The tail end of January 2022 was a mixed bag for Cardano.
Five months after Alonzo and Plutus smart contracts activation, one of the protocol's first DEX launched in mid-January 2022.
The initial excitement quickly turned sour when Cardano was bombarded with transactions affecting the DEX and, to some degree, the whole network. As with any typical blockchain congestion, it took hours, sometimes days, for a swapping transaction to be confirmed, subsequently affecting user experience.
The congestion could be traced to Cardano's unique architecture, whose determinism was partly blamed. However, it should be noted that Cardano is working below capacity. Nonetheless, a series of enhancements would see Cardano's capacity increase over time.
Inherently, Cardano is designed to automatically manage high peak loads. Its Ouroboros and the protocol's network stack operate even when heavily saturated. Still, whenever the network is on-demand, Cardano can use the admission control method for regulation and gradually restore normalcy. This is the "backpressure" the development team mentions from time to time as a strategy for network load management.
Typically, admission control bars traffic from entering the already congested network. Instead, the protocol automatically confirms what's already on the plate. By rejecting new transactions, the "backpressure" is reverted to the user meaning the network stands in self-preservation or "graceful degradation" to maintain user experience.
However, before admission control is activated, mitigation measures to avert congestion could include adjustments to increase the network's total bandwidth. The easiest way out is to increase the block size. At the same time, compressing scripts could further help block space. Layer-2 options like Hydra and other solutions like Mamba and Milkomeda also fit in as developers expand Cardano's network to contain the deluge of transactions and prevent a use-experience-damaging clog.
Another option, which Cardano plans to introduce, is the use of queues. Presently, in Ethereum, there is only one queue where on-chain transaction activation is dependent on fees paid. The more tips paid, the higher the chances of jumping the queue and being served first.
The proposal by IOHK is to add three queues, of which one will be a standard queue. There will be no fee wars in case of high network activity. Instead, the way out is Admission Control, where new transactions are barred while current transactions posted on-chain will be confirmed on a first-come, first-serve (FIFO) basis.
Based on the February 1, 2022 update, IOHK took the first (and obvious) option of increasing block size from 72 KB to 80 KB—an 11 percent increment. The larger the block, the more transactions can fit, translating to greater capacity while keeping block propagation times below 5 seconds for Ouroboros to remain secure.
At the same time, IOHK increased the Plutus Script Memory units per transaction from 12.5M to 14M. This means developers would develop more sophisticated Plutus scripts, or the current scripts would process more items, increasing their capabilities. These enhancements took full effect on Epoch 320. The overarching objective was to increase network capacity and improve user experience by scaling on-chain and providing more resources for Plutus scripts in line with their roadmap under the Basho Phase.
IOHK also expects the network to experience high peaks and possible congestion in the subsequent launch of highly anticipated dApps and large NFT drops. The advantage in Cardano, unlike in Ethereum and other account-style blockchains, is that no fees are charged for failed transactions.
Cardano transaction ordering is implicit. The only time a fee is charged is when the transaction is submitted successfully on the mainnet.
Cardano is officially in the Basho Phase of its roadmap. Unlike Byron, Shelley, and Goguen—which saw the platform progressively take shape, decentralize, and be functional, the Basho stage is all about scaling, increasing interoperability, and implementing performance-enhancing optimizations. It reflects Cardano’s objective of continuously developing and improving its base layer, introducing new features and optimization for better user experience as it inches closer to Voltaire. Already, according to CryptoRank and Santiment, Cardano was the most actively developed crypto project on GitHub in 2021 posting over 140k events. Charles Hoskinson of IOHK--the development wing of Cardano--revealed that there are over 125 crypto projects building on Cardano--a network that’s also looking to introduce side-chains in the Basho phase.
Thus far, the increment of block size and addition of more scripts to Plutus precedes plans of Cardano introducing sidechains and parallel accounting styles that will eventually see the network become resilient, flexible, and high-performant from a solid base that can scale sustainably, remain secure, and allow for the addition of new functionalities without impacting the network's reliability.
Genius Yield is banking on the future of Cardano to release a non-custodial wallet and an order-book based DEX with a smart liquidity management specifically designed to take advantage of the network’s unique architecture and scaling flexibility. At the same time, the protocol’s CTO is Dr. Lars Brunjes, an experienced software developer and Plutus specialist serving as the Director of Education at Input Output (IOHK).