What is Cardano?
Cardano is the home to the ADA cryptocurrency, also known as the Ethereum of Japan. Like other cryptocurrencies, it is used to send and receive digital funds through fast, secure, and direct transfers.
Cardano is more than just the blockchain of the ADA cryptocurrency. It is a technological platform that is capable of running financial applications made by individuals, organizations, or governments and other decentralized applications. ADA is pre-mined and uses Proof-of-Stake (PoS). Unlike Bitcoin, which uses proof of work, PoS is significantly cheaper to run. A reserve of ADA is kept for the “stakers”, the computers that verify Cardano Network Transactions.
This is the first blockchain project that has been developed from a scientific philosophy, and the only one to be built by leading global academics and engineers. The technology is proven to be flexible, secure, and scalable to be used by millions of people worldwide.
The vision for Cardano is that its new style of regulated computing will bring greater financial inclusion by providing open access for all to fair financial services.
The problem Cardano aims to solve seems similar to Ethereum, but targets developers, engineers, and organizations.
Why is Cardano positioned for huge success?
Hoskinson has been a large influencer in the cryptocurrency world. After a disagreement in founding the well-known Ethereum, Charles left to form Input Output HK: an engineering company that builds cryptocurrencies and blockchains for corporations, government entities, and academic institutions.
Although you might not have heard of IOHK, you have heard of its projects. IOHK’s key project is Cardano, however, they also maintain Ethereum Classic, among others.
Hoskinson also founded The Bitcoin Education Project, where he met one of the co-founders of Ethereum, Vitalik Buterin.
Most cryptocurrency platforms are developed by a small core team and then distributed worldwide.
Cardano does the opposite.
Cardano’s platform was brought together through worldwide research coupled with scientifically proven technology. Instead of creating a whitepaper and implementing it into code, the team ensures that experts are involved in a peer-review process, improve them, and agree with the outcome. This distributed creation process parallels the overall goals of the projects decentralized nature.
Cardano is known as a third-generation cryptocurrency.
Bitcoin is a first-generation coin, essentially digital gold. There was very little use of the coin beside a method to transfer value and was plagued with scalability issues.
Ethereum is a second-generation coin. Coins now have a use with the introduction of smart-contracts. They also have much better scalability but not enough to become a global currency. Second-generation coins still struggle with transaction congestion among other issues.
Cardano is a third-generation coin. The three main problems to overcome in this generation of coin is scalability, interoperability, and sustainability.
There are 3 scalability issues Cardano must overcome:
- Transactions per Second
A global payment system must be able to handle thousands of transactions per second. In the United States alone, over 50,000 transactions occur per second.
Cardano solves this issue through its Ouroboros system. By adopting a Proof-of-Stake method, the process is quick and doesn’t waste computing power or electricity. But besides the more efficient process, Cardano restricts the number of computers mining at a given time. The network selects the “slot leaders” to mine the next blocks.
To do this, Cardano splits the time into segments called epochs [pronounced “epics”]. An epoch is the amount of time it takes to mine a new block and has one slot leaders elected to mine that block. If a slot leader doesn’t complete its task in time (listening for new transactions, verifying them, and putting them in a block) or doesn’t show up, that leader loses the right to produce a block and must wait to be reelected.
This addresses the issue of scalability because they can increase the number of slots per epoch and can run multiple epochs in parallel.
- Network Bandwidth
A blockchain is a peer-to-peer network (P2P) in which each node receives a copy of all new transactions. In the case where there are thousands of transactions per second, each node would be consuming a lot of bandwidth.
Instead, Cardano splits up the network into sub-networks. Each node is a part of a specific subnetwork and can communicate to other subnetworks if needed. This implementation is based on the TCP/IP Internet Protocol.
- Data Storage
All transactions that ever happen are stored in the blockchain. This promises accuracy, however, the amount of data grows exponentially and can become very large.
Techniques such as compression, pruning, and partitioning are options to reduce the amount of data stored by Cardano.
However, at this stage in Cardano’s development, the other two issues are more time-sensitive. The amount of data storage is relatively small and is fairly cheap.
There are 2 interoperability issues Cardano must overcome:
- There are thousands of cryptocurrencies.
The Cardano team believes there won’t be a future where only one currency rules. There are many currencies now and there will be many currencies in the future, each with their own protocol and rules. However, each coin is isolated from each other. To convert Bitcoin to Ethereum or other coins, an intermediate is required.
The Cardano Project aims to be a blockchain that can understand other blockchains, allowing for the seamless transfer of assets across multiple chains.
- Governments and Banks are hesitant to trust cryptocurrencies.
Governments and banks don’t like cryptocurrencies because there is no metadata connected to the transactions. Cryptocurrencies don’t follow normal banking regulations and banks like to know why a transaction was made, who sent the funds, and who received them.
Cardano would allow the option to attach metadata to transactions. This is a good compromise for traditional banks and governments to see cryptocurrencies as an asset.
Finally, the last issue is sustainability.
Currently, companies will raise money through an initial coin offering or ICO. However, most companies will need more money in the future to continue developing their product. A debated option throughout the community is to hold a new ICO to raise new money to promote continuous improvement.
Cardano solves this issue through a Treasury.
The Treasury itself is a wallet unowned by anyone and governed by smart contracts. On each transaction, a small fraction is deposited to the Treasury, stored for future developmental payment.
Developers would submit a proposal to the community with protocol changes and how much it would cost to implement. Then, the community votes on which improvements are most necessary. Finally, the Treasury releases the funds to pay for the developments.
- An Ambitious Project with a Successful Track Record
The project is taking on a lot of risks and is still very young. However, Cardano has already been successful in many of its endeavors. With implementations of the open-source Daedalus Wallet, they are already able to freely exchange between the supported currencies. The wallet will begin with the expansion of support with Bitcoin and Ethereum Classic.
With hacks affecting Ethereum and inherent issues with Bitcoin and other currencies, Cardano seems eagerly positioned to become a global leader. It’s very likely Cardano will be the project that solves the fundamental and long-standing issues of cryptocurrencies.
To read the article on my website, The Art of Cryptocurrency, view it here: http://theartofcryptocurrency.com/4-reasons-cardano-ada-will-see-huge-growth-2018/