doesn’t matter, since no one uses it anyway. This doesn’t stop founder Charles Hoskinson from continuing to throw around the biggest and very biggest promises.

In the realm of cryptocurrencies, you occasionally come across projects that are always extremely revolutionary, but never quite finished. This is normal with startups. The difference, however, is that startups burn professional investors’ money this way, while crypto projects feast on private investors’ money. One of these projects is Cardano (ADA). Since this coin keeps making minor and major news, today we’ll take a look at its history and present.

Cardano was born out of an ICO that took place between 2015 and 2017, and it is still not fully built to this day, as it still hasn’t made the leap to decentralization. There are always deadlines for when it will be ready, but these are continually shifting. While most investors in Cardano have made massive losses, founder Charles Hoskinson became one of the richest and most prominent people in the crypto universe because of it. If you don`t have Cardano yet, open an account at Binance with a coupon code from this site.

Solving the Proof of Stake Problem

Proof of Stake ProblemCardano is based on the scientific work of Charles Hoskinson and others. The American, who is just over 30, co-founded Ethereum, but then fell out with Vitalik Buterin and the others over how to coordinate its future development. Somewhat later, he and his company IOHK backed Ethereum Classic, which split from Ethereum in the wake of the DAO hack, but soon focused on his own project: Cardano.

Cardano is a proof-of-stake cryptocurrency that uses the Ourobous protocol. This protocol was formulated in a paper in mid-2016. It is, according to Cardano’s website, “the first Proof of Stake protocol that has been mathematically proven to be secure.”

Proof of Stake is an alternative consensus method. Whereas with Bitcoin, miners burn electricity to secure the blockchain, with Proof-of-Stake, “stakers” simply deposit their coins. Instead of the hashrate, the number of deposited coins determines the chance of finding a block. This method is obviously less resource-hungry and presumably less harmful to the climate.

Even though there have long been cryptocurrencies that use proof-of-stake, such as Peercoin, Whitecoin, Blackcoin, and Gridcoin, the method has never been considered completely secure. There are several problems, such as the nothing-at-stake problem or the lack of true entropy. It would be too much to explain these problems in detail here. They are all about preventing false incentives and forks, under which blockchain security crumbles. Vitalik Buterin explained in a tweetstorm some time ago how Ethereum developers, in search of their perfect proof-of-stake system, are trying to solve these problems without, like the “classic” PoS coins like Peercoin, using centralized checkpoints that are manually deployed after an attack if necessary.

With Ourobous, the developers now claim to have written a mathematically secure proof-of-stake protocol. The paper went through several peer reviews and seems to live up to the high promises.

Pure losses for later investors

So far so good. But after that, something happened that is relatively typical for the crypto world. Charles Hoskinson took this ideal protocol and hired some developers to form “the most precisely constructed cryptocurrency” (according to the website).

This cryptocurrency, called Cardano, should not only use the perfect protocol, but also be the first one written in the Haskell programming language, a language with a strong academic origin. Moreover, Cardano separates the blockchain into two layers, one for settling values, the other for executing smart contracts, which promises to solve all scaling problems and also perfectly combine privacy as well as identitification. You could say Cardano is an “ivory blockchain”: a blockchain that is perfect on paper but often fails to win the market in practice.

Hoskinson funded Cardano through an ICO that took place between 2015 and 2017. In this, vouchers for ADA tokens on the Cardano blockchain were sold, arguably at a price of around $0.0024. In the process, Hoskinson’s company IOHK took in more than 100,000 Bitcoin, which admittedly was worth much less at the time than it is today. He transferred a good 8,000 Bitcoin to the for the newly established Cardano Foundation. Then, when Cardano went live in late 2017, the team generated another 20 percent of the ADA tokens distributed as vouchers among Hoskinson’s company, the Cardano Foundation and Emurgo. The current price can be found at this website.

In November 2017, the tokens were available for purchase for 2 cents, which was already a good profit for participants in the ICO. In a very short time, however, the prices exploded. From two to ten cents in early December, then from 10 to 40 cents by the end of December, to 66 cents on January 1, and from there to more than one euro on January 8. Boom. Those who had invested at the right time could increase their investoment fiftyfold within two months. After that, however, it went down. Back to 60 cents. To less than 30 cents. In September 2018, the price was already below 10 cents again, and since 2019 it has almost always been below 5 cents. Today, one Cardano token (ADA) is worth 2.7 cents, a loss of more than 97 percent in value from the peak. Or, to put it another way, anyone who has invested in Cardano since December 2017, at any point in time, has made losses. There are really few cryptocurrencies that have performed so poorly.

At the same time, Charles Hoskinson posts on Twitter and other social media about his many travels and pleasures. Sometimes he’s at a party in a bunker, then he’s smoking cigars with friends, he’s in Lisbon, New York, South Korea, on the ski slopes and at the beach, and so on. The lousy performance of ADA tokens, as well as Charles Hoskinson’s self-dramatization as a crypto-beta celebrity, seems so absurd to some observers that they wrote “a study on the correlation between Mr. Charles Hoskinson’s travels, meals, pleasures and the Cardano ADA price.” But let’s not reduce currency to price or to Charles Hoskinson the person. What has happened at Cardano since then?

The three-server ghost chain

ghost chainFirst, let’s look at how much Cardano is being used. A look at the block explorer shows a ghost chain. The vast majority of blocks have exactly zero transactions. After just over two years of Cardano, there is no economic activity to speak of.

According to Cardano’s website, it is a “decentralized public blockchain” – a description that is very dubious given the circumstances. This is evident at the latest in a blog published by Charles Hoskinson on December 28, 2017. In it, he explains – alongside a rambling celebration of Cardano’s great progress – where the cryptocurrency currently stands and where it’s headed: “We formed Byron (the September release of Cardano) as a minimal workable product to test the concepts on which Cardano is built.” The experiment, he said, has been a “tremendous success.” Most exciting, he said, “is that Cardano will begin to open up to the world in 2018. Delegation and staking will be rolled out during the first and second quarters.” And that’s the key point.

At the Byron stage, Cardano is not a true proof-of-stake cryptocurrency. One might even question whether the term cryptocurrency is appropriate. That’s because “delegation is,” Hoskinson explains in a later post, “tied to core nodes under the control of IOHK, Emurgo and the Cardano Foundation, and block rewards are turned off.” In other words: Only the three parties behind Cardano are able to form blocks. Cardano is a centralized blockchain with privately negotiated consensus that is not used by anyone. That’s the as-is state.

When is Shelley finally coming?

But this state of affairs is only temporary. It was clear from the start that it would soon change. After all, Hoskinson had already announced that Cardano would become decentralized in the first two quarters of 2018. The update that is supposed to initiate this is called Shelley.

The first quarter of 2018 passed. Hoskinson announced a research program to make Cardano quantum-safe, and spoke to the London School of Economics about how Cardano would improve the world in Africa through a decentralized, secure blockchain. There was endless potential, a Cardano “African Operation Manager” asserted on the blog. Finally, on April 9, Hoskinson provided information about the Shelley update. The developers were fantastic, he said, and they were on a very good path. However, he did not give a concrete date. In the fall, Hoskinson finally announced that Shelley would be released in the first quarter of 2019.

But the first quarter of 2019 also passed. Instead of the live version, Cardano unveiled the “formal specification” of Shelley in April 2019. It then took until September for Shelley to finally be activated – on a testnet. Hoskinson said victoriously that Cardano’s scientific methodology would allow it to outperform most, if not all, cryptocurrencies on the market. Starting in the first quarter of 2020, Shelley would hit the live network.

Now, the first quarter of 2020 is also coming to an end – and Shelley is still not activated, after two years of delay now. Cardano continues to run on the three servers of IOHK, Emurgo and the Foundation. At least there is an “incentivized testnet” where participants can stak real ADA – admittedly without participating in the consensus process for Cardano. Hoskinson said there is a high probability that Shelley will be ready in the next two months, but he doesn’t want to give any more deadlines this time. In exchange, he promises that Cardano will become “the most decentralized cryptocurrency” ever, and that the 2020s will be the era of Cardano becoming the dominant force in cryptocurrencies.

In a video, he also fretted about criticism from investors and the community. Cardano, he said, is a scientific project, and that just takes time. In addition to all of Shelley’s other challenges, he said, the developers also had to optimize the Haskell programming language to rework libraries and solve compatibility issues.

Not so atypical

Cardano and IOTAThere are some striking structural similarities between Cardano and IOTA: both projects promise everything, but so far deliver very little. Both projects remain hugely centralized and have been screwing up all the deadlines they set for decentralization for years.

Add to that some of the details, such as the fact that both are also working on side issues like security against quantum computing or have chosen exotic infrastructure for unclear reasons – Haskell language for Cardano, ternary design for IOTA – and are now, surprisingly, struggling with the consequences of that decision. After all, both projects have been a source of disappointment and loss for investors for more than two years.

In a way, IOTA and Cardano mark the tip of an unsightly trend: announce a revolutionary design, release a “minimally workable prototype,” raise ICO funds, promise to catch up on everything else, miss deadline after deadline, but distract from it with new projects, side sites, and partnerships. In the case of IOTA and Cardano, this is particularly glaring, as the two projects have been celebrating themselves beyond all measure as the reinvention of cryptocurrencies from the start, but conveniently have so far refrained from implementing the absolute core characteristic of cryptocurrencies – decentralization.

  • But the phenomenon, in milder form, is not so rare. In ICOs, the promise of no product is already virtually a requirement, and even Ethereum is counting on its developers to succeed in reinventing the blockchain with Ethereum 2.0.
  • But at least Ethereum has a workable and decentralized network, even if it does not accomplish what Ethereum actually promises to do.
  • For investors, as well as for companies that want to use blockchains, only one thing can follow from this: Look very carefully at what you are getting into.