Ouroboros Protocol is Cardano's consensus mechanism and the first blockchain protocol based on proof-of-stake with rigorous security guarantees. Cardano uses proof-of-stake, so instead of using massive electricity on cracking or solving cryptographic puzzles by all the miners in the network, a node is selected to forge or mint a new block with a probability to get rewards proportionally to the number of coins deposited (security deposit). Also, this means that increasing the number of validators can effectively increase the network’s “transaction per second” without spending a huge amount of energy comparable to proof-of-work.
How does it work?
- Stakeholders are the nodes with a positive stake and only stakeholders can participate in running Cardano's protocol.
- A stakeholder must be elected as a slot leader to be able to generate new blocks for the blockchain
- The slot leader may listen to transactions announced by the other nodes, make a block out of those transactions, sign this block with its secret key, and publish it to the network. Slot leader acts as a miner in Bitcoin.
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