Since the beginning of cryptocurrency, developers have strived to take the next step towards the evolution of this domain. And as Bitcoin established the first generation of cryptocurrency and Ethereum the second, Cardano is trying its best to lead crypto into the third generation.
But what is Cardano?
The “Ethereum Killer” some say. But countless projects are claiming that.
However, in Cardano’s case, there are quite a few things that may turn this project into a true competitor for Ethereum.
Table of Contents
So, what is Cardano?
Cardano is a blockchain platform initiated by Charles Hoskinson and Jeremy Wood under The Cardano Foundation, IOHK, and Emurgo. And of course, on top of this platform resides the ADA cryptocurrency.
In essence, the project aims to become a smart contracts platform for decentralized applications that can fit the needs of a high-demand global market.
The Cardano project started its development in 2015 after Charles Hoskinson and Jeremy Wood left the Ethereum team. And after 2 years of research and peer reviews, in 2017, the first phase of the project was launched. The ICO took place on September 29, 2017, and raised approximately $62 million.
But as mentioned, the project was in its first phase, out of a total of 5 phases.
And although Cardano was launched as a platform without many functionalities, to begin with, the idea of a third-generation blockchain, improved scalability, interoperability, and sustainability caught the eye of the public.
How does Cardano work?
Cardano employs a proof-of-stake algorithm called Ouroboros and is incentivized through ADA. Although it’s far from its final form, the project seeks to bring innovation specifically into 3 areas cryptocurrencies are usually lacking.
First is scalability
It’s not the first time a project attacks the low speed of Bitcoin, the wasted resources required for a robust proof-of-work consensus, and the database that only gets bulkier and harder to manage.
Therefore, Cardano employed a proof-of-stake algorithm called Ouroboros.
The Ouroboros algorithm is a system to reach consensus upon ADA transactions in which nodes stake their cryptos to create new slots.
The staking process is organized in epochs that comprise several 20-seconds slots.
In the staking process, the algorithm randomly chooses a slot leader from the stakeholders (the node owners that keep a certain ADA stake). The chosen slot leader will then confirm transactions and earn rewards in ADA.
The chance is correlated to the number of coins held by a node. Naturally, whales may seem at an advantage, but the algorithm also allows people to delegate their stake.
The algorithm is supposed to address 2 layers:
- The Cardano Settlement Layer (CSL)
- The Cardano Computation Layer (CCL).
The CSL is meant to stock data regarding the actual transactions while the CCL is meant for the reason behind the transactions. Namely, CCL is addressing smart contracts. But CCL is yet to come out.
Blockchain projects are mostly data silos. Although nowadays DeFi projects allow for the creation of tokenized versions of other cryptocurrencies, converting a cryptocurrency to another without a third party is not yet possible.
In this regard, Cardano is looking to allow cross-chain transfers through the implementation of side chains that run along with the main chains via a two-way peg.
Furthermore, in this matter, Charles Hoskinson announced in July 2020 that the upcoming updates will bring an ERC-20 converter to redeploy tokens from Ethereum to Cardano.
Third comes sustainability
ICOs redefined what crowd-funded projects used to mean. Unfortunately, money tends to run out, especially when you develop advanced functionalities.
In this regard, Cardano wants to implement a Treasury that gathers small transaction fees to distribute funds to promising projects.
This way, developers can propose new features and projects and get voted through a DAO-like future by the Cardano community. Afterward, the developers won’t have to focus on an ICO to gather additional funds.
Developments on Cardano
The project as a whole sounds good. However, although Cardano has been online since 2017, the project is yet to reach its full potential.
So, let’s take a look over Cardano’s roadmap.
Byron (September 27, 2017)
The Byron era brings to life the first crucial technology developments of Cardano, launching the mainnet and enabling users to trade and transfer ADA.
Shelley (July 29, 2020)
The Shelley era came after a long wait and started in the summer of 2020 as a hard fork. From the centralized Cardano, in which the mining was done by a few selected entities, the project turned to the decentralized Cardano in which the staking is transferred to as many community nodes as possible.
Shelley also comes with the introduction of a delegation and incentives scheme, a reward system meant to drive stake pools and community adoption.
Goguen (scheduled for mid-December 2020 or March 2021)
The Goguen era is supposed to be the update that will truly turn Cardano into a smart contracts platform. And that’s because the mid-December hard fork is supposed to introduce smart contracts capabilities.
Goguen will come with Plutus, a purpose-built smart contract development language and execution platform that uses the functional programming language Haskell. And for the less technical users, it will introduce Marlowe, a high-level, domain-specific language (DSL) for financial contracts.
The Basho era doesn’t have a known date for deployment but it will open the gates of interoperability. It will come to bring significant developments around performance improvements and to introduce sidechains.
The final era of Cardano’s initial plan addresses the sustainability of a blockchain project. The Voltaire era will be the one to add to Cardano a treasury system and governance in which network participants will be able to use their stake and voting rights to influence the future development of the network.
Cardano vs Ethereum
Some consider that the true winner of 2021 will be the crypto project that will prove to implement a true & reliable proof-of-stake consensus system. And Cardano is not the only ‘Ethereum killer’ competing in this race. There is also Polkadot which follows Cardano’s evolution.
Ethereum 2.0 was scheduled for January 2020, but the Beacon Chain upgrade was introduced on December 1, 2020. The crypto community members already started opening up nodes and organizing themselves in staking pools. And Cardano is quite in the same situation, although it opened up staking with Shelley on July 29.
Although their staking chains are live, their functions are limited, and have no smart contracts yet.
As for Cardano, the Cardano PoolTool network is composed of over 100,000 stake addresses and over 20 billion ADA in stake.
In regards to staking returns, network performance, and functionality, we will surely get our verdict during 2021.
The criticism surrounding Cardano
No doubt, the Cardano project comes with an astonishing initiative to bring innovation to the crypto and blockchain world. Yet, the more complex it is, the more it is bound to have experts find faults in it.
And such is the case with Cardano.
The first critique on Cardano is that it’s still a blockchain in development and some of the most attractive claims are just theoretical. And until the Shelley update, there even were voices articulating that the Cardano development stopped.
Nowadays, Goguen is just around the corner, so the project is definitely still going on. But the fact still remains that many of the Cardano claims are theoretical. And as time passes, there is a chance their innovations won’t be as unique anymore, as that is currently the case with staking.
The scalability claims are also critiqued as Cardano is currently able to deliver around 257 transactions per second while there are already cryptocurrencies like Ripple’s XRP that offer 1,000 tps.
And as for the security, Cardano has been accused that it did not solve the double-spending problem. Although many ADA holders use the official Cardano wallet, Daedalus, the wallet works as a full node wallet. It downloads a full copy of the Cardano blockchain and independently validates every transaction in its history without needing hosted 3rd party servers.
And even if you are able to attempt a double spend, it’s next to impossible to change every other copy of the blockchain held by other Daedalus users and nodes.
- Cardano is the blockchain platform initiated by Charles Hoskinson and Jeremy Wood under The Cardano Foundation, IOHK, and Emurgo. ADA is the native cryptocurrency of the Cardano blockchain.
- Cardano employs a proof-of-stake algorithm called Ouroboros and is incentivized through ADA. Although it’s far from its final form, the project seeks to bring innovation into scalability, interoperability, and sustainability.
- Cardano’s roadmap comprises 5 eras, namely Byron, Shelley, Goguen, Basho, and Voltaire. Currently, the project is in the Shelley era and is soon going to cross into the Goguen era.
- The match between Cardano and Ethereum will finally be judged by how successful will the PoS implementation be. Polkadot is a competitor in this race as well.
- In terms of criticism, most of Cardano’s claims are still theoretical but the project’s developments will bring more and more of these claims to reality.