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Cardano, the fifth-largest cryptocurrency by market cap and soon to be the second-largest Dapp center, is one of the unique blockchain technologies of 2021. In addition, Cardano has a native coin named Ada, performing very well in the crypto markets.
However, Cardano as a network adopted a sidechain system, where the network runs two blockchains. The original blockchain, the Cardano settlement layer(CSL), deals specifically with powering the Ada currency and other settlements done with Ada. It leverages POS to release new Ada into circulation. It’s designed to be very simple and secure.
The second layer, the Cardano computational layer, focuses primarily on smart contract technology. This is where all the actual developments occur. However, to ensure efficiency between the mainchain and sidechain, new technology was developed, NIPoPoW. This guide will look into NIPoPoWs, and how they help the Cardano CSL and CCL. Before that, it’s crucial to understand how sidechains work.
The Sidechain Technology
Sidechains are systems introduced in the crypto world, where two blockchains can interact and coexist superbly well. In fact, in a side chain situation, an investor can transfer their coins from the man chain to the side chain and maintain the value.
Take the example of Cardano and XRP. If both networks were sidechain enabled, it would be possible for XRP investors to transfer their Ripple from the XRP chain to the Cardano chain. How would this work?
The transaction does not necessarily move from one chain to the other. Instead, a token amount is burnt off the sending chain, and the second chain creates the same amount with similar attributes of the XRP. The XRP coins, now in the Cardano blockchain, are still called XRP but can benefit from Cardano features.
Cardano as a network leverages the sidechain capability, where the first chain, the Cardano settlement layer, is where all the ADA business happens. The second layer, the Cardano computational layer, will be introducing innovative contract capabilities. Now, users can quickly transfer Ada from the CSL to the CCL and back without losing value.
However, if there is a transfer from the mainchain, the sidechain gets proof of work done(burning). This is where the NIPoPoWs come in.
IOHK, Cardano developers, introduces non-interactive Proof of Work systems to help in the interlinking of sidechains. NIPoPoWs are systems used by a computing device to verify a particular event on-chain without downloading all necessary details. Generally, NIPoPoWs help proves that a specific block happened without necessarily downloading all the data from the genesis block to the block in question.
As mentioned earlier, the leading blockchain and the sidechain need to interact to ensure efficiency when moving coins. However, that would mean that the miners in CCL need to prove that the transaction happened in the CSL.
NIPoPoWs collect data from the genesis block of either chain during a transaction. Generally, NIPoPoWs compress the data, which would be so large, into a minimal piece of data, which is very easy to send. Once miners from the receiving chain get the NIPoPoWs, they will prove a genuine creation of money.
When it comes to the sending of block data, every block is huge. However, the concept used by developers is that for a block to complete, its hash has to begin with ten zeros. In some exceptional cases, however, the block could start at 15 hashes, creating superblocks. Superblocks are rare, but showing the proof of a superblock is proof enough of the work done since the genesis block.
In the case of a smart contract, things take a similar procedure. The CCL will be focusing on hosting smart contracts for the benefit of the Defi world. The NIPoPoWs can also be a good tool that will benefit the ADA and the smart contract in the CCL.
Let’s say an individual wants to transfer their ADA from the CSL to the CCL, to leverage the features of a particular smart contract. This would take only a single step, and the smart contract will receive the Ada they need for such a benefit.
NIPoPoWs Are a Short Procedure
When creating the NIPoPoWs, there was a factor of reducing complications for the transferring party. Initially, the concept used was PoPoW, but it was interactive since it involved the sender from the CSL to the CCL completing multiple steps to prove a transaction from the main chain.
Foremost, they would have to complete the burn transaction and then create another transaction that would now collect the data from the genesis block. Therefore, it means that every cross-chain transaction from Cardano’s main chain to the side chain and vice versa would involve double transactions.
However, once they were made Non-interactive, it now would be possible for the same transaction party to complete the same transaction in a single step. Of course, the above means that users do not complete the transactions, but just one will be enough to burn and send the required proof.
Uses of NIPoPoWs
The creation and adaptation of NIPoPoWs would be perfect for mobile wallets. This is because they would enable the creation of only a small amount of Data that the wallet could handle in every transaction; the best thing about such is the data does not grow so fast.
Because of NIPoPoWs technology, the creation of sidechains has become very simple and fruitful in Cardano. These sidechains possess the following features including;
- Interoperability- Using NIPoPoWs, it’s easy to show proof of an event occurring without actually carrying the entire event.
- Scalability- It could be possible to create as many sidechains as possible to interact with the CSL but remove the load from the original layer.
- Upgradability- NIPoPoWs and sidechains can help when upgrading to another blockchain.
The concept of sidechains in Cardano has taken very long to take effect. Generally, the network has two chains, the CSL and CCL, which have different benefits. IOHK, the developers behind Cardano dual chain system, came up with a new concept, the NIPoPoWs, that helps create transaction and block efficiency between the mainchain and sidechain.
NIPoPoWs help prove that a transaction happened without giving all data about a transaction, thus speeding things up. If this technology is adopted by many blockchain and banking institutions globally, it will create a very interactive global financial system.