What is Cardano?
What is Cardano?
Cryptocurrencies have been around in this world for quite some time now. Bitcoin was the very first cryptocurrency that completely revolutionized the way the existing financial system operates. Making payments to people has never been this fast and reliable.
Along with Bitcoin, there was an initial wave of cryptocurrencies that were all focused on solving the problems faced by the existing financial structure. All these cryptocurrencies that were created solely for the financial system made use of the blockchain technology. Initially, this was termed as Blockchain 1.0.
While the first wave of cryptocurrencies were all very useful in the world of centralized systems, we had barely scratched the surface of blockchain technology. This all changed with the launch of the Ethereum blockchain in the year 2015.
With the introduction of smart contracts, there now exist endless possibilities when it comes to blockchain technology. With Ethereum’s release, there was an evolution of the blockchain technology to Blockchain 2.0. This opened up a whole new world of possibilities.
With so many decentralized applications, the world was slowly moving towards complete decentralization. However, this came to a standstill when the existing blockchain technology could not handle such an increase in traffic. Transactions that used to take a few minutes to get confirmed started to take multiple days.
Now that the bottleneck was identified, it was up to the developers to come up with a fix for the blockchain technology. This is when Cardano came into existence. Cardano combines the best qualities of both the previous versions of the blockchain and also brings in extra speed and resilience to the table. Thus, the entire technology is more widely adopted. This new version of the blockchain technology is called Blockchain 3.0. Let us take a closer look at what is Cardano and understand how it can handle such high transaction rates.
In terms of functionality, Cardano is very much similar to Ethereum. Just like Ethereum, you can make financial transactions on the network. Cardano also supports the smart contract feature that is found on Ethereum, making it extremely useful.
Under the hood, Cardano is nothing like its predecessors. Cardano is the first cryptocurrency to have followed a scientific philosophy of a layered architecture. This layered architecture that Cardano makes use of is the whole reason for the high flexibility of the entire platform.
The layered architecture, when paired with a robust programming language like Haskell, has resulted in the fault-tolerant system that we can see today. Due to the layered architecture of Cardano, it has become relatively easy to implement new features onto the platform.
The Cardano blockchain also supports users to deploy DApps on the blockchain. It was due to the large number of transactions made by the DApps and smart contracts that brought the Ethereum to a standstill. This was due to the slow transaction verification time on that blockchain. Cardano has solved this issue with its very own consensus mechanism.
So from the Cardano review, we have understood what is Cardano. Let us now take a closer look at how the Cardano platform works and how it can handle more transactions than the Ethereum blockchain.
How does Cardano work?
With all the hype surrounding the transaction speed on the Cardano network, you might be curious to know how it works. Before we get into the mechanism that Cardano uses, let us understand how the existing methods were lagging.
The first-gen cryptocurrencies all made use of proof of work consensus method for verifying any transaction that was made on the network. This required immense computational power that was limited and hence, caused the whole verification process to slow down.
As a replacement for the proof of work consensus, the proof of stake consensus mechanism was introduced. This required users to stake a lot of coins in a node that would then verify the transactions on the network by comparing the transaction signatures. Even though this was able to reduce the transaction speed, it wasn’t able to eliminate the network congestion.
The layered architecture of the Cardano project helps to solve this problem. The layered architecture of Cardano separates the processing and the location of the smart contracts. This results in the two working independently.
The Cardano Settlement Layer or the CSL is the first layer of the Cardano architecture. This layer is responsible for verifying all the transactions on the Cardano network. Unlike the previous generation of blockchains, Cardano makes use of the Ouroboros consensus mechanism.
The Ouroboros consensus mechanism is a proof of stake consensus mechanism where the transactions are verified by nodes that have a large number of ADA coins in it. However, unlike the regular proof of stake consensus mechanism, the main chain branches out into sub-chains in the case of Cardano.
Transactions on the sub-chains are verified parallelly, thereby making the whole verification mechanism extremely fast. On average, the time taken by the sub-chains is just 20 seconds.
The second layer of the Cardano architecture is the Cardano Computation Layer (CCL). This is the layer where all the smart contracts are hosted and run. This separation of the CCL from the CSL allows the smart contracts to run independently without having to worry about transaction verification.
Additionally, this also allows different users to set different rules for the evaluation of the transactions.
Cardano also makes use of the KMZ sidechains. These side chains make use of proof of work consensus mechanism and help to transport any transaction securely from the CSL to the CCL. The KMZ side chains also help clients to communicate with the CSL without having to share any sensitive data.
Apart from gaining knowledge about what is Cardano, we also learn how Cardano works. Let us dig a little deeper and understand what makes Cardano so special.
The basis of Cardano
Just like how Ether is the currency on the Ethereum platform, ADA is the currency on the Cardano platform. Just like any other cryptocurrency out there, the price of ADA is also speculative.
Like Bitcoin, ADA is capped at 45 Billion as the max supply. This means that once we have 45 Billion ADA coins, there will no longer be any more coins produced. It is this feature that makes cryptocurrencies immune to inflation.
ADA coin is not backed by any asset like gold. The price, like other cryptocurrencies, is speculative. This means that if there are not many people supporting the coin at a particular price, then the price will go down.
It is due to this reason that the price of ADA, as well as the other cryptocurrencies, is very volatile. Let this Cardano review will take a look at the special features that Cardano possesses.
What makes Cardano Special?
There are many features that Cardano possesses that makes it an exceptional cryptocurrency. Some of these features are:
1- Decentralization: As Cardano also makes use of blockchain technology, it is completely decentralized and is free from all the problems that centralization brings to the table. Having the entire system decentralized helps Cardano to always have an uptime, meaning that it is nearly impossible to shut down the entire system.
2- DApps and smart contract support: Apart from being used as a way to transfer funds, the Cardano blockchain also supports DApps and smart contracts on its blockchain. As the time taken by the Cardano blockchain to verify transactions is very low, it is the perfect platform to have your DApps and smart contracts hosted in.
3- Fast transaction speed: Almost every single cryptocurrency out there fails to perform when the transaction load increases. This is not the case with Cardano. The transaction speed does not change even with the increase in load. This is because these transactions get processed parallelly. Thus, there is no delay in the transactions. This makes it the perfect platform for smart contracts and DApps.
4- Low transaction fee:Cardano makes use of proof of stake consensus mechanism, which is why the transaction fee that you would need to cough up is very less. The low transaction fee and the fast transaction speed make it the perfect candidate to host DApps and smart contracts.
5- Transparent: The entire Cardano network is transparent and anyone can view the transactions that were made on the network. Additionally, as this is an immutable ledger, the transactions once made cannot be edited. Thus, it is a great technology for bookkeeping.
6- Limited supply: Unlike the centralized fiat currencies, ADA has an upper cap of 45 Billion coins. This means that there won’t be a single coin over this limit, hence making it immune to inflation that the fiat currencies face.
Now that we know what is Cardano and the special features it possesses, let us analyse if we really need Cardano in this world.
Why do we need Cardano?
With over two thousand cryptocurrencies out there, why Cardano? This question must be ringing in your head right now. Most of the cryptocurrencies out there are not reputed cryptocurrencies and are often used for pump and dump schemes.
Cardano is one of the few cryptocurrencies to solve the existing problem in the crypto world. What makes Cardano so special is the ability to host and run smart contracts and DApps on its blockchain.
You might now be thinking that Ethereum can do the same and is more widely used. You aren’t wrong either. Ethereum is the world’s second most popular cryptocurrency and the one that introduced smart contracts and DApps to the world.
However, when the DApps started to become popular, the transaction load that is put on the Ethereum blockchain made it come to a crawling pace. The DApp crypto kitties alone overwhelmed the Ethereum blockchain and revealed its bottleneck to the whole world.
Cardano has been designed to handle such a high transaction rate. This means that not only will your fund reach the receiver instantaneously, but also the DApps and smart contracts will not experience any delay on the Cardano blockchain.
Cardano is sphere-headed by Charles Hoskinson who was also the co-founder of Ethereum. His immense knowledge about how smart contracts and DApps work on the Ethereum blockchain make the implementation of the Cardano blockchain a whole lot easier.
Additionally, Cardano is one of the few cryptocurrencies that released the final product only after careful consideration of features submitted by the users. So, the very first version of Cardano was feature-rich. All these characteristics of Cardano make it a very useful cryptocurrency.
Cardano value and price growth
The currency of Cardano, ADA has experienced extreme highs and lows in terms of the market price. Initially, when it was launched, the price of 1 ADA coin was just over 2 cents. Soon the hype surrounding Cardano grew and many even dubbed it as the Ethereum killer.
Riding this hype wave, ADA reached the price of 50 cents by the end of the year 2017. The price of ADA coins stabilized at this price. However, in early 2018, the hype surrounding altcoin grew and the altcoin bull run that followed took the price of ADA to a staggering $1.2.
Unfortunately for the late investors, ADA was not able to sustain this price and it soon started to recede once the bear market crept in. From a price of $1.2, ADA came crashing down to 12 cents in a matter of a few months.
Over the years, ADA has had several smaller bull runs. However, the price never managed to reach its all-time high of $1.2. Now that the crypto bear market seems to be slowly receding in 2020 and the upcoming Shelly main net launch of Cardano, the hype surrounding this cryptocurrency is higher than ever.
Currently priced at 2 cents per coin, we might see another big push that takes ADA back to its previous high. While nothing is certain in the crypto world, all the signs are pointing towards another bull run and ADAs mainnet release will certainly carry it along in this bull run.
In this Cardano review, we have understood what is Cardano and also how it works. We have also seen how the new consensus algorithm, Ourboros helps to speed up the transactions as well as reduce the fee. Itt is safe to say that Cardano seems to have a very bright future.
Cardano was one of the few projects that have been hyped to this extent. Many even refer to it as the Ethereum killer. In the past, we have seen many cryptocurrencies gain this name and have not managed to come anywhere close to Ethereum. However, the situation is completely different for Cardano because this cryptocurrency project was founded by the co-founder of Ethereum who certainly knows about its downsides. Armed with high transaction speeds and low fees, Cardano is the cryptocurrency of the future that will certainly make DApps and smart contracts more widely used.