Ouroboros Protocol is Cardano's consensus mechanism and the first blockchain protocol based on proof-of-stake with rigorous security guarantees. Cardano used 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 proportional to the number of coins deposited. 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.