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Decentralised block production on Cardano

IOHK, developer of Cardano, the blockchain based on peer-reviewed scientific research, achieved a key decentralisation milestone yesterday, with all ‘blocks’ of data on the Cardano blockchain now produced by the chain’s global network of 2,300 stakepools.

This is a significant achievement for the Cardano blockchain, as it represents a step in the journey to the blockchain being placed entirely in the hands of its community.

Speaking exclusively with City AM’s James Bowater, Aparna Jue, Product Director at IOHK, tells us why this is such an important milestone and what comes next… 

What is block production and why has it been placed with the community?

Block production – where new files containing data created on the network are added to the chain – plays a key role in the effective and natural operation of blockchain networks.

Rather than retain a level of control over this block production, IOHK made the decision to steadily increase the number of blocks produced by the community by two percentage points every five days for the last seven months.

This steady pace of decentralisation has allowed the team to monitor and optimise the platform throughout the process. From now on, Cardano’s network of around 2,200 community pools will be solely responsible for producing blocks of data on the blockchain, making the process completely decentralised and the network even more diverse, a key mission of Cardano since its inception.

What will full decentralisation mean for Cardano?

Cardano’s fully decentralised block production is in huge contrast to the Bitcoin blockchain, which is largely in the hands of around 10 mining pools, which control 85% of the network. Diversifying block production also has important security benefits, as a larger number of people producing blocks means there is less risk of a few bad actors taking control of the network.

Decentralisation is at the heart of of IOHK’s philosophy to democratise blockchain, opening it up to the world for use as a new global financial system which benefits everyone. Decentralisation counteracts the security vulnerabilities and governance and control dangers of centralised data systems, which dominate most areas of our lives. It also overcomes the centralisation issues in ‘Proof of Work’ based blockchain systems, like the Bitcoin blockchain.

When it comes to full decentralisation, IOHK believes that three distinct criteria must be met in order for the blockchain as a whole to be truly decentralised.

These elements are block production, governance, and network. Now decentralisation of block production has been achieved, the next steps will be decentralisation of the other two elements, which will be enabled by peer-to-peer networking and initiatives in the Voltaire era of the blockchain.

Governance is needed in order to decide on the future of the blockchain in a way that involves fair, inclusive voting by users. The governance element of decentralisation is already well underway, with Cardano’s real-world experiment in decentralised decision-making, Project Catalyst, already up and running.

Catalyst’s funding mechanism is the world’s largest decentralised innovation funding platform, and currently has an $80million fund which is available for community proposals to improve adoption of Cardano, all of which is voted on by the community themselves.

Decentralisation of the network – as in the physical infrastructure and protocols – is also in progress, and will continue throughout the year.

Why is decentralisation so important for Cardano?

Decentralisation is at the philosophical heart of the Cardano blockchain, not only from a technical perspective, but also geopolitically.

On a global scale, decentralisation is essential for creating a global financial operating system which can run autonomously from a central authority, lowering costs and fees in the process and providing a more sustainable and secure platform.

This is one of the key philosophies of blockchain, and this is no exception for IOHK. IOHK believes in pushing power to the edges, and believes blockchain can replace the current global financial system. A decentralised blockchain can remove the need for a middleman when it comes to finance, making the system more accessible and affordable for those who have previously been excluded due to either financial background or geography.

Decentralisation of the blockchain will also allow for the democratisation of access to financial services for all participants, regardless of location of background. is something IOHK is passionate about.

There are approximately 1.7 billion people in the world who are ‘unbanked’, without access to financial services. Decentralised blockchain can give the unbanked population access to these services with just a mobile phone, even without an internet connection, though simple apps and paper ‘wallets’ with QR codes, so achieving this is essential to improve financial inclusion.

From a technical perspective, Cardano’s commitment to decentralisation is linked with its proof of stake consensus mechanism, which was pioneered by IOHK in 2017. IOHK’s proof of Stake system allows the entire global blockchain network to be powered by the energy equivalent of just a single family home, making it a more attractive and sustainable option. 

Not only this, but proof of stake provides a greater level of decentralisation than proof of work. Because of the competition encouraged by proof-of-work protocols, it’s possible for a smaller number of miners to have control over block production.

Take Bitcoin as an example – just 10 mining operations currently control around 80% of block production on the blockchain. This low level of decentralization b introduces conflicts of interest for democratization and cryptocurrency governance; if a smaller number of people control the blockchain, control is not only centralized, but there is also a higher risk of security threats.

Proof of stake makes for a much more decentralised blockchain, as it lowers barriers to entry, meaning more people can participate, preventing the same issues arising that come from the concentration of miners in a proof of work blockchain.

Achieving decentralisation of block production is significant not just for Cardano but also the wider blockchain industry. This is an important step towards full decentralisation, and living up to the promises of blockchain technology by creating a global system which is truly independent of central authorities, pushing power to the edges.