Cardano was one of the most promising cryptocurrencies for a long time. Especially in the late summer of 2021, the price of Cardano’s native token, ADA, rose massively. But in the context of the big Bitcoin crash, the ADA Token was hit particularly hard. The token has fallen nearly 60 percent from its all-time high. Is Cardano at the end? In this article, I will be sharing with you everything you need to know about Cardano in 2021.
What Is Cardano?
Initially founded in 2015 by Ethereum co-founder Charles Hoskinson and released in 2017, Cardano is a third-generation open source, fully decentralized “blockchain platform”. The platform aims to deploy its own Smart Contracts as well as decentralized applications (DApps). Cardano is a research-driven platform, developed by a team of scientists, researchers, and engineers, all experts in the field of cryptography.
Cardano is a blockchain made up of three partners, playing key roles in its ecosystem:
- Cardano Foundation: A Swiss-based third party organization that supervises the Cardano eco-system. The foundation is also in charge of establishing business norms and providing guidance to the project community.
- Input / Output (IOHK): A technology company founded by Charles Hoskinson and Jeremy Wood, responsible for developing and maintaining the Cardano platform. IOCK is fully decentralized and is a leader in building computer systems.
- Emurgo: A leading blockchain technology firm, delivering advanced technical solutions to software developers, business startups, corporations, and public sector organizations.
Cardano’s Native Token (ADA)
ADA is the Cardano blockchain’s native token. It’s a safe and smart token that continues to grow in value and gain more and more followers. The ADA token, the platform’s native cryptocurrency, was launched in an ICO (Initial Coin Offering) that generated over $62 million, with a total of 31 billion tokens distributed.
How does Cardano (ADA) work?
The Cardano platform is built in two layers:
- Settlement Layer: allows users to send and receive ADA tokens from one wallet to another by performing a secure transaction (similar to Ethereum).
- Computation Layer: this part is still under development, but it will allow users to sign Smart Contracts. Moreover, developers will be able to modify them with the help of “Soft Fork”, without disrupting the platform.
As mentioned at the beginning of this article, Cardano is a third-generation blockchain (3.0). It was created with the aim of solving the problems of scalability, interoperability, and sustainability that other blockchains, such as Bitcoin (BTC) or Ethereum (ETH), face. The Cardano blockchain is based on two fundamental principles:
- “Peer Review”: i.e. projects are validated by a number of researchers and developers around the world, who give their opinions on them
- The separation of payment and functions of decentralized applications, in order to avoid the connection between the funds and the DApps. They are going to develop a protocol called “KMZ sidechains“, dedicated to this modification.
Unlike Bitcoin which uses a “Proof of Work” system, Cardano is based on a technology called “Ouroboros“. In addition to being secure and mathematically verifiable by many scientists, Ouroboros is an algorithm that allows Cardano to increase the number of transactions per second and thus to validate a block every 20 seconds, this time could gradually decrease as time goes by.
Cardano’s founders and engineers need money to continue developing their platform. For this, the developers have created a Smart Contract used as a decentralized bank account. It will allow the platform to recover a small commission on each transaction fee and mining reward. The money collected by the Smart Contract will be used to fund Cardano’s ambitious projects. The community plays a very important role in the development of the platform and the decisions made by the founders.
Cardano wants to improve the “peer-to-peer” system used by Bitcoin (BTC). The problem with the latter is that the higher the demand for transactions, the higher the bandwidth consumed by the “peer-to-peer” network will be. This is where the RINA (Recursive InterNetwork Architecture) solution comes into play. RINA is a system, which aims to save bandwidth by creating “sub-networks” that will group nodes together. This method allows to consume less bandwidth and to improve the flexibility of the Cardano network.
What are the advantages of Cardano?
Cardano has the ambition to become the new Ethereum, and it seems to be quite close to achieving this goal. Indeed, the blockchain has many advantages over its competitors.
#1 A More Efficient Blockchain
Thanks to its structure with two layers, the blockchain is more efficient. Indeed, transactions and smart contracts can be processed separately. Thus, if there is a change in one of the layers, there will be no impact on the other. This also allows Cardano to scale easily in the future when there is a surge in demand and usage.
#2 A More Adaptable Blockchain
Cardano is more adaptable, especially when it comes to creating smart contracts. Indeed, a single smart contract can be modified to fit different users. This way, we can be sure that all parties involved in the contract respect the rules.
#3 A Decentralized Blockchain
The Cardano blockchain is decentralized. This means that no central authority or entity can exert excessive control over the security and validation process of transactions. In a decentralized blockchain network, no one has to know or trust anyone else. Each member in the network has a copy of the exact same data in the form of a distributed ledger. If a member’s ledger is altered or corrupted in any way, it will be rejected by the majority of the members in the network.
How Do We “Mine” Cardano?
Cardano runs on a “Proof-of-Stake” model instead of the traditional “Proof-of-Work” model. This means that you cannot technically “mine” ADA tokens similar to what you can do with Bitcoin and Ethereum. The Proof of Stake (PoS) concept states that a person can mine or validate block transactions according to how many coins they hold. For Cardano’s case here, anyone who owns Cardano can stake it and set up their own validator node. When Cardano needs to verify blocks of transactions, its Ouroboros protocol selects a validator. The validator checks the block, adds it, and receives more Cardano for their trouble.
The average retail investor wouldn’t normally have a large amount of Cardano to stake, thus resulting in the likelihood of them being chosen as a validator, to be very low. As such, most would join staking pools instead. The staking pool’s owner sets up the validator node, and a group of people will pool their coins together for a better chance of winning new blocks. Rewards are split among the pool’s participants and the pool owner may also take a small fee.
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Cardano vs Solana
Cardano: The Technically Perfect Network
Currently, third place among cryptocurrencies in terms of market capitalization is the Cardano network ADA token. Cardano experienced a growth phase especially in the spring and summer and has established itself as the most important cryptocurrency after the two alpha animals Bitcoin and Ethereum.
Cardano is considered the most technically mature network on the market. The Cardano Foundation is developing the blockchain with a team of scientists according to empirical standards. The blockchain is based on the efficient proof-of-participation consensus mechanism and has optimized the smart contract function this year. This is why Cardano is a real competitor for Ethereum.
Solana: Extremely fast transactions
Solana is the shooting star among cryptocurrencies. The blockchain offers a modern consensus mechanism called proof of history, which allows for extremely fast transactions. The high transaction speed and high scalability of the Solana blockchain make it an extremely exciting project.
In contrast to Cardano, Solana has seen a strong rise in recent weeks. Even a brief crash of the blockchain in September could not stop the rise. Meanwhile, the SOL token has already reached number 6 among cryptocurrencies according to market capitalization. Solana could soon attack Cardano’s third place.
Cardano vs Ethereum
What Are The Similarities?
It’s no coincidence that Cardano and Ethereum have a lot in common. Because two of the co-founders of the Ethereum network are the developers of the Cardano network. Charles Hoskinson and Jeremy Wood contributed to the Ethereum white paper. These two then joined forces to create the new network.
Due to the co-founders in part, Cardano has been heavily oriented to the Ethereum network. Both networks provide a basis for smart contracts or smart contracts. Both networks have network-internal tokens (Ether / ADA). In addition to the function as a means of payment, the networks were primarily built for developers to build decentralized applications on their blockchains.
Decentralized applications that can be built on Cardano and Ethereum include:
- ICO (internal tokens)
- DeFi applications
- Decentralized Autonomous Organizations (DAO)
What Are The Differences?
The differences between the two networks lie in the technical details. The Ethereum network is much faster than the Bitcoin network but has long used the same consensus mechanism, “Proof of Work”, to validate transactions. On the other hand, Cardano uses Ouroboros, a version of a “Proof of Stake” consensus mechanism, with the miner replaced by validators. Ethereum is now also moving to “Proof of Stake” as well.
Ethereum is known for its slower transactions and high transaction fees. By transforming itself also Ethereum 2.0 the network wants to become faster, cheaper, and more secure. But Cardano is technically a few years ahead of Ethereum. Because the Cardano Foundation, as a non-profit organization, works with scientists on the basis of evidence-based principles for further development.
Comparing Both Together
Both Cardano and Ethereum have their advantages. Here is an overview:
|Transactions||Faster and Cheaper Transactions (Ouroboros)||Slow with High Transaction Fees|
|Consensus Mechanism||Proof of Stake||Proof of Work (Transitioning to Proof of Stake)|
Future of Cardano
Cardano is a safe cryptocurrency with good potential due to the decentralized nature of its blockchain and also, due to the multi-tiered architecture that guarantees its scalability. From the beginning of 2021 and more precisely, from March, Cardano has had several successes. Indeed, Cardano offers important liquidity. The interest of investors is growing. So what are the upcoming plans and exciting projects for Cardano in the future?
The Cardano roadmap is a summary of Cardano’s development, which has been organized into five eras: Byron, Shelley, Goguen, Basho, and Voltaire. Each era is centered around a set of functionalities that will be delivered across multiple code releases.
While the eras of Cardano will be delivered sequentially, the work for each era happens in parallel, with research, prototyping, and development often in progress all at once across the different development streams.
The work of each era is gathered and presented on its dedicated page, representing years of effort. Here you will find an overview of the goals of the era, as well as descriptions of the core functional components, links to associated academic research, status updates, and even real-time code commits.
Where Are We Now?
On September 12 at 21:44:51 UTC, Cardano’s network update, Alonzo, is finally live. With Alonzo’s arrival at 21:47 UTC at epoch 290, smart contracts can now begin to be created and deployed on the Cardano mainnet. The update is a key part of the Goguen era, which focuses primarily on building smart contract capabilities. Goguen was developed in tandem with Shelley, the earlier era that introduced “Proof of Stake” protocol, Ouroboros, to the network more than a year ago, as part of an effort to build out the network’s security and decentralization.
As of December 8th, the number of smart contracts based on Plutus, a Cardano-based smart contracts platform, had hit a milestone of 888, data released by Cardano Foundation indicates.
We can also see the exciting amount of projects that are already developing in Plutus. The ecosystem map above is “a beautiful vista” of what the future holds for the top network. It is no secret however that Cardano is still in its early stage of development and the network is bound to face some difficulties going forward.
Cardano is a blockchain with very ambitious plans, which aims to provide a revolutionary solution, in order to solve the many problems that almost all blockchains face, the main objective is to ensure that any developer who is not specialized in developing on Blockchain can easily start working on Cardano. It is supported by a lot of scientists and researchers, who bring a philosophical and mathematical vision to the development of the platform.
However, the project is still under development and has not really proven its leadership in the cryptocurrency market. Most of the internet users are investing speculatively, as they believe in the future of the Cardano blockchain.
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Thanks for giving all the details about Cardano. It would be really helpful for me.