Cardano is known as a Proof of Stake blockchain project that has yet to reach its full potential. As a “third generation” blockchain, it seeks to solve the scalability issues inherent in second-generation blockchains, like the much-anticipated Ethereum 2.0.
Cardano’s development is characterized by a scientific philosophy and much scholarly research. With the 2020 release of Shelley, Cardano gets closer to achieving its goals.
Introduction
The Cardano project and its related ADA cryptocurrency have generated a lot of community buzz since its inception in 2015. The academic rigor applied to its development makes Cardano a should be unique in the crypto space.
The Cardano project is developed mainly by the Input Output Hong Kong (IOHK) technology company, founded by Charles Hoskinson. Hoskinson was also involved in Ethereum in its early days.
But what is Cardano and what functions does it have planned in its long-term roadmap? Let’s find out together.
What is Cardano (ADA)?
Cardano is a general-purpose blockchain and is designed based on peer-reviewed academic research. It was developed by a multidisciplinary team of engineers, mathematicians, scientists and business professionals.
Continuous platform development is always done with a scientific approach. According to its creators, the main design principles behind Cardano are security, scalability, and interoperability.
Ada, Cardano’s native currency, is used to perform operations on the Cardano blockchain, much like the relationship between ether (ETH) and Ethereum.
This development is split into several business units. IOHK handles the development of the Cardano protocol, while the Cardano Foundation oversees the project and EMURGO is responsible for business development and driving adoption. IOHK has also participated in the development of Ethereum Classic (ETC).
What is the Cardano Roadmap (ADA)?
The Cardano roadmap has five main phases: Byron, Shelley, Goguen, Basho, and Voltaire. Byron, the first phase marks the launch of the network along with basic functionality, such as ADA transfers. The Shelley hard fork takes place in 2020 and presents the next steps towards decentralization. The nodes are currently run by the Cardano community, with stake pools run by ADA holders.
Functional smart contracts cannot be deployed on the blockchain as of December 2020. As part of the roadmap, this will be implemented as part of the Goguen update. Following Goguen, the Basho era focused on optimizing scalability and interoperability, and the Voltaire era introduced a treasury system to solve the problem of governance.
How does Cardano (ADA) work?
Cardano is designed as a “third generation” blockchain, which aims to solve the scalability issues of generation one (e.g. Bitcoin) and generation two (e.g. Ethereum).
According to proponents of this classification, previous-generation blockchains were congested, which fundamentally limited the amount of throughput they could handle. This makes them an ineffective choice for worldwide mass use. We can look at the fluctuating BTC and ETH transaction times to confirm this.
Cardano references VISA’s computing power in their documentation for comparison:
It was born to improve throughput in a number of ways. One of the most important pillars of this goal is their own Proof of Stake (PoS) consensus mechanism called Ouroboros. Ouroboros reduces energy costs compared to Proof of Work (PoW) while providing provable security guarantees.
Cardano’s Layer 2 solution for further scalability, Hydra, is named after the mythical creature of the same name. The idea here is that throughput is increased as each new node is added to the network.
The hard fork combo is also a key feature of Cardano, allowing for a hard fork without interruption or restart of the blockchain. The success of the Shelley update proves the effectiveness of this approach.
Cardano (ADA) Key Features
As we mentioned, Cardano’s strength is the academic and scientific philosophy behind it. The development team has published more than 90 white papers on the underlying technology. The project has a well-defined roadmap, while the network wants built-in security, scalability, and interoperability.
While not yet live, the Cardano blockchain will enable future scalable smart contract functionality. Built with VISA as a competitor and limited to hardware as a theoretical goal, it could have all the building blocks needed to be used as a powerful fintech disruptor.
Like Ethereum, the possibilities for Cardano’s use cases are huge. It is only intended to act as the base layer for applications built on top of.
Despite the big promises, it has yet to fulfill it – like most things in the crypto space except for Bitcoin. Although Cardano is ambitious about its platform, its development is relatively slow.
What is an ADA token?
ADA is Cardano’s token, named after 19th century mathematician Ada Lovelace. 57.6% of the ADA supply was distributed during an ICO, in which Cardano raised $62.2 million.
The token is both a digital currency and a way to conduct transactions on the Cardano network (similar to how you need ether to transact on Ethereum).
ADA holders also have stakes in that network, which can be used in stake pools to generate staking rewards.
How to Store Cardano (ADA)
Daedalus is the open source desktop software wallet of choice for storing ADA, developed by IOHK. It is a full wallet, which means that the entire Cardano blockchain needs to be downloaded and each transaction is verified for maximum user security.
Lightweight wallets, which do not require downloading the entire blockchain, are Yoroi Wallet and AdaLite. ADA can also be stored on cold storage hardware wallets such as Ledger and Trezor through Daedalus, Yoroi Wallet, and AdaLite.
Closing thoughts
Cardano is an ambitious project that aims to provide blockchain infrastructure in the cryptocurrency ecosystem. While the project progress is slower than some might expect, it also sets the bar high.
But will this third-generation blockchain project become the dominant smart contract platform or will it be brought to market too slowly? Is there any fourth generation blockchains that can do better than what it does? These questions still need to be answered as Cardano moves further on its roadmap.