What do you think are the biggest risks & challenges for Cardano to succeed?
It would be interesting to share our collective thoughts about this and see if we may come up as a Community with any good mitigates, that maybe the leadership have not yet considered and find it useful to manage or even better we may support to manage.
IMO the following are some of the few risk items (maybe a bit redundant, and some are extremely low risk):
01 - Charles and / or a critical mass of key personal depart the venture for any reason
02 - new disruptive technology, consensus approach arises that fundamentally changes the landscape, which it is not possible to adapt to anymore
03 - any critical technology being developped in Cardano Project finds itself in a dead end or in a limitation not possible to overcome
04 - mass adoption not happening (developers, users, startups, use cases, corporations, etc.) for any particular reason (such as no media coverage, etc.)
05 - run out of budget due to unexpected costs, significantly delayed timeline, etc.
06 - regulations & compliance issues (Central Banks, IMF, SEC, Banks fighting crypto)
07 - resistance develops to Plutus / Marlowe / Functional Programming Languages
08 - stake pools being bought by competition to attack the network, not enough or good quality stake pool operators
09 - economic reasons, crypto market goes below economic threshold where PoS & Treasury doesn´t have enough monetary value & incentives
10 - fierce competition segmenting the market, Facebook Coin, Ethereum, Algorand, EOS, etc.
11 - sustainability of Cardano, Treasury, Liquid Democracy is not working out well for any reason (for instance Community is not mature & supportive enough)
12 - whales sink the boat for any reason
What do you think? Once we have identified the key risks it would be interesting to have severity / priority associated and brainstorm which are the best mitigates to apply or identify ones, which are being applied already today.
ok. let me take a stab at these with my proposed solutions/observations/thoughts below…
This is unlikely, given:
(i) their contract–they could be held liable (I assume) for damages
(ii) the amount of ADA IOHK holds. If they leave they will be throwing their money out of the window. This would not be a smart decision and we all know IOHK folks are very smart.
(iii) the reputation at stake. So if they leave Cardano half complete, let’s say to start another project. Do you think they will gain any traction given their track record with Cardano?
I think the key people are quite motivated to stay. IOHK has a great set up that gives researchers what they want (an opportunity to publish) while benefiting from that R&D directly. They put a lot of resources/money into this. Individual developers might leave but there are a lot of others waiting in line to join, I am sure.
This is a good one. Cardano is somewhat protected with its CL from obsolescence. CL allows it to configure any type of blockchain on a secure ledger. The challenge is when something proprietary like hashgraph comes online that has better performance and security, but from what I have seen they are not better in performance department (their network slows down significantly with only 128 nodes within the US) and I am not sure they are any better from a security point of view. At least I haven’t seen detailed cryptographic papers with proofs.
That said, this is a risk we all take in this space. We are protected by the technology (i.e. decentralized blockchain) that has proven itself for 10 years, offering real value and has real demand.
Cardano is breaking new ground on PoS as we speak, allowing it to provide a provably secure network/platform at the fraction of the economic cost/energy consumption of PoW. We also have sharding and RINA in the pipeline. While there are physical limitations on the tech, I think we are still early in the development stage of this technology. As long as we have resources to spend on R&D, we should reap good benefits, especially in the beginning. When we get to a point when the technology reaches its potential limits (50+ years from now?) I hope the community would have developed an alternative technology that we could all switch to at that point. Long-term, strategic planning is key here.
This is perhaps the most critical risk facing the whole space. How do you get people, governments and institutions trust your platform. One way to do it through grass-roots movement (meetups, clubs, developer support). Another way is to work on solutions that deliver value to people, governments, institutions etc. and have them adopt your technology. Ideally we can combine both to achieve our goals. Strategic thinking and resource allocation are of utmost importance and we have to work hard to make sure that resources are put to good use, financing avenues that are likely to land the platform highest/largest adoption levels.
The good thing is that no platform has reached that critical mass and Cardano has an excellent shot this year with Shelley and Goguen going live.
The two most critical parts of the platform (decentralization and smart contracts) are nearly completed. We have assurances from CF, Emurgo and IOHK that there are enough funds to get the job done. This is enough for me. If things get delayed beyond our timeline we still have the option is to finance further development through treasury.
There is an increased realization, from what I can see, that
(i) regulators cannot continue applying old rules to a new asset class
(ii) development banks can actually benefit from open decentralized platforms, at least they are examining blockchain’s potential closely.
(iii) blockchain and cryptocurrencies are here to stay. They are going to play an important economic role in the future.
All this can of course change, but this is where the wind is blowing at the moment.
Plutus/Marlowe and FP are not the only languages that can be used in Cardano. Any K-specified programming language can be used… so if in the future everything is written in python, then that’s what we will have… but at least we will know that whatever that will be written in these languages will be correct by construction.
Even at current prices the bad actor would have to spend a heck of a lot of money to pull that off. Given the liquidity of the stake and how easy it would be to create new stake pools, buying stake pools is a really dumb idea. As soon as a stake pool starts under-performing the stakeholders would move their stake to a new pool. I don’t expect this to be a huge issue.
Bitcoin survived without clear economic incentives for 10 years. All you had as a participant was mining and hodling. As long as we have a Shelley and Goguen, I think we will be pretty safe as people will use the platform to build things on top.
FacebookCoin – huge trust issue. I wouldn’t trust it. In fact I would instantly convert it to crypto if I have an airdrop tomorrow. Ethereum, Algorand and EOS are true competitors but I think Cardano has something that all of them don’t --decentralized, open and provably-secure platform. It’s hard to beat at this point. Ethereum may get there at some point but they have so much PoW baggage holding them back. Algorand is proprietary as far as I know, wouldn’t trust it. EOS is not decentralized. If people want EOS they can get it on Cardano’s CL via Ouroboros BFT. I bet it would be much better/secure.
Governance is a huge issue that I haven’t yet got my head around in this space. How do you decide expertise on an open, internet platform? Even if you establish competence of people proposing solutions, how do we make sure they execute well? Can we all agree on the strategic direction of the decentralized platform? How can we decide on metrics of potential sucess? These are open questions that I would like those designing the treasury system to consider.
02, 03 and 10 - One of the best features of Cardano is the fact that they do not ignore the competitors, but always analyze other technologies. I don’t see it in any other project. When you see a new cryptocurrency emerging with an innovative technology, you can be sure that Cardano has already seen and studied first. Besides, Cardano is being built to be modular, this is another advantage that mitigates this risk.
04 - Many say that “the best technology does not always win”, but they forget that the corollary to this sentence is that most of the time the best technology wins. Logically thinking, a company that needs a blockchain application will research the alternatives. When they do the study, they will realize that Cardano is safer, cheaper, faster, has more resources … but has fewer users than Ethereum. Will this make the company choose Ethereum? I don’t think so. This technology is very new, sometimes people talk about market dominance as if Ethereum existed 20 years ago. It’s not that hard to overcome Ethereum in my opinion. And after overtaking Ethereum, the sky is the limit.
06 - Unlike the other cryptocurrencies, Cardano is preparing for this. I like this approach. Cardano is worried about the connection with the real financial world, offering fairer alternatives, not living a utopia.
I would also attach a timeframe for each of the risks. Identifying the risk is the qualitative effort, when the risk event could occur is the quantitative part and that’s what helps more in prioritization while considering the relevance of a particular risk. Longer the horizon the less accuracy there is in the assessment of the risk.
Having said that, I noticed that you missed the two most important risks
Unrealistic expectations for the price of ADA, coming from the “when moon” and “when lambo” crowd. Focusing on price is an obsession among crypto traders. Investors on the other hand focus more on the economic value that is being generated for all participants of the network. Economic value does not moon, it never moons. However, it can gradually grow and surpass all expectations.
Lack of education among early adopters. It’s shockingly hilarious to see people in this forum suggest Multi-Factor Authentication as a means of securing Crypto Wallets Lack of understanding of the concept of decentralization and the value of open source among Cardano “well-wishers” is debilitating for the project.
This is great stuff! I like the way you have itemized and detailed these specific risks and provided informed comments. Obviously you have an in depth knowledge of Cardano and the crypto space in general. Very nice to see this!
A good standard way to analyze risk is to provide ratings on Probability and Impact. For example, a risk may have a 4/10 chance of occurring (Probability) and could have an Impact of 6/10 if it actually occurred.
If you then multiply these together you come up with a Risk Exposure rating. In this example, the Risk Example would be 24/100.
You could then rank the risks on the basis of Exposure.
For each risk you could also have a Risk Response plan. Risks can be Avoided, Transferred, Mitigated or Accepted.
Once the Response Plan is applied to the risk you are left with a Residual Risk, which is simply the current risk level. You could also rank the risks by Residual Risk Exposure.