What will Ergo bring to Cardano?

-why will Ergo be vital for Cardano’s success.

1) Ergo will bring all the advantages of Proof of Work to users of the Cardano ecosystem.

Let’s look at the advantages that a PoW blockchain fully compatible with Cardano can bring to all developers in the Cardano ecosystem:

Non Interactive Proofs of Proof of Work (NIPoPoWs), which, although not largely used today, provide several unique cryptographic features which will be discussed later. Proofs of Proof of Work, as their name suggest, are not available on Proof of Stake.

Ease of bootstrapping as you don’t need a check point, bootstrapping from genesis is significantly faster. This also enables some unique capabilities that will be discussed later.

Aggregation of computation capabilities (specially with ASIC resistance), which provides access to its users to a giant supercomputer, which you are not doing with PoS, the protocols are not advanced enough to be able to take advantage of that supercomputer

A different security approach: although PoS is probably now a very secure protocol per se, and more than ever, some smart contracts could require the game theoretic security features of PoW for certain part of their execution (for example to avoid stake gathering via smart contracts), while some other parts would run more naturally on a PoS protocol (for example for voting). Very untested is for the moment what is the security model when you have smart contracts that centralise where the stake is delegated to. The bigger a dApp is, the bigger the stake it has available at its disposal if you are doing collateralized DeFi, and so that is something that requires a lot of research, but it is not completely figured out yet and that inherently is a weak point of Proof of Stake. Ergo brings the proven security of PoW, so developers can be assured that they will find sufficient security for all the most complex implementation of dApps on top of the common UTxO model rather than trying to translate very natural cryptographic concepts inherent to PoW into PoS, where the game theory implications of the protocol are completely different.

More on NIPoPoWs: what you need to know

In a Proof of Work blockchain, superblocks (blocks having a statistically rare easily recognisable hash) play an important role in the construction of compact blockchain proofs which allows the compression of PoW blockchains into so-called Non-Interactive Proofs of Proof of Work (NIPoPoWs). These certificates are essential for the construction of superlight clients, which are blockchain wallets that can synchronize exponentially faster than traditional SPV clients (“Simplified Payment Verification” clients, which are typically contrasted with “running a full node”).

Non-Interactive Proofs of Proof-of-Work (NIPoPoW) enable extremely fast verification of data on the blockchain without having to download all block headers.

This enables:

- Efficiency: Very efficient lightweight wallets (reduction by a factor of 2000 compared to the SPV wallets) with full node security

- Scalability: the sample of block headers needed to verify the blockchain remains low even when the size of the blockchain grows larger

- Interoperability: these short proofs enable efficient communication with sidechains as events happening on a side chain do not require a full monitoring of the sidechain by the miner.

- Offline transactions: NIPoPoW enables the transaction sender to prove that the transaction has been done on the blockchain while only transferring to the receiver a small amount of data.

- Storage: transaction fee once, and data stays there forever which grows the state space indefinitely

- Trustless side chains: you do something on one chain, send the proof on the other chain with the guarantee that the event occurred. This enables 100% proof-based interoperability without any centralized or federated entity in between.

- Privacy applications: some specific applications are only possible with PoW, as PoS relies on parties to reveal their stake. For example, private swaps with other Schnorr based cryptocurrencies to do private swaps with Bitcoin already this year (after its soft-fork)

NIPoPoWs are a new piece of tech discovered by Emurgo research team that unlocks the power of Proof of Work. They enable for example some exciting features like cross-chain compatibility. Ergo implemented NIPoPoWs from genesis.

NIPoPoWs are originally motivated by the need for superlight-clients that can be boot up very quickly, but they also allow for another exciting feature: interoperability.

Without NIPoPoWs, a full node must download all blocks and validate them one by one, and that can take a lot of storage space, computational power and time (usually in days). The vision is that given the consensus protocol of Ergo, these Proofs of Proofs can be used to make this process super-fast and low data intensive, while at the same time providing the data storage rent capabilities at protocol level, making it the only blockchain with long-term survivability in mind at the protocol level already from inception, which will make it particularly suitable to manage these applications.

The superblock sampling technique is not applicable to PoS. The protocols to compress stake chains are epoch-based, and it’s not possible to compress further than that because PoS protocols have stake assumptions on how stake changes hands over time and it’s necessary for a verifier to know who is holding the stake so that they can verify the signatures and say this is a block that was rightfully signed by the majority of the stake, which requires to know the stake evolution and if you limit the stake evolution to a certain bound per epoch, showing one sample per epoch should be enough, but you can’t compress further than that. That is why there is no superlight-PoS-clients at this time. There are some attempts to this using zero knowledge proof constructions with snarks (one attempt is called Coda), but there are issues with that, for instance, there is a required trusted setup that we wish to avoid in these settings, so PoW protocols have the advantage of bringing their simplicity of how the proof of work equation works and how mining works, and due to the fact that there is really no keys and no ability to grind these super blocks, these super blocks really spring out of the protocol quite naturally and you cannot find an equivalent in the case of Proof of Stake.

Additional interoperability:

Ergo is working on supporting the gravity protocol, which is an interoperability protocol that does not go to a proof-based way which is more complex and not easy to integrate with multiple blockchains but instead it has a federated approach using reputation at stake. This will open interoperability with Binance chain, Solana to the whole Cardano and Ergo ecosystem.

2) Ergo is the first blockchain to adopt smart contract language on the same UTxO model as Cardano, bringing compatibility with Proof of Work to a whole new level.

The account-based model adopted by Ethereum is facing scalability challenges, and it is a problem for Ethereum, as the growth of the ecosystem translates in high gas fees. Scaling with sharding for smart contracts still has not really been figured out because on smart contract lives on a single shard, so it is not really scaling dApps.

Ergo is the first blockchain to have the extended UTxO model which adds both data and a powerful smart contract language on top of the standard UTxO model used by Bitcoin for example. The account-based model adopted by Ethereum is not able to scale as much. Scaling with sharding for smart contracts still has not really been figured out because each smart contract will live on a single shard, so it will not help scaling dApps.

The UTxO model allows for more complex logic because it clearly differentiates each key component of a financial system:

• Data (representing events in the real world on which a business logic is applied)
• Smart Contract (representing business logic)
• Digital assets (representing ownership)

It is a key basic building block for developing advanced dApps.

This opens the door to have native assets that are first class citizens, which means you can pay transaction fees with them if the miners accept it.

ERGO’s innovation to the extended UTXOs are the READ-ONLY Data-Inputs: No UTXO spent, no new UTXO created.

This enables:

• Better scaling
• Decreased computation complexity/cost
• Reusability
• No spam attacks
• Off-chain simplicity in tx creation & finding the latest UTXO
• Parallelised reading by any tx in a block
• Outsourcing of computation protocols
• No extra output lowers storage costs
• Increased throughput of dApps
• Improves security (sequential computation)
• Self-updatability
• Outsourcing of UTOXs
• Outsourcing of governance protocols
• Permisionless dApp insurance
• Permisionless/trustless prediction markets
• Use of building blocks in complex protocols
• Multi-stage smart contract sub-protocols
• Inclusion of custom game theory incentives

The UTXO model enables also outsourced UTXO boxes:

Outsourced UTxO boxes will provide pre-processed data from:

• Data mining: data sets (collection, cleaning, classification, modelling)
• AI and Deep Learning
• Decision making: DAOs and expert panels
• Statistics and analytics tools
• Algorithms / Computational logic / Headless dApps
• Real world events
• Oracles and oracle pools and hierarchies thereof
• Outputs from other dApps with their own governance scheme
• Bootstraped UTOXs or data in coins from outside the given dApp or protocol

3) Long-term scalability of dApps with the ability of parallelization of dApps.

Entire wallets where you pay only in a stable coin or some other coin are only possible on eUTxO.

All these advantages of the eUTxO model, carefully designed into patterns allowing real positive effects of the blockchain at its protocol level itself will not be copied by all other blockchains. But thanks to interoperability, other projects or dApps, even if they live on other blockchains, will be able to borrow these unique benefits by bringing their tokens over to Ergo, do some first-class tokenomics, and then maybe go back. As each approach has its own pluses and minuses, interoperability is important.

4) More advanced cryptography with sigma protocols: highly flexible and composable cryptographic signatures.

A lot of higher-level things can be built on top of sigma protocols:

Practical dApps are already working or being built on top of Ergo: auction house, NFTs, crowdfunding app, a DEX, a mixer, algorithmic stable coins (first UTxO-based stable coin), on-chain zero-knowledge treasury (a mini DAO controlling some amount of funds and thanks to sigma protocols, the voters can vote while keeping their privacy even though it’s on chain).

5) The Ergo headless dApps framework.

The idea is to separate the front end of your dApp from the smart contract and the off-chain code. This enables different decentralized entities to build an economy on top of a smart contract, which will allow for easier monetization for back-end and front-end developers without having to be on a same team, through a marketplace of different resources complementing each other in a open economy of decentralized app builders. Decentralisation of app components is the next level of decentralisation that will make DeFi on Ergo and Cardano a rich ecosystem of developers with various skills building each their own block of the final application, and each being able to benefit from it.

Decentralised apps on top of Ergo have some basic design primitives:

- Portability: Rust language compilable in any device. Developer tooling supporting Scala, Rust Blossom (Javascript compilable to mobile and any platform): this enables web dApps and mobile dApps

- Composability

- Decentralisation of the front-end creation: Decentralisation and more competition for the benefit of the users

- The ability to monetize to pay-out front end developers by making it: the ability to monetize smart contract logic development separately from front-end marketing

- Updatable dApps: separation of core protocol logic from governance, funding and other important dApp functions

6) Oracle pools — layered pools of pools of oracles with deviation checking consensus opening a whole new world of applications.

Essential for all financial applications and well beyond only finance as all sort of data inputs will be needed to run applications, will be the oracle pools.

This will open the door to new apps like trustless insurance and many applications that are still to be discovered, but that are very promising and exciting.

7) Local Exchange Trading System on top of Ergo.

The basis of that local exchange will be the new stable coin called ageUSD, the first UTxO-based stable coin, fuelling the Liquidity Machine (some applications stack which is needed to bring liquidity on top of the Ergo blockchain and use the liquidity of other tokens issued on top of Ergo to run the dApps.) and Decentralised Exchanges and ErgoSwap (an automated market maker (AMM) that allows anyone to trade tokens trustlessly on Ergo with shared liquidity between different types of DeXes) and even more advanced new token scheme exchanges; and work with Gravity to provide Ergo token on other blockchains and all kind of interoperability solutions, as well as Gateways.

Basically, it’s a good replication of the Ripple idea, on top of Ergo blockchain, as a standard DeFi stack will be developed (lending, options, bonds, CFDs, prediction markets, etc.)

Emurgo provides a lot of research and developer tooling to the ecosystem as part of the partnership and looking at how to utilize the best of both Ergo and Cardano so as Cardano moves forward into Goguen, we start to see how to take the best of both worlds and make it interoperable.

Bringing these unique cryptographic features, Ergo will be a competive advantage for Cardano, as developpers will look for a full fledged solution to build their dApps.

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