Cardano is a proof of stake blockchain platform that aims to enable the execution of a variety of blockchain apps (for example, smart contracts). Founded in 2015, the project serves as the foundation of the ADA cryptocurrency. The motivation behind the creation of Cardano is to address and optimize known difficulties of existing cryptocurrencies. Cardano is the first and so far also the only project that was developed based on scientific knowledge and approaches.
Who is behind Cardano and what is their vision?
Cardano is backed by a whole alliance consisting of the company IOHK (Input Ouput Hong Kong) of the former Etherium co-founder Charles Hoskinson, the Cardano Foundation founded in Switzerland and Emurgo, a Japanese company. IOHK will be responsible for the technical developments, design as well as construction and maintenance of the blockchain. The Cardano Foundation is the official “owner” of the blockchain and represents the Cardano project to the outside of the world. Emurgo is the company that develops and markets the commercial applications.
These three institutions have each been pursuing a vision of full decentralization since late 2017. Decentralization means that there is no intermediary, but that development is driven by the people who also build out the application capabilities. Cardano aims to create a technological platform on which financial applications can be developed and executed by anyone.
How does Cardano work?
Cardano is being called as the third-generation blockchain and aims to solve the scaling problems of the first (Bitcoin) and second (Etherium) generations. The blockchain works according to the Proof of Stake method. The algorithm behind the Proof of Stake method is called Ouroboros. Here, users (validators) invest a certain amount of ADA coins to signal their participation. This is how they demonstrate participation in the process and assign (stake) their coins to a preferred pool (Such as our Honey Stake). The validators of the pools then have to ensure that they are always online and generate new blocks on behalf of the participating stakeholders. This means that unlike the Proof of Work method, participants have the opportunity to indirectly participate in the validation process without being the true validators – for which they are compensated.
Advantage to other cryptocurrencies
Cardano tries to address where other blockchains have their weaknesses: Scalability, compatibility and sustainability:
Due to the nature of the blockchain, Cardano will be able to manage more than one million transactions per second (TPS) in the future. At the current time, this is more than 15 times more than VISA, for example, is capable of. For comparison, Bitcoin manages just 7 TPS and Etherium 15 TPS.
Currently, there is no compatibility between the individual cryptocurrencies within a blockchain. This is where Cardano wants to start and enable interaction between different cryptocurrencies. A good example of this is the use of WLAN. Let’s say a blockchain is your smartphone and you want to use WLAN, which in that case is the cryptocurrency. If the compatibility is not there, you will only be able to use WLAN at home. Your smartphone is not compatible for all other Wi-Fi networks. In this case, Cardano stands for a smartphone that is compatible for all Wi-Fi networks applied to transactions.
Another important advantage, is the significantly lower energy consumption as well as less computing power required. The higher the Bitcoin or Etherium rises, the higher the power consumption. This is because the more complex the puzzles, the more computing power is required. Cardano has developed the Proof of Stake method for this purpose. Unlike mining, staking at Cardano is not an individual task, but a collective goal. Thus, not only the user who alone generates the most computing power is rewarded, but also those who have staked (according to the number of held (staked) coins). This means that even users with few coins earn a reward and are rewarded for their work. The decisive factor is therefore not the single large pool, but the mass of smaller independent pools.
Possible use of Cardano
- Protection against counterfeiting in branded products or art trade
- Certification and verification of supply chains
- Data protection in government processes, such as the secure digitization of official data, for example tax data, vaccination passports or health insurance data; authorities and states should be able to do without private third-party providers by using Cardano technology.
- Regulation in the pharmaceutical industry: protection against counterfeit or adulterated drugs
- Authentication of certificates, such as degrees and diplomas
What can we expect to see soon with Cardano?
Cardano has already evolved in many ways and has a broad community. Starting in August 2021, Cardano wants to take further steps forward and enable the transacting of smart contracts. These are computer protocols that either map or verify a contract or provide technical support for contract negotiation or settlement.
Cardano is definitely a blockchain with a clear vision of knowledge and togetherness. The clear scientific route makes the project particularly interesting and attractive to the market. However, it should be noted that Cardano is not a short-term investment, but a long-term project. Those who are looking for quick money will therefore not find what they are looking for with Cardano. However, those who believe in the vision and are interested in sustainable growth will be rewarded with new development progress and sustainable growth with Cardano.