Midnight is a Partner Chain

After the Cardano Summit and the interview with Eran Barak, CEO of the Midnight project, we have a slightly clearer idea of what Midnight will be for Cardano. In this article, we will try to answer the question of what a partner chain means. There is still a lack of available information, so our idea may be inaccurate.

Original Cardano Design and Its Upgrade

In the now legendary document 'Why Cardano' it is written that accounting of value should be separated from the story behind why the value was moved. This essentially means separating value from the computation.

Two layers were created. Cardano Settlement Layer (CSL). This is a ledger. This layer has responsibility for accounting (send and record value). Cardano ledger supports a few scripting languages and can work with native assets minted by users.

The second layer is the Cardano Computation Layer (CCL). This layer is intended to insulate the CSL from the burden and complexity associated with the execution of smart contracts and allow for multiple such layers to exist.

All CCLs share one ledger, the CSL. One of the goals for the settlement layer was to scale well and be able to serve all CCLs that could process calculations in parallel.

Charles Hoskinson recalled this design at the Cardano Summit. The original design has become subject to change.

The Cardano Settlement Layer has been renamed the Cardano Assets and Settlement Layer (CASL). The new name for CSL is Cardano Service Layer. This replaces CCL (Cardano Computation Layer).

To make it clear, now we have CASL (old CSL) and CSL (old CCL).

It is important to note that Charles talked about the importance of interoperability and a new framework for building blockchains. The new framework is to be called the Cardano PartnerChain Framework (CPF). He mentioned a Parity stack for building blockchains called Substrate. CPF will be based on Substrate.

He also mentioned research into the use of multiple-consensus mechanisms (such as PoW and PoS) in one system called Minotaur.

CPF (in Charles's presentation he was talking about a framework, not a specific partner chain) is supposed to use Minotaur technology, i.e. multi-resource consensus.

My understanding is that the new framework (CPF) uses Substrate and Minotaur.

CSLs are supposed to have their consensus and ledger. In the original Cardano design, CCLs do not have their consensus and ledger. They are just computation layers, which currently means that it is an off-chain part of smart contracts (applications).

Off-chain logic of applications cannot do without the on-chain part, i.e. essentially without the settlement layer (CSL). In the picture, you can see how currently the applications on Cardano work.

This is going to change with the new design that Charles has introduced. CSL (Cardano Service Layer) will essentially be partner chains. Partner chains will have their own ledger and consensus, which means that they do not need Cardano to exist.

Midnight is a partner chain - a new version of the Cardano Service Layer.

Charles mentioned that current SPOs, i.e. entities that maintain CSL (in the future CASL) can provide security to partner chains. For this, they will be rewarded in the tokens of partner chains. So some kind of potential link between Cardano and Midnight was hinted at.

Midnight

Midnight is the fourth-generation blockchain with a focus on privacy. Midnight will have its consensus and ledger. It is being built from the ground up. According to CEO Eran Barak, Midnight will be independent of Cardano. He said that a partner chain is not an L2 solution.

Cardano is a strategic partner because it has a large number of SPOs that can be leveraged to bootstrap Midnight. This allows Midnight to achieve high decentralization very quickly.

Third-party developers can create new use cases through the use of both chains. They will be financially incentivized to do so. More than 1000 teams were interested in gaining access to the dev net. Unfortunately, it didn't reach everyone.

Midnight was presented at the Summit as the first partner chain.

Substrate

To understand what the Cardano Partnerchain Framework will be, it is necessary to know what Parity's Substrate is. This will also help you understand what exactly a partner chain can be.

Substrate is a blockchain software development tool used by developers to create the parachains that make up the Polkadot network. Essentially, Substrate is the SDK with which you can build parachains and Polkadot is the means of securing the chains and allowing them to communicate with each other.

While Substrate can be used to build any type of blockchain, not just Polkadot parachains, connecting to Polkadot offers a multitude of benefits, including built-in security, and cross-chain interoperability.

Although Substrate and Polkadot are synergistic, they are not dependent on each other. Chains built with Substrate do not need to be connected to Polkadot (or Kusama). Substrate-based chains can exist as solo chains on an independent basis.

While parachains are part of the Polkadot network and benefit from its security and interoperability features, they operate independently and have their own consensus mechanisms. The Relay Chain in Polkadot plays a crucial role in coordinating interactions between different parachains and validating transactions that involve communication between different parachains. So, in that sense, parachains rely on the Relay Chain for certain functions.

Interestingly, Substrate was mentioned only in the context of the newly built framework, but not in the context of Midnight. So it is not confirmed that the team uses Substrate for building Midnight.

Partner Chain

A partner chain can be a solo chain that is independent of another (Relay) chain. As we have already said, Midnight will very likely be like that.

Charles said at the Summit that the partner chain can borrow security from other chains and that it can be CASL or other chains. Whether this only means that Cardano SPOs will be leveraged, or whether there is some kind of settlement at the level of the Cardano ledger (CASL) is not known at this time. But it almost certainly won't be necessary for Midnight.

Charles talked about interoperability but did not say what mechanism will be used to connect partner chains (CSL). Will it only be through CASL, or will a new layer (relay chain) be created that will be similar to what the Polkadot ecosystem has? That is not known at this time.

The current Cardano consensus is not ready to serve as a relay chain, as it has a long block finality. In my view, the connection of partner chains is crucial for interoperability. To connect chains (or applications) it is necessary to use some common standard or framework. Polkadot has this implemented. In the case of the CPF, it was not said how it would work and if the IOG team would work on it.

At the Summit, Charles described and drew what you see in the picture. Dashed lines indicate that partner chains are not dependent on any other chain. However, for the sake of interoperability, some relationships should exist.

Partner chains will have their consensus. This means that they must also have their own monetary policy and tokenomics. In the case of Midnight, we don't know the details. All we know is that there will be 2 tokens. DUST will be a shielded token. There will be a second token on the public ledger alongside DUST.

Conclusion

Midnight will probably be focused on business and SLA. I expect that it will not have on-chain governance as it is currently shaped for Cardano. I don't see Midnight as a chain built by people for people but as IOG's commercial chain.

Some people say that Midnight, as a fourth-generation blockchain for business, has a higher upside potential than Cardano. As for user activity, it is obvious that Midnight can be a competition for other chains. Midnight, like every other project in the blockchain industry, is fighting for developers, users, and liquidity. I will be happy to be wrong and maybe some detail will be revealed that will convince me that Midnight will be a partner for Cardano in the sense of mutual prosperity.

IOG is a for-profit organization and it is obvious that they want to use the years of research not only for the benefit of Cardano but also for the benefit of the organization. It's fair that some other company wasn't founded that just took open-source papers and used them to build Midnight. The people from IOG know very well why enterprises are not using blockchain networks en masse yet. With Midnight, they will meet regulatory and other requirements that current projects with their public ledger and volatile token cannot fulfill.

On the one hand, it is a shame that Cardano does not have a private ledger, or that it will not use private smart contracts and other technological progress in the field of zero-knowledge cryptography that IOG (and other teams in crypto) have achieved. On the other hand, Cardano will have on-chain governance and ADA holders will have the project in their hands. They will decide the future of Cardano. dApps developers should also take the same approach. They can use both Cardano and Midnight and create new use cases based on this.

There is no point in making premature strong conclusions because, as I mentioned in the introduction, there is still very little information. We saw the opinions of people in the community who understood Midnight differently than we did. It would benefit the community if the IOG team communicated more about Midnight and the new framework for building blockchains.