Liz Bancroft-Turner, project manager at IOHK, gives an update on the progress made in the month of June on Project Shelley. Below you will find a summary of the latest video update.

Goal

the primary goal of the Shelley release is to upgrade the network to operate in decentralized fashion

it includes the following workstreams:

-Incentives which is about providing stakeholders with monetary incentives to follow the protocol and makes sure the system to run smoothly

-Delegation to allow stakeholders to delegate their right and obligations to sign blocks

-Networking which is about providing the network infrastructure to support decentralization

Project Update

Delegation:

through their research paper, they have established how delegation will be performed in a way that satisfies requirements

these requirements are also detailed out in the research paper, such as requirements for stake pools, recovery if keys are compromised, security convenience, reward considerations as well as making sure security of your funds do not get compromised if you delegate

for the delegation design document, they are working on specifying and detailing how the scheme proposed in the research paper can be implemented in Cardano

they must make sure the design of delegation is compatible with the envisioned incentives mechanisms

design elements covered in the design document are things like handling of stale stake (what does the system do if it detects a stake pool or stakeholder stops producing blocks?) or how to share rewards with people delegating to a pool without flooding the system with transactions

the design document will also specify how leader election works within delegation

there was also an updated chapter on wallet recovery

Incentives:

in the Incentives research paper, they proved that using formulas for utility, each Nash equilibrium has a desired form of k pools of equal size

Nash Equilibrium is a central concept in game theory: where you have a game in which players can choose a strategy and depending on the strategy that each player chooses, rewards are paid to the players

strategies are selected for each player so that such player or no player can improve his or her reward by unilaterally changing their strategy

in other words, you have a Nash equilibrium if we have no rational reason to change what they are doing if nobody else changes what they’re doing

in Cardano’s case, strategies are things like: creating a pool with certain costs and then setting the margins of a certain amount, or delegating a certain ratio of one’s stake to a pool and the rest to another pool

the basic idea of applying game theory to practical problems is the belief that in reality, things will settle down in a Nash equilibrium

in our example, it would be bad if there were Nash equilibria with bad properties such as less than k pools or pools of unequal sizes. So the fact that Liz and the Shelley team proved that there are no bad equilibria means that hopefully in practice, the system will indeed end up with k pools of equal size

this was the main achievement on the research side

for the design document: after having settled on the general shape of the incentives mechanism, the research team spent the last month fine-tuning, verifying and refining it

small simplification to one of the formulas for pool desirability was made and the change was verified experimentally

after some back-and-forth between theory and experiments, the results eventually aligned perfectly

research team was able to formally prove the correctness of this improved game theoretical model and then the experiments confirmed the mathematical theorems

this gave more confidence to the team that their mathematical analysis was correct

from there, the team moved attention to the analysis side, and here, they looked at some of the cases like coalition between players and large stakeholders and examined how the system would behave in the presence of such complications

while the engineering side examined the question of how to be sure that pool leaders would provide the necessary relaying infrastructure

as of now, they have decided to rely on social pressure instead of technical measure

this will be done by requiring pool leaders to publish their relay addresses as part of their pool registration, thus making that information publicly visible and verifiable

Networking:

the networking stream involves Peer 2 Peer Discovery

for this part, the team has a new addition who is looking at this

he is still onboarding and getting familiarized with what was left from the former colleague

another stream in networking is Delta Q Measurement

here they have identified a number of real-world use cases that they will investigate to act as examples during the implementation and testing

this gives them control to make the network usage more or less aggressive in its real-time use of network resources

the team has identified the key use cases like catching up with the tip of the chain and block broadcasts

the Delta Q Measurement approach is being used to help minimize latencies for those activities while not creating adverse network performance for other applications

they are also investigating these use cases on the communication protocol

this is essential part of the communication protocol design

they have been looking at the way in which a node downloads blockchain segments from its peers and the way in which it deals with forks

at the moment, this is done not so efficiently in the current release of the Cardano Settlement layer and it is essential to improve on that

the Shelley team have converged on a solution and now they are analyzing it to make sure it is faithful to the Ouroboros paper

Additional Graphs

At this point in the video, Liz presents two graphs to help understand the simulation and experimentation they conduct in their research

The following two charts show the evolution of pools but with different parameters

To read these charts, you will need to know that:

-the x-axis is time

-each coloured band is a pool

-the height of a band is the size of the pool

-the x-axis is time -each coloured band is a pool -the height of a band is the size of the pool These simulations both used K = 10, meaning the ideal outcome would be 10 equally sized bands (note: in real life, K will be a much higher number like 100)

the first shows that the ideal outcome was achieved as you can see that at the end of the simulation, there are 10 equally sized pools

Liz and her team were able to achieve this result in all their experiments

the second part plots the number of pools over time so it should be at 10 at the end of the simulation on the right hand side

this second chart shows similar parameters as first graph, but while the first graph shows you a scenario in which pool costs are low with respect to rewards and the stake of the pool leaders has no influence on rewards

in this version, costs are high and there is a significant influence of leader stakes on rewards

as you can see that under both set of parameters, they were still able to get the desired results

The Plan

at the point of this video, Liz and her team are almost complete with the research phase

they have completed the delegation research paper

and are just making final adjustments to the incentives research paper

speculative research by its nature is not an exact science and while the team did not meet their calendar date milestones for the research phrase, they are confident about achieving their overall business objectives

for the design phrase, they are due to complete the delegation and incentives design document in the next week

incentives design would then be merged in with delegation design to make one final document

once the design document is signed off, which they aim for next week, they will detail out the technical implementation plan

this involves breaking the design down into the user stories and creating tasks for the developers to implement

Testnet Update