The third generation blockchain project, Cardano was developed in 2015, by a company named Input-Output Hong Kong (IOHK), co-founded by Charles Hoskinson. Just like Ethereum, it is a smart contract platform that offers scalable and secure architecture for developers and users.
But, Cardano is touted to have many more advanced features than any other blockchain protocol in the market. It is based on the Proof-of-Stake algorithm that aims to make the network one of the fastest and most scalable blockchains in the world. It addresses problems that previous protocols like Bitcoin and Ethereum failed to tackle, such as speed, interoperability and security.
Weiss Cryptocurrency ratings, which ranks crypto projects regularly, based on various criteria, ranked Cardano along with Tezos at the top of the technology category on April 21, 2020.
Did you know? Charles Hoskinson, the co-founder of Cardano is also the co-founder of Ethereum and BitShares. He wrote the project using Haskell programming language, which is used in defence and financial software.
How Does Cardano Work?
Cardano was developed with the aim to not repeat past mistakes, especially with regard to the architecture of existing cryptos, like Ethereum. It is similar to Ethereum but built on scientific philosophy and research-driven methodology. Peer reviews of its whitepapers from scientists and developers across the world were collected before the idea was actually implemented.
The Haskell programming language has a high degree of defect tolerance. The platform has been constructed in layers, with a settlement layer and a computational layer, which allow the system more flexibility and upgrades through soft forks. The settlement layer is used for transactions of ADA, the coin that fuels the network. The computational layer helps in computing DApps and smart contracts. The segregation of these two layers allows the team to modify the consensus protocol on the settlement layer, without making any changes on the computational layer.
The network uses Ouroboros Proof-of-Stake (PoS) consensus protocol. Time is divided into “epochs” here, which are further sub-divided into “slots.” There is an assigned slot leader for each slot, who cannot create more than one block in their allotted slot. Once a transaction is verified, the slot leaders receive a transaction fee, which is collected from the epoch.
In this way, Cardano supports transactions in a systematic and faster way. Bitcoin, with its transaction speed of 14 Tx/s, lacks the infrastructure to serve as a global payment network. The Proof-of-Work (PoW) consensus algorithm that supports Bitcoin, Bitcoin Cash and Litecoin, is highly energy inefficient. Decentralisation is difficult to achieve through the PoW protocol, which requires ASIC miners and specialised equipment to mine digital currencies. In contrast, PoS is not energy intensive and has lower entry barriers. Ouroboros further powers the quick distribution of ADA coins into the ecosystem.
The Cardano team is looking to build RINA (Recursive InterNetwork Architecture), to reduce the bandwidth required for data communication and dissemination. RINA is not based on a layered protocol, such as TCP/IP, but rather on a recursive structure. Such network protocol architecture has fewer protocols but works faster. It is a heterogeneous network that provides transparency, privacy and scalability.
Did you know? The aim of the Cardano project is to serve as an “internet of blockchains.” The system wants to establish interoperability, not only with other blockchain protocols like BTC and XRP, but also with legacy systems of the financial world, like SWIFT.
The Cardano (ADA) Cryptocurrency
Cardano supports the ADA cryptocurrency, which can be used to send and receive digital funds. The currency is fully open source, which makes transactions fast and secure though cryptography. Coins are mined by Epochs, which require much less computational power than BTC. Simultaneous blocks and chains are created by Epochs, which is faster than BTC’s one block at a time. This increases transaction speed per second.
The total supply of ADA coins is set to 45,000,000,000, of which 25,927,070,538 ADA are already in circulation. ADA’s price is following the current bearish market trend, but as of April 23, 2020, it has risen 5.59% to trade at $0.037. As of April 23, 2020, ADA ranks 15th among the top cryptocurrencies in the market. With the introduction of Cardano’s Shelley, it might soon gather more traction in the industry.
Cardano has its own open-source wallet, called the Daedalus wallet. Currently, it is only a desktop wallet that supports Windows and MAC. Ledger Nano S intends to add Cardano to its list soon. The team is also very interested in converting Daedalus into a multi-currency wallet.
Did you know? Three different organizations manage the Cardano project. The Cardano foundation in Switzerland manages the user community and protects, standardises and promotes the Cardano protocol technology. IOHK (Input Output HongKong) is a blockchain-based financial services company, headed by Charles Hoskinson. It has a contract to develop Cardano till 2020. Emurgo is a Japanese company that supports and incubates commercial projects that want to develop applications based on blockchain technology.
One of the most talked about future events is the Shelley upgrade, which will introduce staking for the first time in the ecosystem through Cardano’s Ouroborous Genesis consensus mechanism. Staking is a process in which network validators are selected as slot leaders to create new blocks. If they don’t want to do so, they can delegate their tokens to a staking pool.
Cardano, unlike Ethereum, plans to go beyond solo staking. Now, individuals must join a staking pool or run their own pool, so that there are enough node operators to run the network. The system will also develop separate keys for staking and spending. ADA tokens that need to be staked will never leave the wallet. Also, users don’t need to lock their tokens for a certain time period; they can be un-staked at any time.
There are more modifications and plans for the network in the future, including multi-asset wallets, addition of another proof of merit to the network other than ADA and reducing the blockchain size.
Along with a novel governance method, the Cardano team has been focused on establishing a sustainable income model, where the revenue generated is invested in developing the community and sustaining the ecosystem.
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