With the upcoming dawn of Shelley, Cardano - the first third-generation blockchain to emerge from a scientific philosophy - will become the world’s first provably secure & decentralized Proof-of-Stake (PoS) blockchain. As a Proof-of-Stake blockchain, there are some fundamental differences between Cardano and other blockchain ecosystems. A key point of difference is how Cardano chooses who participates in adding blocks to the Cardano blockchain, thereby strengthening the overall security of the network. In this post, we will simply explain how staking in Cardano fairly and unbiasedly chooses the next ADA holder to add a block to the Cardano blockchain once Cardano becomes fully decentralized.
Cardano: A Fundamentally More Decentralized Approach
In a previous post, we compared Cardano and Bitcoin to two different kinds of supermarkets. Within the Bitcoin supermarket, the checkouts are the mining pools. Baskets of goods (or baskets of cryptocurrency transactions, known as blocks) are processed by the cashiers (miners) and are added to the blockchain if the transactions are all correctly validated. We ultimately saw that in the Bitcoin supermarket, there are a very few checkouts (mining pools) that process the majority of the baskets of goods (cryptocurrency transactions that take place on the blockchain). This is because the size of the checkouts (mining pools) are proportional to the amount of energy these cashiers (miners) contribute towards keeping the Bitcoin blockchain running. Smaller, normal computers are very tiny checkouts, while bigger, industrial mining rigs are very large checkouts. Naturally, the giant checkouts have the biggest chance of getting to process a basket of goods and receive rewards.
However, within the Cardano ADA supermarket, the Cardano blockchain network with staking functionality can support many more checkouts (stake pools) that are each run by a cashier (stake pool operator) to process the baskets of goods (blocks) on the network. Effectively, staking is when an ADA holder participates by staking or delegating their ADA to the Cardano blockchain network. Cardano is designed to ensure each checkout reaches a maximum size to guarantee there cannot be many giant checkouts processing the majority of baskets.
Cardano & The Fairness of Randomness
Each time a basket of goods (a block of ADA transactions), needs to be added to the Cardano blockchain, one cashier and checkout (stake pool operator and stake pool respectively), needs to be selected. This selection is a lottery with ADA rewards attached. When regular Cardano holders contribute their ADA stake to a certain cashier, this cashier gets more lottery tickets. This means they have a greater chance to win the lottery. A smaller checkout with fewer lottery tickets would have lower chances of winning, while a bigger checkout with more tickets would have greater chances of winning.
