Warp Transactions: A Deep Dive into Cardano's New Technology

Introduction

Cardano is a rapidly evolving blockchain platform, with a wide range of use cases and the potential to revolutionize many industries and become a major player in the blockchain space. Its development roadmap includes plans for further scalability, interoperability with other blockchains, and more sophisticated smart contract functionality.

Further, Cardano has unveiled cutting-edge features and innovations that have notably enhanced the network’s development. Warp transaction is its latest feature and was developed specifically to optimize token transfers within the network.

In this deep dive, we’ll unveil how this novel technology, exclusive to Strica’s Typhon Wallet, is transforming the way ADA tokens are transferred, making transactions more balanced and user-friendly. As we delve into the intricacies of Warp Transactions, you’ll gain a comprehensive understanding of how this innovative feature utilizes Cardano’s unique UTXO model and multi-signature capabilities. But, before we dive into this new technology, let’s start with an overview of the Cardano blockchain and its value proposition.

Cardano: An Overview

Source: forkast.news

Cardano is an open-source, decentralized blockchain platform that was launched in 2017. It was created by IOHK, a research and development company led by Charles Hoskinson, the co-founder of Ethereum. Cardano aims to provide a more sustainable, secure, and scalable blockchain ecosystem.

Cardano operates as a public Layer 1 blockchain, utilizing the Ouroboros proof-of-stake (PoS) consensus model. This mechanism enlists validators or “stake pool operators.” These individuals are selected to create blocks based on the amount of ADA they commit or “stake.” Compared to Bitcoin’s proof-of-work (PoW) consensus mechanism, Cardano’s approach is more eco-friendly and scalable.

Further, Cardano has a two-layered transaction system; a settlement layer for basic transactions (transferring ADA, Cardano’s currency) and a computation layer for smart contracts. The dual layer is to help the Cardano network process transactions faster. Cardano transactions share many foundational principles with other cryptocurrencies but have distinct characteristics based on Cardano’s unique architecture.

ADA is the native utility token, named after Ada Lovelace: a 19th-century mathematician recognized as the first computer programmer. The total number of ADA tokens is capped at 45 billion, which will be introduced gradually via minting. This fixed supply ensures that the ADA token is deflationary. Nevertheless, the system is expected to display an inflationary pattern until a significant chunk of this reserve enters circulation, projected to start around 2030.

Additionally, Cardano has recently been unveiling cutting-edge features such as Hydra and Mithril, which have notably enhanced the network’s scalability, interoperability, and sustainability. Warp transactions are its latest feature and were developed specifically to optimize token transfers within the network. In succeeding sections, we will explore what Warp transactions are, how they work, and the advantages they offer.

What is Warp Transaction?

Warp transaction is a novel feature developed by Strica, and designed to improve the way ADA token transfers are conducted on the Cardano network. In contrast to standard transactions, which typically operate on a straightforward sender-pays-all model, warp transactions integrate a more balanced mechanism, where both parties play a role in the transaction process, thereby redefining user experience and reducing transaction barriers.

So, what’s the problem with normal Cardano transactions? Aside from standard costs of transactions, Cardano charges a ‘sender’ fee of 1.14 ADA per transaction to protect the network from spam and potential attacks. While this mechanism has proven effective in maintaining Cardano’s impeccable record of security and uptime, it raises concerns about long-term sustainability, especially as the network aims for mainstream adoption.

Warp transactions ingeniously utilize the receiver’s wallet’s unspent transaction output (UTXO). This means that the receiver’s wallet covers the minimum ADA amount, sparing the sender from additional charges, and introducing a collaborative approach to transactions.

Exclusive to Strica’s Typhon Wallet, warp transaction leverages Cardano’s multi-signature capability and uses its foundational UTXO feature to improve token transfers, offering a more user-friendly experience and more efficient than traditional transactions.

About Strica

Strica is a blockchain solutions company developing open-source tools for the Cardano ecosystem. It’s known for tools such as Cardanoscan.io, Typhon Wallet, and Flac Finance.

Co-founded by Ashish Prajapati, Pavan Vora, and Prashanth Soordelu. Strica builds products that improve user experience and enhance developer experience on the Cardano blockchain. The aim is to provide full feature sets, possible on Cardano, and provide the best user experience by utilizing the power of the Cardano blockchain.

With an open-source full-suite Cardano wallet library and Cardano key pair generation library written in pure JavaScript. These libraries have been adopted by many marketplaces for building Cardano transactions.

Typhon Wallet

Source: Typhon Wallet

Typhon Wallet is a non-custodial Cardano in-browser extension and web wallet created by Strica. It houses the exclusive feature of warp transactions. The Typhon wallet code can be used to create wallets on both the Cardano mainnet and the testnet.

Typhon wallet has the following unique features:

1. The ability to send $ADA to multiple addresses with a single transaction by harnessing the power of UTXO.
2. Users can submit as many transactions as possible without waiting for the previous transactions to get confirmed.
3. Flexible wallet options, choose from HD wallets like Daedalus, or a simple and faster single-address wallet.
4. Supports hardware wallets like Ledger Nano S/X and Trezor T.

How Does Warp Transaction Work?

Warp Transactions works on the concept of unspent transaction output (UTXO), a feature native to Cardano and Bitcoin. Cardano has further developed it into extended unspent transaction output (EUTXOs). In this section, we’ll examine how Typhon Wallet uses this feature for building, signing, and submitting transactions.

UTXOs

Source: Cardano Docs

An Unspent Transaction Output is more like a “change” you’d receive after a transaction. During the transfer of cryptocurrencies, transactions involve using these UTXOs as initial inputs. A user (the sender) signs digitally to prove they own these inputs, leading to new outputs. Once a UTXO is used, it’s marked as “spent” and can’t be used again. But, the new outputs from that transaction become fresh UTXOs, ready for future use by the receiver. Cardano further improves this model by its Extended UTXO (EUTXO) model.

EUTXO

Source: Cardano Library

While executing UTXOs, only the private key associated with the sender account is to be signed. In contrast, the EUTXO model uses smart contracts to determine if the output can be spent.

Another difference is that EUTXOs can carry (almost) additional pieces of data called redeemers, which the transaction provides for every input, which is also used to validate transactions. Redeemers provide context to transactions and allow for greater flexibility and complexity.

Building the Transaction

Source: @StricaHQ/introducing-warp-transactions-689d3e1339c7">Strica Medium

Wallets create transactions using the UTXOs they have. In hierarchical deterministic (HD) wallets, if each UTXO comes from a unique address, all these addresses must provide their signatures for the transaction to be approved on the blockchain. It is safe to note that the network doesn’t distinguish whether the UTXOs come from one wallet or several wallets.

Instead of the sender bearing the cost for the minimum $ADA required, Typhon utilizes the receiver’s wallet’s UTXOs. Essentially, this means the receiver’s wallet covers the minimal $ADA amount, sparing the sender’s funds.

Signing the Transaction

Source: @StricaHQ/introducing-warp-transactions-689d3e1339c7">Strica Medium

The recipient is notified of the transaction and can choose to sign off on the transaction or decline by not giving authorization. To approve a transaction, multiple signatures are needed, an already existing feature on the Cardano blockchain. Multi-signature would require at least two private keys to authenticate a transaction. In this case, that would mean that both the person sending and the one receiving need to authorize the transaction. The recipient would have to sign off the transaction within 24 hours.

Note: The sender can cancel the transaction if it hasn’t been signed off. Also, the sender might notice a portion of their $ADA being held in escrow before sign-off. This is a standard procedure as the sender will be refunded after a successful transaction.

Furthermore, once transactions are initiated and approved, they’re converted into Concise Binary Object Representation (CBOR), which is a more efficient way to organize and present data. The transaction is held in a mempool until they’ve been fully approved with all necessary signatures. Only then are they sent onward to the Cardano network. Transactions in the Cardanoscan Mempool can be viewed here.

Mempool

A mempool or memory pool is used for storing information on unconfirmed transactions. It acts as a holding area for transactions broadcasted but awaiting addition to the block by miners.

Advantages of Warp Transactions

Warp transactions have several advantages over traditional Cardano transactions, including:

1. No fees for the sender: The receiver’s wallet covers the minimum ADA fee required for the transaction, so the sender does not need to pay anything.
2. Faster transaction times: Warp transactions are processed much faster than traditional transactions because they do not need to wait for the sender to pay the minimum ADA fee.
3. More user-friendly: Warp transactions are easier to initiate and manage than traditional transactions, thanks to the Typhon Wallet’s user-friendly interface.
4. Flexible: Either party can reject the transaction within 24 hours if it hasn’t been multi-signed. Receivers have a choice of declining the transaction since their UTXOs will be used to fund the transaction.
5. Optionality: The Warp Transaction feature is 100% optional, as users can still decide to make transfers using a minimum of 1.14 ADA.

Disadvantages of Warp Transactions

There are also a few disadvantages to warp transactions:

1. Only available on Typhon Wallet: Warp transactions are currently only available on the Typhon Wallet. This means that users who want to use warp transactions need to switch to the Typhon Wallet. This also makes it restricted in use and can limit its adoption, even on the Cardano network.
2. Requires receiver approval: Warp transactions require the recipient to approve the transaction before it can be processed. This can delay the transaction, especially if the recipient is not online or does not check their wallet regularly.
3. Privacy concerns: The Typhon Wallet manages the mempool for warp transactions. This means that the Typhon Wallet has access to information about all warp transactions, including the sender’s and recipient’s addresses and the amount of tokens being sent. This could raise privacy concerns for some users.

Conclusion

Warp transactions, introduced by Strica, is an innovative approach to facilitating token transactions on the Cardano blockchain. It improves user experience by using foundational features of Cardano like the UTXO transaction model and multi-signature transactions, all without the complexity of smart contracts.

While its exclusivity to the Typhon Wallet might initially limit widespread adoption, the potential advantages highlight the gains for the growing Cardano user base. This can also prompt other Layer 1 blockchain to improve their token transaction model.

Overall, warp transactions are a promising new way to send tokens on the Cardano blockchain. They offer a number of advantages over traditional transactions, including no fees for the sender, faster transaction times, and a more user-friendly experience. However, users should be aware of the disadvantages, such as the limited availability of warp transactions and the privacy concerns associated with the Typhon Wallet. Thus, do your own research and seek financial expert guidance before trying out this unique innovation.