What is Cardano?

about 3 years ago

Belonging to third generation blockchains, Cardano's goal is to be a platform that serves for the creation and operation of decentralized applications and smart contracts, but much more researched, tested and safe to be used by millions of users.

It arouses different feelings among the participants in the crypto community and today we are going to analyze some of the main points of its proposal.

STORY

The project was developed in 2015 and launched in September 2017 by an organization called Input Output Hong Kong (IOHK), led by Ethereum co-founder Charles Hoskinson. At the ICO occasion, $62 million was raised and the tokens were sold mainly to Japanese investors, who were 95% of buyers.

The name Cardano is a tribute to the Italian Renaissance mathematician Girolamo Cardano and his native currency, ADA, takes its name from Ada Lovelace, a brilliant 19th century mathematician, recognized as one of the first computer programmers of all time.

Ada was also the only daughter of the famous poet Lord Byron.

What makes Cardano different is the fact that it is the first blockchain to be developed based on a scientific philosophy and designed by a global team of engineers and academics recognized worldwide. Development goes through a peer-reviewed research-based process and evidence-based models.

This process involves conferences and the preparation of academic papers, with the aim of trying to minimize the occurrence of errors and with the promise of creating a blockchain based on the highest scientific level.

Instead of writing a whitepaper and the code, the team sends the document to experts around the world for improvements to be made. There are currently 95 whitepapers supporting the development of Cardano, which reinforces the construction narrative based on scientific and mathematical research methods.

This means that Cardano follows the same strict criteria for the development of complex systems, such as aerospace.

The project is led by a team of academics, researchers and scientists who work together with the long-term goal of making global access to financial services that were previously provided exclusively by traditional institutions, but in an innovative way, allowing for fast, inexpensive transactions. and highly scalable.

The idea is to build cryptocurrencies and blockchains for companies, government entities and academic institutions and thus go even further than Ethereum in scalability and security.

FOUNDER

Charles Hoskinson is an American mathematician and businessman who attended Denver's Metropolitan State University and the University of Colorado Boulder, where he studied analytical number theory before embarking on cryptoeconomics.

His professional experience includes the foundation of startups and activities carried out in the public and private sectors.

He was also the founding chairman of the Bitcoin Foundation's education committee.

His current projects focus on educating people about cryptocurrencies, blockchain and decentralization and leading Cardano's research, design and development.

Hoskinson was part of the team of founders of Ethereum with Vitalik Buterin between 2013 and 2014, when he left after disagreements about the acceptance of financing by venture capital companies for the project and the need for a more formal structure.

He believed that Ethereum was not scalable enough to support the mass adoption of decentralized applications. After he left, he approached Jeremy Wood and together they formed the IOHK (Input Output Hong Kong) company that would give rise to Cardano.

Cardano's core philosophy focuses on how to resolve three main issues related to previous generations of blockchains:

INTEROPERABILITY:

There are several blockchains, but they are unable to work together. For example, it is very difficult for the Bitcoin blockchain to communicate and get along with the Ethereum blockchain.

Regardless of how decentralized the system is, the values of each are fragmented.

Thus, Cardano proposes to be the internet of blockchains, that is, a blockchain that can understand and communicate with other blockchains.

SCALABILITY:

As stated by its developers, Cardano can achieve 250 transactions per second (TPS). For comparison, Ethereum can only process 15 TPS today.

SUSTAINABILITY:

Cardano intends to develop the platform so that its operation is sustainable and that changes are implemented in a simple way.

THIRD GENERATION BLOCKCHAIN (3.0):

In this phase, the blockchain expands the possibilities beyond the applications in the financial area and appears with the objective of making the technology scalable, flexible and robust. Cardano, together with HIVE, EOS, Cosmos, among other projects, aims to combine the positive elements of the first two generations, adding new concepts and functionalities and eliminating the most common problems: faster transactions, interoperability and energy savings. Unlike most blockchains that come to life through "forks", the team built their own protocol from scratch. It uses the Haskell programming language and smart contracts are created in Plutus.

EMURGO

A Japanese multinational blockchain technology and venture capital company that provides solutions for developers, startups, companies and governments that want to innovate using blockchain. It is considered a sister organization to IOHK.

IOHK

Founded by Charles Hoskinson and Jeremey Wood, IOHK (short for Input Output Hong Kong) is a software research and development laboratory based in Hong Kong and responsible for building, designing and maintaining Cardano. This off-chain governance model will continue until the network reaches the "Voltaire" era, where the goal is for the network to achieve a high level of decentralization.

CARDANO FOUNDATION

It is an independent non-profit organization based in Zug, Switzerland, which oversees and promotes the development of Cardano's ecosystem.

ROADMAP

Cardano uses a timeline that consists of five eras focusing on specific functionalities related to the platform's objectives: Decentralization, Smart Contracts, Scalability and Governance. Each of them bears the name of a poet, philosopher or computer scientist.

BYRON (FOUNDATION ERA)

The name of this phase is a tribute to the English poet George Gordon Byron (Lord Byron), father of Ada Lovelace. This phase focused on establishing a solid foundation for Cardano and started in September 2017, with the launch of the first version of the protocol, where users were allowed to send and receive ADA tokens, in a network powered by the Ouroboros consensus protocol. .

It was at this stage that the Daedalus and Yoroi portfolios were launched, as well as when the ADA was listed on all major exchanges. The Byron era arrived in September 2017 and ended in 2020 with the launch of the Shelley era.

SHELLEY (ERA OF DECENTRALIZATION)

Shelley is an integral part of Cardano's transition to a fully decentralized network, the ultimate goal of which is to allow Cardano to run forever, without censorship or intervention. The Shelley core network was officially launched on July 29, 2020, ushering in the era of implementing the PoS mechanism, migrating from the federated network format and allowing users to contribute to the transaction validation process directly or through delegation, in exchange of staking rewards.

The name Shelley is a tribute to the British writer Mary Shelley, author of the horror book "Frankenstein".

GOGUEN (ERA OF INTELLIGENT CONTRACTS)

After the Shelley era, Goguen is considered the most important step for Cardano to become a de facto competitor for Ethereum.

Goguen is due to launch around March 2021 and will offer the ability to create smart contracts, decentralized applications (dApps), as well as allowing ERC20 token convertibility, enabling the migration of Ethereum tokens to Cardano.

All of this through the Marlowe language (its DeFi platform), built on top of Plutus (its smart contract platform). The aim is also to allow even those who do not have a lot of technical knowledge to create their own smart contracts. The name is a tribute to the American computer scientist Joseph Goguen.

BASHO (ERA OF SCALABILITY)

This phase will aim to optimize the network, dramatically increasing scalability and allowing interoperability.

The objective is to improve Cardano's performance to support the growth and adoption of applications that require high transaction volumes. Sidechains will be introduced that will be used as a fragmentation mechanism to further scale the capacity of the network without affecting its security and allowing more than 10,000 transactions per second.

The name is a tribute to the famous Japanese poet and haikai master Matsuo Bashõ (1644-1694).

VOLTAIRE (ERA OF GOVERNANCE)

This is the final phase and dedicated to putting the final touches of governance on the network with the aim of making it totally self-sustainable and decentralized.

A voting and treasury system will be implemented, in which participants will be able to use their holdings and their voting rights to guide Cardano's future and through which a fraction of all transaction fees will be pooled to provide funds for credit card activities. development carried out after the voting process.

With that, the management of the platform will be transferred from IOHK to the community.

The name is a tribute to the famous 17th century French poet, writer and philosopher, Voltaire

OUROBOROS

Blockchains require a mechanism for agreement among participants on how to add new transactions to the network. That
mechanism is known as a consensus protocol.

The goal is to ensure that only one chain is adopted and followed. Otherwise, the system will immediately collapse.

Bitcoin uses the Proof-of-Work (PoW) consensus mechanism, where, in order for a new block to be added to the blockchain, it is necessary to solve a mathematical puzzle. This process is known as mining and who can solve
first creates the block and receives a reward for it. This method uses heavy calculations and specialized hardware, in addition to limiting the number of transactions that can be verified.

Cardano uses the Proof-of-Stake (PoS) consensus mechanism, called Ouroboros, which uses sweepstakes and eliminates the need for energy expenditure. It was built through extensive research
and the validators are selected at random,
proportionally to the number of tokens they have in stake. There is also no minimum stake value.

Therefore, it is not the hashing power that gives the opportunity to produce a new block and be rewarded, but rather your bet that increases your chances of being elected.

Since there is no rush to mine a block, there is no waste of energy or computational resources. Therefore, in this sense, Ouroboros is a more efficient and cheaper protocol.

STAKING

Unlike other cryptocurrencies, the ADA cannot be mined, as it does not implement the proof of work consensus (PoW) model. As there are no miners to reach consensus, it depends on the network nodes, which validate the transactions and guarantee their integrity through the Cardano portfolios and stake pools.

Stakers are then entitled to a reward commensurate with the resources placed on stake. ADA holders can join stake pools by delegating their tokens through the Daedalus or Yoroi wallet and in these cases the staker does not need to maintain a constant connection to the internet.

It is also possible to manage your own staking pool for the ADA, however this is a much more complex process, as it requires knowledge about how to run the node and also because it is necessary to keep the hardware on and connected to the internet at all times.

WALLETS

DAEDALUS

More than just token storage, it functions as a network node. It allows the user to view all transactions carried out, including making specific inquiries about information about the state of the Cardano network.

This also helps to protect the network, maintaining a copy of the entire state of the blockchain, as well as validating blocks and transactions before they are finalized and added to the chain.

To use the Daedalus wallet, simply download the wallet for Windows, Mac or Linux. It can occupy up to 6 GB of space, as it needs to store the copy of the blockchain in the wallet.

YOROI

It is a wallet developed by Emurgo. It is lighter than Daedalus, since there is no need to have a copy of the blockchain installed and it can be easily installed and configured without requiring a lot of resources from the user's system. Interesting for quick transactions and everyday use.

TRANSACTIONS PER SECOND (TPS)

When the Cardano network was first tested in 2017, it was able to process up to 257 transactions per second. This metric measures how many transactions per second can be written to a block. For comparison, Bitcoin can process 4.6 TPS and Ethereum 1.0 between 15 and 20 TPS, which is far from enough to host millions of users.

Cardano attracts criticism for the gradual way in which it implements its updates, because because of its methodology it ends up taking a longer time to be delivered. Others believe that this delay is important and is part of the process, as it allows enough time for the tests and reviews necessary to make it a reliable platform with the potential for massive adoption.

Undoubtedly, Cardano is a project that is well worth the research, as it is one of the most interesting protocols in the ecosystem today, mainly due to the scientific rigor used in its development process.

It is no coincidence that it currently occupies the 3rd place among the largest market capitalizations. Between Ethereum and Cardano, it cannot yet be said that there is a final winner, as both are still very young and are still developing. Ethereum has a certain advantage, thanks to its pioneering spirit and the amount of applications built and the user base it has. However, the occurrence of any event that could cause the loss of Ethereum's leadership position can never be ruled out.

Even though Cardano is technically better, Ethereum has a much wider reach and more developers interested in contributing and fixing Ethereum than migrating to other projects. It is possible that in the future both Cardano will get more adoption and Ethereum will actually solve its scalability problems and, so, why not, the two continue to coexist and grow, attracting users for specific applications. With the development of the two networks, the crypto market is the winner.

As investors, we should pay a little less attention to prices and more depth of themes, better understanding the fundamentals and details, as we are experiencing a unique opportunity to accompany the birth of a technology that will still impact the world a lot.