Smart contracts from Cardano are faced with great scalability problems

The central theses

• The Cardano's eutxo-based protocol design has proven to be a challenge for decentralized application developers.
• Minswap, the first decentralized stock exchange, which was launched on the Cardano-Testnet, was faced with immediate scaling problems last week.
• While several projects claim to have solved the problem of parallelism, none of their solutions have announced.

Cardano, the third largest cryptocurrency with a market capitalization of over $ 82.8 billion, is criticized because its ecosystem infrastructure does not allow the most fundamental decentralized applications to work without immediate scaling problems.

Cardano Dapp developer have to fight with parallelism problems

Cardano faces a large scalability hurdle.

Input Output, the development company behind Cardano, announced the introduction of Plutus Smart Contract functionality on Testet last Thursday. Since the start of the update, serious scaling problems have occurred at MINSWAP, the first decentralized stock exchange, which has started in the testnet, that reveal concerns about the ability of Cardano to carry out smart contracts.

users who tested Minswap surprised that the DAPP could only process one transaction per block. "Looks good," wrote a Reddit user. "But when I try to exchange things, I only get a 'transaction: Utxos are used in this block. Please wait 20-40 seconds and try again."

"After the start, some users made screenshots to blocked Utxos on Twitter (NYSE :) and the rest is history," Minswap founder and engineering manager Long Nguyen told Crypto Briefing. He added that Minswap had built up its protocol on Cardano because "it is the most decentralized proof-of-stake chain, with more than 3,000 knots that are operated by the community and 66 % of individual node operators".

Anyway, it seems that the structure of decentralized decentralized applications on the blockchain has become a greater challenge than many expected in the community. In contrast to,, and most other smart contract enabled blockchains that use an account-based model for calculating transactions, Cardano uses a new iteration of the UTXO model called Extended Utxo (EUTXO).

The EUTXO model presents Cardano-Dapp bubilers for challenges due to a so-called parallelism "problem". To put it simply, the parallelism refers to the ability of several different agents to interact with the same smart contract at the same time.

Conto -based models enable several users to interact with the same smart contracts by default. Eutxo-based Smart Contract Blockchains, however, present developers with difficulty reducing the parallelism without compromising in security or decentralization.

The solutions for the parallelism include creating DAPPS, tolerating the segmentations of the status, or aggregating several interactions in order to agree on the same status. For decentralized stock exchanges, this would mean either the liquidity is divided into several pools (states) or used sequencers of third -party providers to bundle several transactions and to be wrapped as a transaction in the same state.

the former harms capital efficiency considerably, while the latter could possibly prove to be a practical solution. Maladex is a decentralized stock exchange based on Cardano that claims to have solved parallelism. Jarek, CEO and Senior Developer of the Project, discussed the potential disadvantages of using sequencers to reduce parallelism towards Crypto Briefing:

"Except, depending on the type of implementation, degree of centralization, [there are] none. Off-chain is a natural part of the ecosystem and only prepares transactions for the blockchain, where it is then validated and executed."

"There is this unpleasant part that could increase centralization," he added. "But it does not differ from the centralization that we have with the user interface for every protocol."

Jarek also argues that the use of DAPP-Layer sequencers can weaken the front-running and MEV attacks because they summarize several transactions for simultaneous execution.

The Chief Investment Officer by Arcane Assets and the loud Cardano critic Eric Wall argues that MEV would still be possible if the blockchain uses a sequencer. He explained how Mev could appear on Cardano and told Crypto Briefing:

"First of all, the sequencer can extract the Sequenter MEV by incorporating a transaction (its own), but censored another. Secondly, the miner/validator on the Cardano base layer can look at the transaction stack of a sequencer and reject parts of it or the entire stack if he prefers to carry out some of these transactions if he collects the block.

other proposed solutions for the scaling of DAPPS on Cardano include the implementation of Layer-2 protocols and side cubes that deal with their own unique centralization and security challenges (while such solutions are still live on Cardano, there is at least one EVM-compatible side in the pipeline). .

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The big question is whether Cardano-given its eutxo-based design choice-can support scalable and capital-efficient decentralized stock exchanges that are completely built in the chain. While Maladex claims that parallelism is "completely and complete", Eric Wall argues that it is unlikely that Cardano Dapp's parallelism will solve parallelism without significant safety or centralization victims. He told Crypto Briefing that DAPP developers could find problem expenses, but they could "contain significant challenges in development, UX challenges or centralization".

The Cardano community celebrated Alonzo as an important new step for the defi skills of the blockchain. However, the testnet results indicate that it could take at least a few more years for it to keep its promise. As soon as the upgrade is delivered, there will be no explosion of defi protocols. Instead, Nguyen believes that it will look like Ethereum in 2018. "The good and best dapps will slowly appear in the coming years," he said.