Introduction
Cardano is the new hot potato in town. It was listed on Bittrex on 1st October 2017 and smashed its way up the ranks. It was worth 5 cents last month, today it's trading at 50 cents, a whopping 10x gain. Currently it's ranked 7th with a $13 billion market capital. So what is Cardano?
Cardano
Cardano is home to the Ada cryptocurrency, which can be used to send and receive digital funds. This digital cash represents the future of money, making possible fast, direct transfers that are guaranteed to be secure through the use of cryptography.
Cardano is more than just a cryptocurrency, however, it is a technological platform that will be capable of running financial applications currently used every day by individuals, organisations and governments all around the world. The platform is being constructed in layers, which gives the system the flexibility to be more easily maintained and allow for upgrades by way of soft forks. After the settlement layer that will run Ada is complete, a separate computing layer will be built to handle smart contracts, the digital legal agreements that will underpin future commerce and business. Cardano will also run decentralised applications, or dapps, services not controlled by any single party but instead operate on a blockchain.
Like Ethereum, Cardano offers a cryptocurrency (ADA), smart contracts and decentralized apps. The project was founded by the Charles Hoskinson (ex-CEO of Ethereum, Ethereum Classic leader) and Jeremy Wood. Hoskinson recognized the scalability issues of Ethereum, which gave birth to that project in 2015 to address that particular problem.Cardano uses Proof of Stake mining (PoS) with an algorithm called Ouroboros (https://www.cardanohub.org/en/ouroboros/). PoS has many benefits, including security, reduced risk of centralization, and energy efficiency. As a comparison, Proof of Work (PoW), used by the first generation cryptocurrencies like Bitcoin and Litecoin, is slow and requires a lot of energy to solve the mathematical puzzles for mining. Cardano is developed by academics and engineers, its foundation is built on solid science, mathematics and engineering.
Scalability
The main goal of Cardano's is scalability. It achieves that with its layered design that allows it to upgrade and expand with soft-forks. Each layer contains the different elements, that is: the currency, the smart contracts and the DAPPs. What's more, Cardano offers the possibility of multiple blockchains, which enhances its scalability.
IOHK: Input Output Hong Kong
Founded in 2015 by Charles Hoskinson and Jeremy Wood, IOHK is a world-class engineering and technology company committed to using peer-to-peer innovations to provide financial services to three billion people that don’t have them. The group is contracted to design, build, and maintain the Cardano platform through to 2020.
Cardano's major investors are Japanese, that's why some people call it the Ethereum of Japan.
First Impressions
I wanted to invest in weeks ago when it was around 10 cents, but I was busy with programming and didn't have time to do my homework about Cardano. I regret that today, because ADA is at 50 cents. But that's OK, the altcoins are rising and ADA has a bright future. I bought some ADA on Bittrex, then installed the wallet to do some tests.
The Deadalus Wallet
The wallet is available for Windows and MAC, no Linux version yet (https://daedaluswallet.io/). Unfortunately, we have to download the full blockchain to synchronise the wallet, which takes a couple of hours and 1GB of HDD space.
The wallet is sleek in design, simple and very easy to use. It allows the creation of multiple wallets. I did a small transfer test from Bittrex to my wallet. On the Bittrex side, things went very fast. But the transaction wasn't showing up in my wallet, despite the transaction being confirmed on the block explorer (https://cardanoexplorer.com/). As it turns out, the wallet is sensitive to the system's timestamp.
https://forum.cardanohub.org/t/daedalus-wallet-stuck-on-connecting-to-network/1766/11
https://forum.cardanohub.org/t/iohk-statement-connecting-to-network-issue/1545
If the time on the user’s machine is off by 20 seconds or more from the internet time it is not possible to connect to the network. To fix this issue the user needs to synchronize the time on the computer where Daedalus is running with NTP (Network Time Protocol) servers, by using the setting of their operating system.
So, the solution was to update my system's time and restart the wallet.
Next, I tested the transaction time. I created a second wallet and transfered 1 ADA to it from my first wallet. The transaction appeared instantly. A high assurance level (9 confirmations or more) took about about 2 minutes to complete, which is pretty good when compared to other major cryptocurrencies. Naturally, I found that too long, especially when I'm used to the swift STEEM transaction speed of 3 seconds!
Fees
One thing that struck me was the fee. It cost 0.17 ADA to transfer 1 ADA! This is too high. I did some searching and found the answer for that.
https://cardanodocs.com/cardano/transaction-fees/
https://cardanofoundation.org/press/how-cardano-transaction-fees-work/
The minimal fees for a transaction are calculated according to the formula
a + b × size, where ‘a’ and ‘b’ are constants and ‘size’ is the size of the transaction in Bytes. At the moment, the constants ‘a’ and ‘b’ have the values
a = 0.155381 ADA, b = 0.000043946 ADA/Byte. This means that each transaction costs at least 0.155381 ADA, with an additional cost of 0.000043946 ADA per Byte of transaction size. For example, a transaction of size 200 Byte (a fairly typical size) costs
They argue that the parameter 'a' is to prevent DDoS attacks. I'm not convinced of that argument. However, the developers are looking into tweaking those parameters, hopefully they'll come to their senses and use lower fees if they wish to be competitive.
This means that ‘a’ and ‘b’ will probably be adjusted in future to better reflect actual costs.
Supply
Another striking aspect of ADA is its huge non-mineable supply. With a maximum 45 billion ADA and 26 billion ADA in circulation, I wonder if the price could reach double digits, or triple digits in the future. Nevertheless, nobody thought EOS would reach $10, precisely because of its high supply and inflation. But here we are, it skyrocketed to $12 this week. Thus, anything is possible with cryptos.
Final Thoughts
Cardano is a very young project with a huge potential. It solves a scalability problem, which makes it a great contender for Ethereum. The wallet is buggy, from what I've read on forums, so there's room for improvement. The fees issue must be addressed! It's already a major problem for Bitcoin, there's no reason for high fees when other platforms offer dust fees or none. There's a lot to learn about Cardano, it's very well documented and is worth investigating, and perhaps investing too.
Suggested Video
IOHK | Cardano whiteboard with Charles Hoskinson
DISCLAIMER: I'm not a financial nor a professional adviser. I formulate my opinion based on my own learning and interpretation of chart analysis. If you're not a professional, please educate yourself before doing any market trading and don't risk more than you can afford to lose.
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