Cardano is in line with nature
Cardano uses PoS consensus, which is more energy-efficient than PoW. Cardano is thus more in line with nature and the natural order of things than projects using PoW. Let's talk about why this is important.
What is natural
Nature tends to achieve the best results with the minimum energy expenditure. Those who manage their energy better in nature have a better chance of survival. Animals conserve energy and never waste it. They save their energy for when they absolutely need it. For example, when they’re foraging for food or defending themselves against predators.
The principle of achieving the best results with the minimum energy expenditure is universal. People behave this way for pragmatic reasons as well. We also look for the highest possible efficiency when developing new technologies. Imagine you have two very similar cars from different manufacturers. You can’t decide which one to buy, and you examine their specifications. One of the most important ones is energy consumption and efficiency. If you put the same amount of fuel in the tank of both cars, you will be interested in which car will go further. The differences can be significant. You naturally want to save money when buying fuel, so you choose the car that will save you money. Engines are constantly improving and cars are becoming more efficient. This means that for the same amount of energy, they consistently get a better range.
Efficiency should be rewarded. Inefficiency should be punished or lead to extinction. This is the way one can overcome the other when it achieves a higher effectivity. Evolution is about finding the best strategy for survival, and that is almost always about better management of energy.
If we boil it down to our car example, the better car maker will survive, and the worse will disappear. Extinction and survival are often decided by economic interests in the human world. Not exclusively, but in the world of technology it often does. People tend to save money, so they choose a car that will have lower running costs. But that is not the only reason. A car with higher efficiency can be assumed to be more environmentally friendly. People tend to protect their environment, and we even have legislation and various support programs for that.
Car engines have to meet certain standards to be sold there. It is in the interests of everyone on the planet that energy resources are conserved and spent efficiently because in doing so we are protecting the possibility of preserving the human species on our planet. The winning carmaker is thus determined by several factors, and behind most of them, we would find a desire to increase efficiency.
Does the principle of increasing efficiency also apply to blockchain?
Decentralized networks and blockchain are technologies and are therefore no exception in terms of their inherent nature. Humans are particularly good at improving technology. We are constantly evolving as a result. You may be surprised to know that we also need a lot of energy to develop. Science and research consume large amounts of energy and other resources. In return, we gain new knowledge that allows us to increase our efficiency. This cycle is unstoppable. If it stopped, society would naturally collapse. The collapse occurs when there are inefficiencies in the system. The inefficiency must be removed from the system for society to start again. The collapse of society thus has a recovery effect.
It is therefore perfectly fine and in line with nature to replace a worse and less efficient technology with a superior one. In effect, this allows us the much-awaited constant growth. Constant growth is hardly sustainable in the long term, but our society is growing and our quality of life is improving. This is only possible through scientific research and efficiency improvements. If we want to use public blockchain networks, time will sooner or later push us to increase efficiency.
What is efficiency? It is the state or quality of being able to accomplish something with the least waste of time and effort. Time and effort are resources that are spent to achieve a result. In the case of networks, the demands for higher efficiency always increase with the number of users. Users are also willing to expend some resources to achieve the best result. The basic principles are still the same. Essentially, users want to spend as little money as possible to send a transaction and at the same time want the transaction to be as fast as possible. Time and money are the user’s resources. The transaction sent is the result.
If people adopt decentralized technologies more, efficiency will become much more important than it is now. In the beginning, we need to show that the technology is viable and people don’t care so much about the fact that so much energy is being consumed. This is the case with the Proof-of-Work consensus. Cardano uses Proof-of-Stake consensus because it is more energy-efficient. Wondering how much more? Cardano blockchain is 1.6 million times more energy-efficient than Bitcoin. A lot of money and time has been spent on the development of PoS, which scientific research cannot do without. In return, we have a much more efficient consensus algorithm. This development is completely in line with nature. Moreover, it never stops. Today we have PoS, tomorrow we’ll think of something even better or about improving PoS. The evolution of technology is a process that has no end.
The question arises why this is so important in the case of blockchain. Again, we can see many reasons why it is very important. The first reason is scalability. Blockchain is inherently a global network and therefore it needs to be able to handle the transactions of all the people who want to use it. The use of the money must not be burdened by high fees. If you pay through cash, the fee is zero. If by credit card, it will be minimal, if not also zero. People naturally expect the same from blockchain if it is to become an alternative to money, a store of value, or a backbone of the financial world. Cardano is about 50x more scalable than the largest PoW network.
An on-chain transaction is also a kind of scarce resource that has to be paid for. Therefore, it makes sense to reduce and stabilize costs. As the efficiency of the system increases, new users will start to use the network. Conversely, if another network becomes less efficient, people will naturally leave it. This is a perfectly natural behavior stemming from a selfish interest to save one’s own resources, i.e. money spent on transaction fees. In other words, if transactions are economically available, they will be used. If not, people will look for alternatives and develop more efficient technologies. It may also turn out that the whole concept of decentralized networks is not interesting to people at the moment because of their low efficiency. However, we believe science and research can move us to a point where decentralization is economically affordable for everyone.
While the blockchain will need a second layer, that doesn’t mean we don’t care about increasing efficiency at the first layers. The first layer is the cornerstone of any decentralized network, and the more energy-efficient the first layer is, the better all the other layers built on top of it will be. Again, this is only natural. If you are building a house, the foundations are the most important thing. If the foundations are bad, sooner or later the building will fall, no matter how many floors it has. If there is an inefficient component in a complex system, it needs to be replaced because it affects the rest. If, for example, transactions at the first layer are expensive and slow, this must be reflected in the higher layers. Therefore, transactions at the higher layer can also be expensive to cover the cost of the existence of the first layer. If this were not the case, the first layer of the system would economically collapse.
A public network needs to consume resources to exist, so it must strive for the best possible efficiency. Even the property of preserving value digitally is a result dependent on constantly consuming resources and covering the costs for them. Here too, let us not seek an exception to the universally valid principles of nature. A more efficient network has a higher chance of surviving in the long run. Digital scarcity can be very costly but at the same time probably unsustainable, or cheap and sustainable. Cardano will have a huge advantage here over PoW networks due to PoS, which may not be evident today or tomorrow, but will be evident in a few years.
In the case of blockchain, there are multiple results we need to achieve. It’s not just scalability, but also security and decentralization. These are the basic properties we need to achieve effectively. Here we need to remember that users take security and decentralization for granted and it is the scalability that is perceived by them the most. While decentralization and security are abstract terms and these properties are hardly measurable it is a transaction that is processed in a given time for a given price.
As with cars, we must not forget about legislation and the tendency of people towards energy savings. If we put the Cardano network as a representative of PoS networks and any Pow network side by side, the logical choice of people unconcerned with other aspects and the speculative nature of cryptocurrencies should fall on Cardano. Purely for pragmatic reasons. People are pushing to conserve energy, and that includes large investors. PoW can be considered a waste of energy if we already have a working PoS consensus. We can talk at length about the details of PoW and PoS networks, but in a broader context, both options can deliver very similar functionality.
Blockchain networks, including Cardano, have a certain number of coins that can be considered a resource. This resource is exchanged for other resources, namely electricity and the time of the people looking after the networks. It is important to note that any limited resource must be treated sparingly. In the case of blockchain networks, resources in the form of coins will one day decline substantially and it is questionable whether the networks will be able to survive. Here, again, only increasing efficiency will help. If you know that you will run out of one resource and the existence of the network is fundamentally dependent on it, there is no other way than to innovate. As we have said, innovation is also very costly in terms of resources expended. You could say that the more you can increase efficiency, the better your chances of survival and success among your competitors. Competition is a natural phenomenon. In nature, the more efficient species survive. In the world of technology, there may not be such harsh laws, but there will always be a tendency towards greater efficiency.
Environmentalists and representatives of countries facing environmental disasters will always point to energy waste and more planet-friendly alternatives. Energy waste will become increasingly difficult to justify in the coming years.
Innovations and adaptability are needed to survive
If we accept that increasing efficiency and adapting to the environment is a necessary characteristic for survival then science and research are the way to achieve this goal. As we have already explained, science and research are very costly. Cardano is on a path of continuous improvement and adaptation to the needs of the outside world and users. This is very important from our point of view, as stagnation is often a sign of doom.
Governance and sufficient funding is, therefore, a very important part of public blockchain networks as it allows them to evolve. Throughout history, we can find a large number of examples where new technologies have replaced old ones. Nobody drives a steam-powered car today, and it is possible that petrol engines will eventually replace electric engines. Who knows if in another hundred years we will develop fusion engines. The cost of developing and producing electric cars was astronomical. Electric cars can be bought today and there is a demand for them among people. It’s natural human behavior.
Blockchain technology will evolve if the resources are there. It is therefore clear that their efficiency and, consequently, their key features will increase. We can improve scalability, decentralization, and security. There is no reason to think we cannot. It is similar to saying that we cannot make cars that run on electricity or, in the future, on other engines. Innovation is all about resources, mainly time and money.
Decentralization and security are properties that are not binary. You can imagine that these properties are on a scale from 0 to 100 and you could try to find their current value. The team and all the people taking care of the network are to increase the quality. Different networks will have different qualities in each property. There is no way to say or somehow definitively determine what properties and their level of quality are the best for survival. The only way is to adapt to your environment and constantly strive to improve. That is to say, to achieve the best qualities with the least amount of resources.
People often argue that we need Proof-of-Work to achieve maximum security. As we said, security is a spectrum and there are many attack vectors. Moreover, as the environment changes and technology evolves, the chance of executing an attack will change. Security will never be the same throughout the life of the network. This means that the team must constantly evaluate security threats and ensure that the protocol remains secure. For example, if the PoW network runs out of security budget, another system will have to be devised to ensure security. Cardano has a much lower resource cost, making it many times more sustainable in the long term.
The threat model is different for PoW and PoS. It’s just different and you can’t objectively say which is better. Proof over time is often the best. However, this is where you need to be wary. Just because the network has run smoothly so far does not mean that it will continue to do so for the next ten years. The probability is of course high, but never 100%. Security doesn’t work that way. Security needs to be actively managed. The security budget is not just about rewarding PoS delegators, PoW miners, and pool operators. It’s also about budgeting for a team that needs skilled people and experts.
The same could be said of decentralization. Decentralization is like democracy and if we stop caring about it, we will lose it. Decentralization is also a scale and its quality changes over time. Here too it is difficult to judge objectively whether PoS or PoW is better. Again, greater efficiency may give us a clue. In the case of PoW, you as an ordinary user can participate in the decentralization of the network in a relatively complex way. You have to buy an expensive PoW miner and pay the electricity costs. This is only advantageous in some parts of the world. Chances are that in your country mining is not profitable. Higher efficiency means you get higher quality decentralization at a lower cost. This is the case in PoS, where you just need to get ADA coins and immediately take an active role in decentralizing the Cardano network. So, in essence, decentralization grows with the distribution of ADA coins. Just reduce risk, reduce costs and make the process as easy as possible for the user. The beauty of PoS is that as decentralization increases, security naturally increases as well.
Of course, both PoS and PoW have their disadvantages and security risks. The goal of the team is to address the issues and improve the quality of key features. The only key to success is innovation and securing the budget for it. It is natural to evolve. It is against nature to stagnate.
Technology versus ideology
Sometimes people succumb to false ideology and give it more important than technology and innovation. Ideology is of course an important feature of our society, but not strong enough to overcome the power of technological progress. Cryptocurrency communities are strongly ideological, but our future will be largely pragmatic.
There are certain principles that apply universally and will hold true in the long run. Ideologies are ephemeral and are often a fringe issue for a small group of people. The adoption of blockchain technology will be pragmatic in the sense that we will demand the best results for the resources expended. Decentralization must be inclusive, not exclusive, and we will never achieve this without increasing efficiency. That is simply a fact. We can choose more than one possible path and try more than one possible concept. The best concepts will win and survive in the end. Until they get obsolete.
Decentralized networks and network consensus, blockchain, cryptography, protocols, smart contracts, and other important components, are all primarily technologies. It’s possible to build an ideology around it, but it certainly won’t be the deciding factor in terms of network effect and adoption. In terms of network effect, the networks that will win are simply those that allow people to interact economically or otherwise in a decentralized way. The biggest advantage of decentralization is to replace inefficient intermediaries. Inefficient means that a given service is expensive, slow, of poor quality, or otherwise disadvantageous to users. If it is within decentralization’s power to replace the middleman and increase efficiency, it is natural to take this route. Today we are talking mainly about transactional networks, but smart contracts have shown us other possibilities.
Let us not use ideology to hinder innovation and technological progress. We are unnecessarily hindering natural development. In the long run, technology will triumph over ideology. Efficiency is beneficial for each individual, so it will also be beneficial for society as a whole.
The IOG team that is building Cardano is following the path of scientific research and innovation. This is the best way to succeed and is completely in line with nature and the pragmatic interests of our society. Energy efficiency is an important part of decentralized networks, and let’s not pretend ideologically that it is not necessary, possible, secure, or desirable.
Once the adoption and technological capabilities of smart contract platforms increase, the cost of operation will be absolutely crucial. If we sincerely want to improve the quality of life of those around us, let’s celebrate technological progress and not support false ideologies.
The aim of the article was not to compare PoW with PoS, but rather to point out that increasing efficiency and technological progress is a natural part of our world. It is often a winning strategy not only in nature but also in business. Cardano is being built on the basis of science and research and this will bear the desired fruit. We believe that Cardano will make its way and play a significant role in a decentralized world. That is not to say that it will be the only network that has a chance of success. We believe that more networks will participate in decentralization. The existence of multiple competing projects is also part of human nature. Let us not resist nature and succumb to false ideologies. Let us be pragmatic and look for the best possible solutions to our problems. This is a winning strategy for the human species.