Cardano is a fairly recent cryptocurrency to make it in the top 10 . It currently positioned in the 10th place in coinmarketcap with a market cap of $3 Billion. This is huge for a coin which made in the exchanges just couple of months ago (Oct 1st). Charles Hoskinson is the man behind Cardano. He is the CEO of IOHK (Input Output HongKong). He was the former CEO of Ethereum who stepped down few years ago to work on Cardano along with huge group of leading academics and engineers. If anybody has time then i would recommened that you watch the Cardano whiteboard with Charles in their official website. It is 50 minute video so if you do not have the time then you can read through the below post for the concise summary on what lead to the birth of Cardano.
Birth of Cardano
First Generation
Bitcoin is the 1st generation of cryptocurrency which was successful in creation of a decentralized blockchain token which is scarce and tradable. When a person wants to send these digital money to other, he/she doesn't require a 3rd party to do so.
Drawbacks
No contracts
Meaning if Mike wants to pay Bob only when Bob fixes his tv then that is not possible to put in terms and conditions in the 1st generation of cryptocurrency.
Nothing more than a digital asset
Everytime someone has to make a change to bitcoin then it has to be a new cryptocurrency.
This makes way for the Ethereum (first of the 2nd generation cryptocurrency)
Second Generation
Ethereum, 2nd generation of crptocurrency made customizable transactions possible meaning that the terms and conditions can be embedded within these transaction. Smart contracts was made possible for the first time. Charles himself along with Vitalik and few other developers worked on Ethereum.
Drawbacks
Scalability
Cannot scale to millions/billions of users
Lacks good developer experience
Development flaws resulting in hacks
Bad governence experience
When you notice a major disagreement in these cryptocurrency then you see a split like Ethereum & Ethereum Classic and Bitcoin & Bitcoin cash.
This makes way for the Cardano (first of the 3rd generation cryptocurrency)
Third Generation
Cardano Project is a vision to solve all the problems seen in First generation and second generation and also to add new concepts and technologies to the cryptospace. Cardano project involves Peer Review and they write proper scientific papers and engage universities with a goal to provide high assurance code. This third generation protocol is all about the 3 topics:
Scalability
Interoperability
Sustainability
Scalability
Scalability is not just about how many transactions can be processed in a second. It carries actual data so the Network needs to have enough bandwidth to support it. As you know that data needs to stored in each nodes, it is challenging when the data size keeps increasing. To solve all these problems Cardano takes an elegant approach. For throughput, Cardano uses Ouroboros which is Provably Secure Proof of Stake which enables multiple blockchain to be created at a given time and all of these can run in parallel so that the system will be able to handle humongous transactions. Also Ouroboros has a very rigorous security standards which means that any future capability developed in this protocol will also be secure. To solve the network overhead issue, Cardano uses a new technology called RINA (Recursive Inter-Network Architecture) which functions in a heterogeneous network rather than a homogenous network to provide privacy and transparency. RINA is currently being developed in parts and is expected to be fully complete in 2019. When it comes to data, the thing is that not everybody needs all of the data i.e., if Mike sends money to Bob, my only concern will be to know if the transaction is legit or not. Techniques like Pruning and Subscriptions in the settings can substantially reduce amount of data one user needs to store. Also the idea of Partitioning is that the users need not have a full copy of blockchain rather they will have a chuck of a blockchain along with some notion which can put all these chucks together. Cardano's goal is to study all these capabilities to partition things wherever it is possible and to compress the history but do so in a way that they do not remove the original replicated security system that Bitcoin has endowed the space with.
Interoperability
Idea of Interoperability is that there will never be one coin to rule the world. Crytocurrencies like Bitcoin, Ethereum, Ripple will exist along with Legacy systems (Traditional Bank). Currently it is difficult for bitcoin and ethereum to understand each other. And it is even more difficult for a crytocurrency to understand the traditional bank system since it has added requirements of metadata for a transaction. The problem is that if there is no canonical way for these systems to understand each other, the Kingmaker will always be middle man (Exchanges like Coinbase, bittrex) which controls the movement of value between these systems. These exchanges are very fragile and could be hacked or could be shutdown for any regulatory policy. Since the requirements of these ecosystems are different, there are some additional headaches to it.
For example lets say that you raised Millions of dollars worth of Ether in a crowdsale and want to deposit that in a Bank. Bank being a regulated entity, they will ask a simple question where did you get the money from?. Unfortunately I got the money from bunch of people in the internet is a not good answer since bank needs to file suspicious activity and have to deal with Tresury/European environment.
What Cardano wants to do in terms of Interoperability is that, it wants to watch other crytocurrencies and verify if any event/tranasction is legitimate or not. Also wants to make the cross chain transfers reliable without the need of a trusted 3rd party. This is possible with the notion of sidechain concept where information in any blockchain can be sturctured in a compressed way which can help in identifying a legit transaction and also to ensure that the value is not double spent. Cardano has already started its sidechain effort and published a paper which contains an approach on how to generate proof in proof-of-work world (non-interactive proof-of-work). But this is still one part of it since the cryptospace is still incompatible with traditional bank space mainly because of three things
Metadata (where did you spend it? what did you spend it on? whom did you give it to?)
Attribution (Identity)
Compliance (Know your customer, Anti Money Laundering & Anti Terrorist Funding)
Above listed things are bread and butter of a traditional bank system but it does go well with the cryptospace since the crypto-transactions are transparent to everyone. Cardano is working on a mechanism where one can escalate a transaction to add metadata to an transaction when required and do so in a secured/encrypted way so that the data is not misused.
Sustainability
Sustainability is all about how the system is able to pay for its own bills. We have seen two traditional approaches in this regard. One approach is Partionage, where a large company volunteers and provides the funding. But the problem with this approach is that they can influence the protocol to move in a certain direction. This deviates from the whole point of being decentralized. Other approach is ICO, which is great way to get the funding. But it is a not continuous event which means that it will always be a finite amount of money and hence no matter how much money it may be, it will always run out. Cardano's idea of sustainability is to create a treasury where the money from blockchain will go to this decentralized bank account which will be funded through inflation. And Funding proposals will be done through a democratic voting system. Cardano is trying to do it a modular capacity so that the treasury system can be upgraded independently.
Sustainability is not just about how do we pay for things? but it is also about Where should we go?. Cryptocurrencies are not static which means that the coding needs to evolve as the Technology/Use-cases changes. In the current cryptospace it happens through Hard-Forks and Soft-Forks. In most cases it is tough to decided if it needs to be a hard-fork or soft-fork and sometimes it causes disagreement within the community results results in splits like we have seen with Bitcoin and Bitcoin Cash and Ethereum and Ethereum Classic. Cardano is planning to implement Cardano Improvement proposals which is similar to the ballot system in Treasury. It is a work in progress and it is expected to complete by the end of 2019.
In short Cardano is a third generation protocol
Built with Peer-review
Uses High assurance software standards
Coded in Haskell programming language
Built to be sustainable, interoperable and scalable
It is currently trading at 0.11 cents which will skyrocket sooner. I'm not a trading adviser but i would suggest that you buy and hold some Cardano (ADA) in your wallet. But right now one cannot buy Cardano directly thorough fiat currency. You need to have Bitcoin or Ether to buy Cardano in exchanges like Bittrex. By the time Cardano is made available to trade in fiat currency, the price will definetly shoot up 10x times or 100x times or much more. Please do your own research prior to the purchase.