Both trailblazers in their own right, Bitcoin and Ethereum made headways for cryptocurrency in the consumer market with Bitcoin setting the stage in 2009 and Ethereum offering smart contracts on its blockchain. Since then, each digital coin that came afterwards has something to offer, be it a new feature or an improvement from its predecessors.
Dubbed as the third generation cryptocurrency, Cardano follows in the footsteps of the two biggest cryptocurrencies, steadily climbing its way up the crypto market as one of the top performing digital assets. Find out what Cardano’s groundbreaking network has to offer crypto traders here at Cryptoshimbun!
What Cardano cryptocurrency is all about
Cardano is one of the fastest-growing cryptocurrencies in the market and currently a top-performing asset in terms of market capitalisation. However, before it reached this success, Cardano started as a research project conceptualised by Ethereum co-founder Charles Hoskinson.
With the help of Jeremy Wood, a former Ethereum operations management employee, plus a variety of researchers and blockchain experts in the academe, the Cardano whitepaper was created in 2015.
It is the first peer-reviewed blockchain based on two years worth of scientific research. The blockchain was officially launched in 2017, aiming to solve the scalability, interoperability, and sustainability of the cryptocurrencies that preceded it, specifically Bitcoin and Ethereum.
Similar to other cryptocurrencies, Cardano has a monetary function for seamless and decentralised transactions using its native coin, ADA. The coin is named after Ada Lovelace, one of the few 17th-century female mathematicians who was also regarded as the first computer programmer.
Although Hoskinson and Wood are the key authors behind Cardano technology, they don’t completely overlook the project. Three major stakeholders support the development of this project namely:
- Cardano Foundation – A non-profit custodial entity for Cardano that is responsible for the primary supervision and oversight of the entire brand.
- Input-Output Hongkong (IOHK) – A research development company founded by Wood and Hoskinsons to help engineer the Cardano blockchain. It is also dedicated to promoting blockchain education on a wider scale.
- Embargo – The large funding entity that financially supports Cardano for future developments of its blockchain technology.
How Cardano works
At the heart of Cardano cryptocurrency is its blockchain technology called Ouroboros. It is the first ‘provably secure’ algorithm that uses a proof-of-stake protocol to send and receive ADA coins securely at all times. Moreover, the technology also allows the blockchain to operate on more secure and scalable terms, aiming to solve the energy consumption issue of both Bitcoin and Ethereum.
The Cardano blockchain is split into slots called epochs that can be partitioned infinitely. This technology allows the network to be scalable and flexible in settling transactions without the need for an enormous amount of energy.
Through the proof-of-stake algorithm, the Cardano network will randomly select users to become nodes. These nodes will become slot leaders of an assigned epoch. It’ll give them a chance to mine their assigned epoch and earn ADA rewards for their services.
Every user who stakes ADA on the blockchain will have a fair chance to become a node and mine a block on the network. This eliminates the main structure of the proof-of-work consensus that requires tons of energy to sustain.
Proof-of-stake vs proof-of-work
Most crypto blockchains like Bitcoin operate on a proof-of-work consensus algorithm to verify transactions. Whoever solves the equation first can mine the blockchain and get cryptocurrency as an incentive.
However, the proof-of-work system requires a lot of computing power to make a single transaction, making it unsustainable in the growing demand of the crypto market. Proof-of-stake aims to solve this problem by selecting participants or nodes through stake pools.
What makes Cardano different from other cryptocurrencies in the market is its ability to simultaneously validate transactions as well as create dApps and enact smart contracts. This is possible because of its dual-layer blockchain architecture that includes the Cardano Settlement Layer (CSL) and the Cardano Computational Layer (CCL).
The CSL layer serves as the balance ledger for all ADA transactions on the blockchain between Cardano users. On the other hand, the CCL layer keeps track of all smart contracts and dApps that’s created on the blockchain.
Since the CCL layer isn’t connected to the CSL balance ledger, users can create personalised rules and commands for their smart contracts and dApps.
Cardano has its own wallet where users can access their ADA coins. Unlike most crypto wallets, the Daedalus wallet also runs a full blockchain node allowing users to have full control over their funds on the Cardano network.
This wallet also allows users to take part in the staking system. Account-holders can receive rewards for delegating ADA or running a staking pool and becoming a node validator.
Cardano: Third generation cryptocurrency
Although still in its infancy, the Cardano network promises better security, scalability and compatibility in its protocols through the Ouroboros proof-of-stake protocols. This protocol aims to solve the lapses of its predecessors by providing a decentralised system that facilitates various transactions at once at significantly lower energy consumption.
This development can benefit the crypto community in the long run and speed up transactions more securely and efficiently.
Bridging the gap between crypto and financial institutions
The Cardano network also aims to entice banking institutions and government financial agencies towards crypto adoption with protocols utilizing dApps and smart contracts to provide financial services.
This can potentially help bridge the gap between the financial sector and the crypto industry amidst a call for regulations and control from governments including the United States, China and South Korea.
Cardano’s full blockchain rollout is scheduled into five eras namely Byron, Shelley, Goguen, Basho and Voltaire. Currently, the network is in the Shelley era that aims to completely decentralise the entire network.
Once it reaches the Basho and Voltaire era, Cardano will become an entirely self-sustaining network with improved scalability and optimal performance. Additionally, more nodes will be run and utilised by the users as the network progresses in its rollout. With this, there’s no doubt that Cardano will set the stage for more innovative approaches and applications of cryptocurrency in the future.