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Since we spoke about Ethereum, Polkadot and Solana recently, it seems fair to zoom in on Cardano to complete the set of blockchain networks that are leading the crypto world and understand what makes each of them unique.
What is Cardano?
Let’s dive into quick facts:
Cardano is a Proof of Stake blockchain (read more here) launched in 2017 by Charles Hoskinson, who is yet another co-founder of Ethereum.
Cardano was built under the umbrella of IOHK (Input Output Hong Kong), which is a blockchain infrastructure research and engineering company.
As an academic, Charles Hoskinson focuses heavily on research and peer review, which is why Cardano’s blockchain protocol has been rigorously reviewed by peers.
Cardano started off with an ICO (Initial Coin Offering), which is the crypto equivalent to an IPO in the real world.
In terms of Tokenomics….
ADA is the native coin of the blockchain, which is part of the top 10 largest cryptocurrencies by market cap.
ADA has a maximum supply of 45 billion coins. This limited supply means that it is designed to appreciate in value over time.
The ADA coin is mainly used for Staking, and paying transaction fees.
Did you know?
Even though Polkadot’s founder, Gavin Wood, is also an Ethereum co-founder, the story of Charles Hoskinson leaving Ethereum and setting up camp on his own has a bit more of “sal y pimienta” (salt and pepper in Spanish), which means a stronger seasoning, metaphorically speaking.
Apparently, Vitalik Buterin wanted to continue building Ethereum as an non-profit organization, while Charles Hoskinson wanted to accept VC money and be for profit.
At the same time, Vitalik aimed for a more practical approach of building and fixing along the way, whereas Charles Hoskinson had a bias for a more methodical and rigorous research approach before building.
These opposite views ended up with Hoskinson leaving Ethereum, and shortly after, building IOHK.
So what does Cardano bring to the table?
With the goal of solving for Scalability, Interoperability as well as Sustainability, there are a few key things you should know about Cardano.
1. Ouroboros.
Ouroboros is at the core of Cardano, and is the name its Proof of Stake protocol.
The way it works is as follows:
Ouroboros processes transaction blocks by dividing the chain into “epochs”.
These “epochs” will then be further divided into Time Slots.
Each Slot will have a Slot Leader who is responsible for adding a new block to the chain.
By doing this, Cardano manages to process a few hundred transactions per second. This number is planned to grow exponentially, once the so-called “Hydra scaling solution” is put into place, which will essentially allow each of Cardano’s staking pools to process around one thousand transactions per second.
2. Sidechains
Cardano aims to scale through layers:
Cardano Settlement Layer (CSL): this is the mainchain, acting as the balance ledger and keeps a record of all ADA and native assets transactions.
Cardano Computation Layer (CCL): the sidechains, that will contain information on why transactions occur. This is the layer that runs the Smart Contracts hosted on Cardano’s blockchain.
But what is a sidechain?
Think of it as adding lanes to a highway: if we only have one main lane, traffic will cause congestion sooner or later. However, if side lanes are being built and added to this highway, then the capacity tolerance in terms of the number of vehicles will proportionally increase as well, providing smooth and fast traffic.
In blockchain, it’s the same. Normally,
a sidechain is a secondary blockchain that runs parallel to a mainchain
. The goal is to offload the work, execute smart contracts or validate transactions, and then send the data back to the mainchain for security reasons.
Therefore, by having sidechains, Cardano ensures that the mainchain (CSL) doesn’t suffer from congestion.
3. Decentralization
Cardano achieves high decentralization by incentivizing participation:
a. More Pools
Cardano’s Staking is designed in a way that its rewards decline if there is too much ADA in a single pool, which encourages new pools to be formed.
If new pools are formed, means that there are more nodes connected to the network, hence contributing to greater decentralization.
b. No Lock-Up Period
There is also no staking lock or unlock time, therefore it’s a no-brainer, causing the fact that around 70% of ADA supply is being staked.
What’s Cardano’s most recent upgrade?
Like all other projects in crypto, a lot of things are being built.
Cardano has a clear roadmap, divided into 5 different Eras.
Each Era focuses on a particular phase of its development.
Recently, in September 2021, Cardano finally hit the milestone of reaching the 3rd Era, which is the Goguen Era, with the launch of its
Smart Contract
capability
.
With this launch, Cardano is introducing 2 programming languages:
Plutus
, a smart contract oriented programming language built for developers to build dapps (decentralized applications) and new tokens,Marlowe
, a high-level language for financial contracts, that comes with an easy-to-use platform that will allow non-programmers to build financial smart contracts.
In terms of Smart Contract Use Cases, it will be very similar to the likes of Ethereum, building mainly Defi, NFTs, and DAOs.
There was news about Cardano working in Africa… what’s that about?
Turns out, Cardano has an Enterprise Solution sector that aims to leverage blockchain to solve problems across multiple industries, and its main product is called Atala PRISM.
Cardano’s commercial and venture arm is called Emurgo.
Atala PRISM is a decentralized identity solution created on the Cardano blockchain.
This is how Cardano has secured a partnership with the government of Ethiopia to collaborate on tracking the performance and educational credentials of teachers and students in the country.
Final Thoughts
The Beauty of Diversity
If you’ve been following my previous articles, you must find some similarities between Cardano, and the likes of Ethereum and Polkadot. This is really not a surprise: all 3 of the people driving these 3 leading blockchain platforms had co-founded Ethereum together.
As geniuses as they all are, they each have a different vision of what the roadmap and best solution should look like. Therefore they went ahead and managed to create three separate monsters that are the building blocks that are shaping and enabling the crypto world. Isn’t this beyond impressive?
Imagine having just 1 of them… this space wouldn’t be evolving this fast, and people wouldn’t have so many options available.
My personal thoughts on Cardano
Cardano has one of the largest and most passionate communities in the crypto world, which is very powerful. No wonder how they’ve been in the solid position of top cryptocurrency by market cap all this time.
Having said this, I do have a bit of doubt in 3 aspects:
The lack of smart contract capabilities till very recently means that even though the community and market cap both seem very positive, we are yet to see what Cardano can actually do.
For technological disruptions of the magnitude of crypto, I tend to have a bias for action over heavy research and peer review. Think about it: it took Cardano 4 years to finally launch its smart contract... that’s a sweet long time, even more so in the crypto world.
Additionally, the speed of technological innovation in crypto is unseen, and the competitiveness of the smart contract space is rising very rapidly, so again, I tend to favor the practicality and flexibility of building and rebuilding along the way in such a fast-changing environment.
Because of this, I do believe the next few months are going to be critical for Cardano!
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