What is Cardano & ADA?
In a nutshell, Cardano is an advanced blockchain platform, and ADA is a cryptocurrency representing the platform. Created by professionals—researchers, engineers, and scientists—Cardano is the first blockchain project driven by a scientific approach. Cardano seeks to deliver more advanced features than Bitcoin, Ethereum, and other cryptocurrencies developed so far. Cardano focuses on smart contracts, developing their own stack of technologies to make smart contracts more secure and scalable.
Smart contracts might be a key for the real-life economy to achieve higher trust between parties and decrease expenses in various fields (for example, by automatization of contract processes). There are several smart contract platforms, including Ethereum and NEO. However, smart contracts are still a young technology, and Cardano aims to get them ready to become mass-market.
Cardano is believed to be the brightest among the third-generation cryptocurrencies. It would hardly be an exaggeration to call Cardano a breakthrough like Ethereum was, compared to Bitcoin, and like Bitcoin was, compared to traditional payment methods. But what makes Cardano so special?
The Concept of Third-Generation Cryptocurrency
Apart from creating an advanced smart contract platform, Cardano aims to resolve challenges faced by cryptocurrencies: scalability, interoperability, and sustainability. Overcoming these challenges is vital for mass adoption of blockchain and cryptocurrency. And Cardano might be on the way to proposing a universal solution for these three challenges. Moreover, by accomplishing it, Cardano can take the whole blockchain industry to the next level.
Scalability is vital for mass adoption of cryptocurrencies. For a cryptocurrency, being scalable means being able to fit into the real economy. Nevertheless, scalability is still a serious challenge for the industry. Bitcoin can perform 4-7 transactions per second. For comparison, the traditional banking system processes thousands of transactions each second. Just by adding more computing power or clients, Bitcoin (or other cryptos developed so far) would not be able to provide more transactions. Also, scalability is associated with the size of the blockchain. So, this is the root of the scalability issue — cryptos are simply not designed to make their transaction throughput higher than a certain determined amount. In most cases, this amount is much lower than traditional payment systems have. Cardano’s team plans to utilize various scalability techniques, such as sharding.
Interoperability issues are rooted in distinctions between different cryptocurrencies and between cryptocurrencies and real-world economy. Each cryptocurrency has its own network, and interoperability between cryptocurrencies will allow networks to interconnect and share information. Cardano’s solutions are developing a new sidechain protocol and using atomic swaps to be interoperable. A big step towards better interoperability was the launch of the IELE virtual machine. Interoperability has another dimension—the ability of a cryptocurrency to tokenize value. In other words, to represent objects or assets using blockchain.
Moreover, there is a need for legacy systems to recognize tokens as a representation of value. One of the possible solutions to ensure such interoperability, as suggested by Cardano’s team, is supplying transactions with additional metadata. Although, there is still much research to be done.
Sustainability issues within the crypto world may refer to both internal sustainability of the project (stability of network and community) and external sustainability (legal compliance or energy consumption, for example). Sustainability of cryptocurrencies is a complicated issue, as many processes are still not fully researched and the best models are yet to be discovered. Until then, there are many trade-offs between performance, centralization, consensus, and so on. Maintaining development and preventing excessive centralization at the same time is quite complicated, as skilled developers and other professionals are needed. The team is developing a new treasury system to be governed by ADA holders. It might be a good solution for better decentralization. For better sustainability, Cardano utilizes the Proof-of-Stake algorithm, which is considered to have lesser energy consumption than Proof-of-Work.
Another notable thing about the project is the attention of the team to the legal side of the project. Maintaining a balance between demand in privacy and regulations is vital for a long-term project, and Cardano is backed up by a considerable amount of information regarding the legal and regulatory basis of the project’s functioning. The vision for Cardano is based on finding a healthy middle ground for regulators to interact with commerce without compromising some core principles inherited from Bitcoin. And this vision is well-justified, taking into account the evolution of the market. After all, turning a blind eye to regulations is as bad for a project as losing support from users.
A couple of observations about Cardano’s global strategy: it looks like it focuses on both maximizing typical strengths of blockchain projects (decentralization, groundbreaking technology) and minimizing typical weaknesses (scalability, legal compliance). This strategy is regarded as one of the most balanced, which is good for sustainable development of a big project.
Team of World-Class Professionals
There are not many teams in the blockchain industry as big as Cardano’s. The Cardano ecosystem is built up by three major groups of developers, researchers, and other specialists: Cardano Foundation, Input Output Hong Kong (IOHK), and Emurgo.
IOHK was founded in 2015 by Ethereum co-founder Charles Hoskinson and another Ethereum team member Jeremy Wood. Apart from Cardano, IOHK is well-known for contributing to Ethereum Classic. Such a background is hardly ever seen among founders of new cryptocurrency projects. IOHK is the main R&D body inside the Cardano ecosystem. IOHK has the contract to design and build the Cardano platform until the end of 2020. Moreover, IOHK is responsible for providing a weekly technical update since July 2017—an excellent way to keep the community informed and bring additional transparency to the project.
Cardano Foundation is a non-profit organization registered in Switzerland. The Foundation oversees and supports Cardano’s worldwide community and drives the adoption of the platform. Cardano Foundation’s mission consists of several key directions: driving adoption of Cardano, shaping legislation and commercial standards, growing the global Cardano community, ensuring stakeholder accountability, and facilitating partnerships.
EMURGO is a multinational company with HQ in Japan. EMURGO is the official commercial arm of Cardano. It contributes to the blockchain ecosystem through commercial ventures, like investing in projects and organizations that adopt Cardano. The company highlights the importance of Cardano’s adoption in logistics, retail, and other key industries. The important part is establishing partnerships as they did with Korean mobile platform Metaps Plus.
The three groups combined include more than 230 people—an enormous power for the blockchain space. Another remarkable thing is the significant number of known scientists and researchers taking part in the project.