IOHK | WHY WE ARE BUILDING CARDANO | 06/28/2017    Proof of Stake Using proof of stake for a cryptocurrency is a hotly debated design choice , however because it adds a mechanism to introduce secure voting, has more capacity to scale, and permits more exotic incentive schemes, we decided to embrace it. Our proof of stake protocol is called Ouroboros and it has been designed by an extremely talented team of cryptographers from five academic institutions led by Professor Aggelos 2 Kiayias of the University of Edinburgh. The core innovation it brings beyond being proven secure using a rigorous cryptographic model is a modular and flexible design that allows for the composition of many protocols to enhance functionality. This modularity allows for features such as delegation, sidechains, subscribable checkpoints, better data structures for light clients, different forms of random number generation and even different synchronization assumptions. As a network develops from having thousands to millions and even billions of users, the requirements of its consensus algorithm will also change. Thus, it is vital to have enough flexibility to accommodate these changes and thereby future-proof the heart of a cryptocurrency. Social Elements of Money Cryptocurrencies are a prime example of the social component of money. When restricting analysis solely to technology, there is little difference between Bitcoin and Litecoin and even less so between Ethereum and Ethereum Classic. Yet, both Litecoin and Ethereum Classic maintain large market capitalizations and robust, dynamic communities as well as their own social mandates. It can be argued that a large part of the value of a cryptocurrency is derived from its community, the way it uses the currency, and its level of engagement in the currency’s evolution. Furthering the thought, currencies such as Dash have even integrated systems directly into the protocol to engage their community in deciding what should be a priority to develop and fund. 2 University of Connecticut, University of Athens, University of Edinburgh, Aarhus University, Tokyo Institute of Technology WHY WE ARE BUILDING CARDANO  Creative Commons Attribution 4.0 International License Page 5 of 44