After Ethereum, Cardano has launched the date for its Vasil hard fork upgrade. The Cardano community has been eagerly waiting for this upgrade which is finally happening on 22 September 2022. The upgrade will add many exciting features to the ecosystem of Cardano.
So let's understand this upgrade from soup to nuts.
To take it easy for you, we have broken down the Vasil hard fork into multiple parts.
What is a Hard fork?
When the blockchain network protocols undergo significant changes, it becomes incompatible with its older protocols. It creates two different branches of protocols where one follows the new version, and the other follows the older version. These versions work separately with no direct relationship.
Coming to Cardano, it constantly updates the blockchain for growth and development. Its blockchain has undergone multiple hard fork events. For example, Mary hard fork of Cardano allowed developers to create their own tokens on it.
Similarly, to take Cardano to a higher level, its next significant hard fork, the Vasil hard fork, is coming. It will make Cardano cheaper, faster, and more efficient.
Cardano's Vasil Hard Fork
Vasil Hard fork is named after a Bulgarian mathematician and a popular Cardano community member, Vasil Dabov, who died recently. However, the fork will expectedly make the Cardano network more suitable for developing DeFi, NFTs, and dApps. It will also decrease network congestion and fees to boost the scalability of Cardano. Market specialists described this event as the golden opportunity for Cardano to get ahead of its competitors like Ethereum and Solana.
This Vasil Hard fork has five functions as its major highlight. It includes four Cardano Improvement Proposals (CIP-31, CIP-32, CIP-33 and CIP-40) mechanisms and a Diffusion pipelining feature.
Let's understand them one by one in the following part:
Diffusion Pipelining
Currently, a block in Cardano has to pass six steps to get stored in the blockchain. This process needs to become faster to avoid network congestion in Cardano that arises with its increasing traffic. For this purpose, Cardano is introducing a Diffusion pipelining feature to fasten the transmission of blocks in its consensus mechanism.
The Diffusion piping will overlay some of these steps to make it possible for them to complete simultaneously instead of one after the other. If it goes as planned, Diffusion pipelining will significantly reduce the time required for block validation. It will also provide space for block size increase and overall scaling boost of the Cardano.
CIP-31 (Reference Inputs)
To understand this feature, first, let's understand two terms- Output and Input associated with the Cardano blockchain. An Output contains the sent fund value and the address of the sender. And an Input has a cryptographic signature and a pointer. The signature acts as the key to unlock output, whereas the pointer works as a link to a previous transaction output. When the key of an input unlocks an output, the unlocked output becomes considered "spent"
Now, coming back to CIP-31, Cardano is introducing a new kind of input called the "reference input". This new input will allow dApp developers to look at an output without spending it to enhance their experience and performance of Cardano. This change will also reduce the churn associated with spending outputs.
CIP-32 (Inline Datums)
The piece of data attached to Outputs is called "Datum". This Datum is attached to outputs through the Datum hashes. This setup makes Cardano a bit inconvenient for its users. With the installation of CIP-32, the datums will start to attach to outputs instead of datum hashes. It will make it convenient and simplified for Cardano users and developers because the Datum will be available in the output itself.
CIP 33 (Reference Scripts)
There exist scripts in Cardano, which are the information about transactions stored as a script context. While spending an output, these scripts must be included in that transaction. Therefore, the size of these scripts adds to the total size of a transaction. It results in higher fees and overloading in transactions.
CIP-33 was proposed as a possible solution to this problem by referencing scripts without including them with transactions. It means transactions can use the reference of the outputs that contain these scripts instead of involving them. It will reduce the transaction size and eventually reduce transaction fees too.
CIP-40 (Collateral Outputs)
Cardano requires developers to submit collateral to ensure the successful working of the smart contracts. The Cardano network uses this collateral amount to compensate nodes for their work if the validation process fails due to faulty smart contracts. Currently, this collateral amount can go very high. However, after the Vasil fork, the network will collect only a small collateral amount and will send the remaining funds to another address.
Besides these features, the upgrade will also bring some changes related to the scripting language of Cardano.
Will Vasil Hard Fork be successful?
Cardano's hard fork upgrade completed its testnet successfully on 3 July 2022. It is a big positive sign for the success of the Vasil Hard Fork's mainnet, occurring on 22 September 2022.
What will be the effect of this upgrade on the ADA's price?
Since Cardano announced the date for its Vasil Hard Fork's final stage, its native token ADA has been experiencing a nice rally. Its market cap rose from $14.7 billion to $17 billion within a week after the news rolled out. ADA is flashing huge bullish signals and may hit the $1 mark anytime before or after the upgrade. However, other factors like market sentiments, the Merge upgrade of Ethereum and prevailing bearish sentiments will also play a big role in deciding the price trajectory of ADA in the upcoming days.
