Introduction to CardanoA deep dive into Cardano
Cardano has been in the top 10 for many years. It has an insanely strong community and is often the topic of the day. Many see Cardano as on of the potential ‘eth killers’. But why is that? How capable is Cardano and how far does its potential reach? Let us have a look.
Cardano is a third-generation cryptocurrency that was developed by IOHK. It is a decentralized platform that runs smart contracts and is fully open source. It uses a unique proof-of-stake algorithm called Ouroboros, which allows users to earn rewards for validating transactions on the network. Cardano also has a treasury system that funds future development of the platform.
Scientific Approach
Cardano is the first blockchain platform to evolve out of a scientific philosophy and a research-first-driven approach. This entails that every upgrade, before implementation goes through a peer review assessment. The development team consists of a global collective of expert engineers and researchers.
Three companies; IOHK, Emugro, and the Cardano Foundation, develop and maintain Cardano. The native currency on the Cardano blockchain is called ADA.
The mission of IOHK is to "create accessible financial services for all" by utilizing the peer-to-peer reviewed blockchain technology. They are the primary force behind the development of Cardano.
The development is supported and funded by Emugro. Finally, As the custodian organization for Cardano, the Cardano Foundation is a non-profit corporation that is subject to regulation. To preserve, keep safe and promote the Cardano Protocol technology is their primary duty.
Blockchain Trilemma
Cardano's approach to the blockchain trilemma of security, scalability, and decentralization is twofold;
First, the project uses a unique proof-of-stake algorithm called Ouroboros which allows users to earn rewards for validating transactions on the network. This consensus algorithm is incredibly energy efficient, meaning that it can be run on a large number of nodes without the need for special hardware.
Second, Cardano has a treasury system that funds future development of the platform. This two-pronged approach gives it a unique advantage in the blockchain space. Cardano also uses a unique system of layered protocols, which allows it to scale without sacrificing security or decentralization.
To tackle this scalability, IOHK has drafted a scientific paper by the title of ‘Hydra’. It is a layer 2 solution, soon to be deployed on the Cardano blockchain. The image depicts the basis of Hydra.
It shows that Cardano’s blockchain can simply confirm that the 30 ADA coins that once left to ‘Hydra’s head’ are returned to the blockchain. The number of coins never change. It is just that in the second layer (Hydra), coin ownership might have changed, giving Alice 20 ADA and Bob and Carol each 5. The benefit is that a lot of quick transactions between lots of users can happen at the second layer without directly affecting the blockchain. Hence, more speed and less fees.
Additionally, every stake-pool (the ones confirming transactions on the network due to the ouroboros mechanism) can open one of these Hydra heads. One head is designed to cover 1000 TPS. This means that as the project grows, the number of stake-pool operators will grow too which in turn enables more Hydra heads and thus more throughput and TPS. A linear growth model, and the first of its kind.
Cardano vs Ethereum
Cardano is often compared to Ethereum because both platforms are hosting a number of decentralized applications (dApps) and both aim to solve some of the same problems. Due to its early entry into the market and significant adoption, Ethereum has the first-mover advantage. However, Cardano's advantage is that it has learned from the errors of tens of thousands of earlier initiatives to create a more resilient solution that is future proof. It's important to note that Charles Hoskinson, the founder of Cardano, originally co-founded Ethereum.
Moreover, Cardano is more scalable than Ethereum, meaning that more transactions can be processed per second. Additionally, Cardano is more flexible than Ethereum, as it offers a wide range of features that can be customized to fit the needs of a particular application.
This does not mean Ethereum is out of the game. The most probable scenario is that both chains will co-exist and fulfill the needs of its clients.
The picture shows some of the current stats of the projects building on Cardano (compiled by community members and no official company release)
Cardano and Africa
IOHK has plans to help develop Africa through their partnership with the African Development Bank. The project is called “IOHK for Africa” and it is a five-year plan. The goal is to use blockchain technology to help with financial inclusion, elections, and land rights. They are also working on a project called “Atala Prism” which is a blockchain-based identity system.
IOHK has been working towards solutions to balance the influence of institutions and politics in Africa. One way they hope to accomplish this is by creating a decentralized platform on which African entrepreneurs can establish their enterprises. These businesses will then have the same access to the global market as their competitors in wealthy countries because of blockchain. This would immensely help to level the playing field and allow African entrepreneurs to compete on a global basis.
From an investment perspective, partnerships and real world applications and solutions like these, open up a path towards more adoption. Cardano has stated multiple times that they are building a road towards a billion users. And by conquering the continent of Africa, this ambition goes beyond just a possibility.
Backlash for Cardano
One of the main complaints that the Cardano ecosystem has received over the years is its slow development. Its scientific approach and development which includes writing papers and having these ideas peer reviewed, take a long time. Only after that, development starts which takes a while as well. This slow approach results in the ecosystem still being at the very start and behind competitors, some that even launched after Cardano..
Compared to its competitors such as Ethereum or Binance, Cardano only has a handful of projects actually operating. Many of them are still developing and were/are waiting for various updates on the network. There is not much DeFi happening on the chain, nor does it have a stable coin yet. The main activities taking place currently are NFT’s and staking.
It is fair to say that they are still behind on their competitors regarding the ecosystem as of today. Charles Hoskinson, the CEO and founder of IOHK, has stated that this is only for the better as it means that every implementation is carefully designed to outperform and outlast its competition.
Looking at the technology of Cardano, it is in many aspects ahead of its competition, despite the fact they are slow. Especially with looking at current problems in the crypto space: many blockchains are unsustainable as they are not able to scale. Others are not designed to be interoperable. IOHK has taken every detail since its inception into careful consideration by numerous experts in various fields to make Cardano future proof. Perhaps the slow but delicate progress of the project will deem to be profitable in the near future. As they often say, ‘slow and steady wins the race’.
