In this article, we will take a detailed look at Cardano, what the project is all about, where the network is headed and what can make Cardano a strong Ethereum competitor for being the go-to smart contract/DeFi blockchain.
What is the basic idea behind Cardano?
Cardano is a project that has its very own blockchain which is capable of running smart contracts. Based on a Proof of Stake consensus algorithm, the network aims to be a scalable and secure solution for the masses. The potential use cases range from the technology applied in the fields of education and government, to agriculture and healthcare, as well as to functions that individuals can take advantage of.
- Cardano’s goal is to offer scalable and secure solutions that bring blockchain technology to the masses
- ADA, the native token of the network, is used for staking and running the Cardano platform
- With high transactions per second (TPS) and similar use cases, Cardano is a competitor to the popular Ethereum network
Cardano’s value proposition
With its Ouroboros proof-of-stake (PoS) consensus algorithm, Cardano aims to provide a scalable, secure and environmentally friendly, decentralised financial system (DeFi) which is capable of running its own decentralised applications and is therefore applied to various aspects of everyday life. The developer team behind Cardano includes respected names from the blockchain and DeFi space, who back up the ambitious goals of the roadmap. The network is also aiming to offer its solutions to developing countries in Africa and Asia.
When it comes to transactions per second (TPS), Cardano is ahead of many leading blockchains. Additionally, the speed which the network operates at is set to increase with every update, working towards true scalability.
Utilising a unique blockchain design, Cardano has two layers: the Cardano Settlement Layer (CSL), which is where peer-to-peer transactions happen, and the Cardano Computational Layer (CCL), which is is a test space for decentralised applications & is responsible for the security of the Cardano blockchain.
Cardano’s history and background
Cardano was founded in 2015 and didn’t launch until later in 2017, with the core vision of establishing a network that overcomes the main challenges of blockchain technology: scalability, interoperability and sustainability. The founders of the project include former Ethereum developers such as Charles Hoskinson, who is the co-founder of Ethereum.
ADA, the network’s pre-mined native token, was launched together with the Cardano network in 2017. The total supply of ADA tokens is 45 billion. The name ADA comes from the first recognised computer programmer from the end of the 19th century, Ada Lovelace, daughter of the poet Lord Byron (this is where the name of the first era of Cardano comes from, see below).
ADA – Cardano’s native token
Let’s take a closer look at Cardano’s native token, ADA. Currently, the cryptocurrency can be sent and received by anyone worldwide, while the respective transaction is recorded in a permanent, secure and unmodifiable way and stored on the Cardano blockchain.
Furthermore, ADA can be delegated (or pledged) to a staking pool. Staking pools are where many stakeholders’ resources are combined and used as one. These pools are the nodes maintaining and running the Cardano network. The stake is ADA tokens that you can delegate to a staking pool (if you want to earn rewards from the transaction fees collected by that pool). You can do this in a convenient, user-friendly way through your Daedalus wallet. To be part of a staking pool, you need to own ADA first. You can easily buy Cardano (ADA) here.
If you prefer establishing a staking pool, you need to pledge all (or part) of your ADA holdings to your pool. The more ADA you pledge, the more rewards the pool receives, making your pool more attractive for others wanting to delegate their ADA.
The popularity of ADA in recent months can be attributed to the highly- anticipated Cardano-updates’ launch, the network’s competition with Ethereum, and a generally positive sentiment in the altcoin market.
As the network develops and expands, so do the potential use cases of ADA: you will be able to utilise your tokens for various applications and services on the Cardano platform in the future. Meanwhile, ADA will be used as the token that runs Cardano’s DeFi ecosystem, provides voting rights and represents a stake in the network.
This update is called “Alonzo”. Currently in tests, this highly-anticipated chain of events will enable Cardano to compete with Ethereum directly, both in terms of decentralised applications and smart contracts. Additionally, just like Ethereum, Cardano will also support the launch of native crypto tokens on its blockchain.
Cardano roadmap and important milestones
The roadmap of Cardano is divided into 6 time horizons, each of which has its own mainnet & forked from the others. They are named after various scientists, poets, and philosophers.
- Byron is the first Cardano mainnet, named after Lord Byron, a poet from the 19th century. It began with the launch of Cardano in 2017 and enabled users to buy and sell ADA, Cardano’s native token. It also introduced the ADA wallets Daedalus & Yoroi.
- Shelley, named after a British poet Percy Shelley, followed & closed the Byron-era in July 2020. The hard fork brought staking and more decentralisation to the Cardano network. This is the most-recently completed phase of the roadmap.
- Goguen, the current phase of Cardano, named after the American computer scientist Joseph Goguen, includes the next big step: the Cardano network will be able to run smart contracts. The anticipated dates for the implementation of the latter vary, the update is expected to happen in Q2-Q3 of 2021.
- Basho, named after the Japanese poet Matsuo Basho, will be the era where Cardano achieves its final form. Sidechains & compatibility with other blockchains like Ethereum will make Cardano a truly scalable network.
- Voltaire, named after the famous French thinker and writer, allows ADA holders to vote and decide the future of the Cardano network, hence this is called the “governance” era.
Cardano vs Ethereum
Cardano is often compared to Ethereum. However, next to the similarities, at the moment there are significant differences that distinguish the two giants from each other. The Ethereum mainnet currently uses a Proof of Work consensus algorithm, while Cardano opts for the Proof of Stake concept.
On this note, it is worth mentioning that Ethereum 2.0 will also bring the Proof of Stake algorithm to its network. When it comes to transaction speed and gas fees, Cardano seems to have an edge over Ethereum as it is able to process transactions significantly faster than its rival, doing so with lower fees overall.
When it comes to usability and practicality, it is not easy to tell whether Cardano’s smart contracts will actually prove to be a more optimal choice than Ethereum’s or not, as Cardano smart contracts are set to be launched in the near future. With that said, on paper, and according to the development team behind Cardano, it appears that with the Alonzo update successfully implemented, the Cardano network’s more flexible and easier to develop smart contracts might have an edge over Ethereum’s.
While many are aware of ADA, fewer people seem to know about the fundamentals behind the project. With the famously-high volatility of the crypto market in mind, being informed about the motives and the people behind blockchain projects might pay off in the long run. Cardano is no exception, considering the fact that, as you read above, it is only the beginning for this innovative network.
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Author: Aron Abraham