What is Cardano? Demystifying the long-awaited Ethereum-killer

[ad_1]

Cardano coin stock photo 1

Edgar Cervantes / Android Authority

In a world full of competing cryptocurrencies, it’s rare to find a project that prioritizes a slow and methodological approach to feature development. And yet, Cardano has found significant success by going down this exact path.

Founded in 2015, Cardano aims to deliver a decentralized blockchain platform based entirely on peer-reviewed research. It also often proclaims itself as a “third-generation” cryptocurrency network, building upon the fundamentals previously laid down by Bitcoin and Ethereum.

See also: The best cryptocurrency apps for Android

So what makes the Cardano platform unique, and why is it among the world’s most valuable cryptocurrencies? Let’s find out.

Understanding the basics

Given that Cardano is an extension of earlier cryptocurrencies, you may come across a myriad of technical phrases unique to this ecosystem. Here are a few such terms to get you started:

Blockchain: In the context of Bitcoin, a blockchain is simply a ledger of transactions spread across hundreds or thousands of computers. Over time, however, blockchains have become incredibly versatile. Specifically, a modern blockchain can store any kind of data. This allows third-party developers to create entire applications with data permanently stored on a distributed blockchain network.

Smart contracts: Originally pioneered by Ethereum in 2014, smart contracts leverage the properties of blockchain to create programmable, self-executing digital contracts. Execution of the contract is handled by the blockchain network when a certain condition is met. Since the conditions are pre-determined by both parties, a smart contract reduces the chances of disputes – all without central authorities like a court.

Decentralized applications: A decentralized application (dapp) is essentially just a computer program that uses smart contracts to achieve its functionality. The most popular dapp, Uniswap, is essentially a website that allows you to swap one cryptocurrency for another. In this case, every swap is recorded to the public Ethereum blockchain – thereby eliminating the risk of fraud and offering an unprecedented level of transparency.

What is Cardano?

Cardano positions itself as an Ethereum-rival, in part because it intends to offer the same functionality – with a few notable improvements. By the end of 2021, the platform aims to add support for smart contracts and decentralized applications.

Cardano’s primary differentiating feature then is the way it handles new transactions. More specifically, Cardano uses the Proof of Stake consensus mechanism for transaction verification, which is several orders of magnitude faster than Bitcoin and Ethereum’s Proof of Work. We’ll circle back to how this change affects you and others using the network in a later section.

In a nutshell, though, Cardano prides itself on its efficiency and ability to outperform most other blockchain platforms. To that end, it is often described as a third-generation blockchain platform – alongside other projects such as Polkadot. However, it is important to note that these are mostly self conferred titles and hold no official relevance.

The Cardano blockchain platform was first conceptualized in 2015 by Charles Hoskinson – one of the original co-founders of Ethereum.

Notably, Hoskinson quit working on Ethereum after an internal dispute over the direction of the project. Vitalik Buterin, the other co-founder, argued that Ethereum should be structured as a non-profit organization, while Hoskinson lobbied for a commercial-focused approach. Ultimately, Buterin prevailed, and the non-profit Ethereum Foundation was born.

Knowing this, it isn’t surprising that Cardano shares Ethereum’s goals to a significant degree. Cardano also has a native cryptocurrency, called ADA, that can be used as an investment, transfer of value, and payments for functions on the blockchain, such as transaction fees. As of mid-2021, Cardano’s ADA is comfortably one of the largest digital currencies on the market.

What makes Cardano special?

ethereum trading

Cardano’s primary selling point is that its development follows evidence and science-based methods. This means that every single proposal or change to the platform is based on peer-reviewed research papers. This is somewhat unique in the cryptocurrency industry since most projects incorporate changes based on community feedback.

So far, over 110 research papers have been published by IOHK, the company that oversees Cardano’s development.

Keeping this rigorous standard in mind, Cardano’s developers came up with an overarching roadmap for the platform all the way back in 2015. Divided into five phases or eras, the roadmap takes Cardano from a simple token-only platform to one that supports complex decentralized apps and self-sustaining governance.

Cardano’s five phases include:

Byron: Phase 1 or Byron was released in September 2017 and represented the first version of Cardano released to the general public. It introduced the ADA cryptocurrency and the official Daedalus desktop wallet. Only three entities were in charge of transaction verification at this stage, which meant that Cardano was essentially centralized.

Shelley: This second stage focused on making Cardano decentralized by finally allowing anyone to participate in the transaction verification process. It also made ADA a highly performant cryptocurrency – managing to process thousands of transactions per second. All of this was accomplished by Cardano’s Proof of Stake consensus mechanism, dubbed Ouroboros. Shelley officially launched in June 2020.

Goguen: Cardano’s third era aims to introduce smart contracts and decentralized applications. Even though Cardano’s true utility lies in the existence of these features, they were conspicuously absent at the time of the platform’s release. A few delays later, Goguen is finally expected to introduce them in late 2021.

Basho: Dubbed the era of ‘scaling,’ Basho aims to scale Cardano even further by introducing sidechains. This essentially means that the primary blockchain will be split up into several smaller chains, called shards. Sharding is also a key feature of Ethereum’s Serenity network upgrade – and is expected to boost transaction capacity even further.

Voltaire: Cardano’s final goal is to become a self-sustaining system without the oversight of IOHK, Cardano’s parent company. Voltaire will introduce a full-blown governance system with provisions for user voting on new features and proposals. Cardano will only become a truly decentralized platform once this phase is complete.

If some of these names look familiar to you, that’s because they are all names of esteemed poets. Even the ADA token is named after Ada Lovelace, the mathematician who became the first computer programmer. Ada was also the daughter of the romantic English poet Lord Byron.

While Cardano’s eras do not have fixed deadlines, the roadmap has been the subject of some ridicule due to the slow process. In particular, support for smart contracts was expected to be released several years before its actual launch in 2021.

Cardano’s ace card: What is Proof of Stake?

Coinbase exchange stock photo 1

Edgar Cervantes / Android Authority

As with any cryptocurrency or blockchain platform, Cardano needs a mechanism to verify the authenticity of new transactions on the network.

Bitcoin, the world’s first decentralized currency, pioneered the Proof of Work (PoW) consensus algorithm to do just that. In a PoW-based blockchain, “miners” spend computational power to find a unique mathematical solution for a batch of transactions. The first computer to find the correct solution is rewarded for their effort, and the transactions within that batch are recorded permanently.

The PoW consensus algorithm has proven to be rock solid over the past decade. However, it is not without its problems. Most notably, the algorithm’s competitive reward structure has led to millions of computers joining the network.

On its own, this wouldn’t be an issue. However, factor in the carbon footprint of these miners and Proof of Work’s problems are suddenly much more tangible. It is also nearly impossible to scale the PoW…

[ad_2]

Read More:What is Cardano? Demystifying the long-awaited Ethereum-killer