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Ergo And Cardano Combine To Create The Ultimate Blockchain Platform

When most people think of cryptocurrency, they think about how it can be used for financial purposes. Ergo is building upon this idea to build an efficient and secure financial platform. It was founded by Alexander Chepurnoy, who worked as an IOHK Research fellow and founder of (now Chainlink).

Ergo on its own has a lot to offer, but its close ties with Cardano show even more promise. In this particular post, I won’t be diving too deep into the connection. However, another post with more information on that is in the works!

Autolykos & Mining

Proof-of-Stake has kind of taken over cryptocurrency projects lately. Cardano, Polkadot, Algorand are all heavy hitters in that space. Even Ethereum is going to be joining the ranks in the future. But Ergo has taken a step away from that. It is a proof-of-work blockchain that uses a new algorithm, Autolykos.

Autolykos was created by the Ergo and designed to be ASIC resistant. This allows for most consumer-grade hardware to be able to participate in the network and earn a little ERG. This was mostly due to having higher memory demands per miner, which prevents most viable ASIC usage.

However, upon initial release, the algorithm didn’t support pool mining. The argument behind the decision was to try to preserve decentralization. After all, when miners pool together it loses some decentralization as the pool’s rate grows. The algorithm required miners to access wallet private keys to mine, which created security risks if used in a pool.

As of block 417,792, Ergo received a hard fork that updated Autolykos to 2.0. From here on out, mining pools we supported by the network. This furthers consumer ability to participate without having to buy a rig specifically for mining.

Improving Bitcoin’s UTXO model

UTXO is not something you hear about outside of cryptocurrency and was originally found in Bitcoin. It signifies the Unspent Transaction Amount (UTXO) for each transaction. When you have a $20 bill and use it to purchase a product for $10, you forfeit the entire $20 and receive a new $10 as your change. The new bill can be viewed as your UTXO.

When a Bitcoin transaction is done, it uses the entire amount in the wallet and returns the difference back to your wallet. This is called a change UTXO. That and the amount that goes to the new wallet are both considers UTXOs until used again.

Ethereum rejected this model entirely and went for an account-balance model. This model fundamentally works like a credit card. Sent Ethereum is ‘debited’ from the account and received in ‘credited’.

For more information on Bitcoin’s UTXO model, check out this article.

Cardano created an Extended UTXO (eUTxO) model that is something of a hybrid between both Bitcoin and Ethereum’s models. eUTxO exists on the settlement layer and an account based model exists on the computation layer. This solution allows for additional functionality that is necessary for dApps. It brings the ability to maintain contract state and enforce the same contract along the entire sequence of transactions.

One benefit of this is that fees needed to verify a transaction can be shown accurately before going through with it, which is not possible on current models.

So what Ergo has done here is it became the first to really adopt this same eUTxO model. And this is important because it brings total interoperability with Cardano here. This means that the PoW network is fully compatible with Cardano and can bring in a host of security features that will benefit some larger dApps in the ecosystem.

Ergo’s website has a great writeup on this that has more information.

Ergo Ecosystem

There are quite a few different things to look at when it comes to the ecosystem. Ergo has everything from stablecoins to Asset Tokenization and is poised to grow even further. But what exactly does it have going for it right now?

SigUSD is the native stablecoin of Ergo. It is based on the AgeUSD protocol. It differs from some more familiar stablecoins, like USDT, in that it isn’t collateralized with fiat currency. This makes it closer to DAI than USDT. But it has to stay pegged to $1 somehow. It cleverly uses ERG to keep this peg. People can use ERG to mint SigRSV and provide liquidity. Alternatively, SigUSD directly if there are enough reserves.

ErgoDEX is, as the name implies, the upcoming DEX. Here things get a little more exciting as it will be launched for both the Ergo and Cardano ecosystems. Developers will be utilizing Cardano’s Plutus smart contract language to power it alongside additional development on the Ergo platform.

This DEX is going to have some features that will be familiar to those using CEXs or traditional investors. Limit orders, partial filling, and buy-back supports are some key features. Ergo also allows for Multi-Stage Contracts that allow for timed release payments. What this means is that it gives investors an opportunity to cancel their orders if the project doesn’t live up to promises.

These are just two of the most relevant products of Ergo, but you can read more here.

Final Thoughts

On its own, Ergo is a great blockchain platform. The integration with Cardano just brings it to the next level. With Alonzo coming up pretty soon, I think we’re going to see some huge things happening with smart contracts. The combination of PoW and PoS allows the platform as a whole to reap the benefits of both and compliment each other.

The DEX looks great so far and the roadmap is moving along at a regular pace. I’m excited to see how Ergo comes alive alongside Cardano. We’re going to witness some great things happening in the next few months here!

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Alexandra Martinez

Focused on various forms of technology from gaming to cryptocurrency.