Cardano is considered a third-generation cryptocurrency that combines features from both Bitcoin and Ethereum. Its unique blockchain technology utilizes a proof-of-stake protocol that can operate simultaneous transactions at once, setting it apart from other altcoins in the market today. Aside from this, what does Cardano promise to offer the crypto industry?
Find out more about the Cardano cryptocurrency and how it plans to revolutionize blockchain technology here!
What is Cardano?
Just like other cryptocurrencies, Cardano is a blockchain platform that can be utilized for monetary transactions where users can seamlessly send and receive funds through a secure network.
What sets this blockchain apart from its competitors is its unique multi-layer architecture based on mathematical principles and consensus mechanisms. The team behind the cryptocurrency aims to solve and improve upon the scaling problems of Bitcoin and Ethereum.
Through the cryptocurrency’s two-layered blockchain, users can transact with one another, develop decentralized applications (dApps), and execute smart contracts all at the same time. A smart contract is a self-executing contract with terms and agreements directly written in a blockchain. On another note, dApps are digital programs that exist and run on the blockchain.
Cardano’s humble beginnings
Released in 2017, Cardano is the first peer-reviewed blockchain based on two years’ worth of scientific research. The developers behind the cryptocurrency include academics, scientists, and blockchain experts from various universities including the University of Edinburgh and Tokyo Institute of Technology.
It was conceptualized by Ethereum co-founder Charles Hoskinson to create a better blockchain and smart contracts platform, devoid of the scalability issues Bitcoin and Ethereum are facing. With the help of Jeremy Wood, a former Ethereum operations management employee, they teamed up with expert engineers and cryptographers to create the Cardano whitepaper.
Today, Cardano is supported by three organizations overlooking the project: The Cardano Foundation, Input-Output Hongkong, and EMURGO. However, these organizations do not own Cardano. Instead, they support the project through marketing strategies, protocol research and development, and financial support.
How the Cardano blockchain works
There are two core components running the Cardano blockchain made possible by the Ouroboros proof-of-stake protocol. This includes the Cardano Settlement Layer (CSL) that acts as a unit of account where users transact ADA coins with each other, and the Cardano Computational Layer (CCL) that runs the smart contracts.
Ouroboros proof-of-stake protocol
According to Cardano’s official website, the Ouroboros is the ‘first provably secure proof-of-stake protocol’ based on peer-reviewed research by experts in the cryptography field. The node operators receive rewards in the form of ADA coins by completing network activities such as mining the blockchain and validating the transaction.
Moreover, the Ouroboros protocol divides the blockchain into time-sensitive periods called ‘epochs’. The network selects nodes or slot leaders within a stake pool to create or confirm transactions for a given epoch.
In theory, Cardano’s blockchain is scalable because each epoch can be partitioned infinitely. This allows the blockchain the flexibility to process transactions from various users at once without overloading the network with protocols.
Since the code allows various protocols to be performed at the same time, the functionality of blockchain is enhanced. As a result, the growing needs of the crypto community are given more attention and accommodation.
This system eliminates the need for excessive computational power required by a proof-of-work protocol and guarantees an objective way of picking a validator through a secure and energy-efficient process.
Dual-layer blockchain architecture
The Cardano blockchain is what sets it apart from other cryptography networks. Since settling ADA transactions and creating smart contracts can be done simultaneously on the dual-layered blockchain, the network has a higher processing speed.
In the first layer of the blockchain, the CSL verifies and records all ADA-related transactions between its users. This layer serves as the balance ledger that keeps track of all ADA transactions and trades.
The second layer handles all the developments of the network. This layer allows developers to create smart contracts, protocols and decentralized applications that will diversify the network’s services.
Solving the scalability problem of Bitcoin and Ethereum
Bitcoin and other altcoins that preceded Cardano all faced scalability issues. The blockchain of most first and second-generation cryptocurrencies consume a large amount of resources and energy to mine coins and execute even a single transaction.
The proof-of-stake protocol eliminates this through its careful selection process. This means that the Cardano network offers a more energy-efficient and sustainable network that would benefit the crypto industry in the long run.
The unique design promises better security, scalability, and compatibility in its blockchain protocols to cater to financial industries and institutions. This means it can be utilized at a global scale at par with legacy financial systems.
Cardano aims to run traditional protocols developed by altcoins that preceded it to accommodate large scale transactions from financial institutions and data infrastructure providers such as Facebook and Google.
However, since Cardano is still in its infancy stage, concrete examples of its utilization are limited. The full rollout of the blockchain is scheduled into five eras called Byron, Shelley, Goguen, Basho, and Voltaire.
Currently, Cardano has completely transitioned from Byron to the Shelley era in July 2020. This means the blockchain was successful in the network implementation of its proof-of-stake system.
As Cardano progresses, more nodes will be run and utilized by the community. Now that the Goguen era is set to roll out, the network will begin to integrate smart contracts and dApps on the blockchain.
Moreover, Cardano’s blockchain protocols aim to provide financial services to various sectors especially the world of business and finance. This can help bridge the gap between financial institutions and the crypto industry amidst various government calls for regulation.
Cardano has faced a lot of challenges and criticisms for its ambitious plans but there’s no doubt that the cryptocurrency is set to create waves of change and innovation in the future.
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