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A Detailed Guide on Cardano Blockchain! The Third Generation Blockchain Network

Written by: Qadir AK

September 21, 2021

 One of the most talked-about projects in recent times is Cardano, which is the most popular among the crypto masses. The third-generation network is designed to be more effective and the best alternative for the Proof-of-Work networks. Cardano aims to overcome the limitations of the networks behind Bitcoin and Ethereum

Cardano is named after Italian polymath “Gerolamo Cardano”, whose fields of interest were mathematics, physics, biology, chemistry, astrology, and astronomy. It was founded by Charles Hoskinson, a co-founder of Proof-of-Work Blockchain Ethereum. He smelt the upcoming challenges of PoW and started building Cardano & its native currency ADA in 2015 and launched ADA in 2017. 

Do You Know? More than 70% of ADA is staked in more than 2600 Cardano active pools which is worth more than $31 billion.

The altcoin ranks third on the market charts, in terms of market capitalization with a return on investment of more than 9600 at the press time. The open-source project aims at positive global change with equal contributions from changemakers, innovators, and visionaries. Let’s dive in deep to know more of the most disruptive technology of all the time, ‘Cardano’.

Table of contents

What Is Cardano?

Cardano is a decentralized blockchain network, which uses the Proof-of-Stake model. The roles and responsibilities are equally shared by the Cardano partners, ‘The Cardano Foundation, IOHK, and EMURGO.  The network is the first blockchain to implement Ouroboros, which is a decentralized, PoS algorithm. 

It is built around peer-reviewed papers, instead of writing a white paper and implementing it in the codes. The team ensures that experts from across the globe read their papers, improvise them, and agree with the output.

Cardano is being developed using the “Haskell” programming language that enables the ecosystem to pursue evidence-based development. Which helps the project retain adaptability, responsiveness to newer requirements, and offer unparalleled security and stability.

The platform aims to achieve scalability, interoperability, and sustainability needed for real-world applications. The network is being developed into a development platform for decentralized applications with multi-asset ledger and verifiable smart contracts.

Why Was it Created?

 Cardano was developed with a vision of a world without mediators, where the power is not controlled by a few regulators, instead of where the system empowers the masses. The platform aims to transform a global society that is secure, transparent, and fair. A platform that is built for a sustainable future, offering global solutions to global problems.

The network was founded by Ethereum co-founder Charles Hoskinson back in 2015, which was later launched in 2017. The network was founded after Charles Hoskinson left Ethereum over a dispute with one of Ethereum’s co-founders Vitalik Buterin. While Hoskinson wanted to accept capital inflows from venture capitalists, the latter wanted the platform to be a nonprofit organization. 

The aim of the ecosystem is to overcome the existing problems in the market leaders, while Bitcoin was relatively slow and lacked flexibility, Ethereum lacked scalability and security.

How Cardano Blockchain Works?

As mentioned earlier, the Cardano blockchain uses the Proof-of-Stake(PoS) algorithm Ouroborous to mine blocks. It is designed to reduce energy consumption and also being cost-effective by eliminating the hash power or the computing resources usually used in the Proof-of-Work network. Here, in Cardano, staking determines the strength and capability of nodes to create blocks. 

Ouroborous primarily divides the physical time into epochs which are nothing but slots of fixed time. These epochs work in a circular fashion, when one ends, another starts. Moreover, the slot selection is through a lottery system, the more you stake the more the chance of winning the lottery. And the selected slot leaders need to fulfill 3 major tasks, validating transactions, creating transaction blocks, and adding newly created blockchain to the Cardano network. 

This algorithm requires a very minimal amount of ADA holders to remain online to maintain the network. Moreover, the validators or the ADA holders can organize themselves into staking pools and also elect some representatives during the protocol execution. This could make the tasks much easy and also ensures the block creation even if some of the validators remain offline. 

Stake pools is a ‘server node’ that runs 24/7 on behalf of the ADA holders. These basically hold the combined stake of various stakeholders as a single large entity that would be responsible for processing new blocks and add them to the Cardano blockchain. 

What Is ADA?

ADA is the native token of Cardano, it is named after 19th-century mathematician Ada Lovelace, who is known as the first computer programmer. Digital currency can be used by any user as a secure exchange of value without any mediators. 

The cryptocurrency has the upper limit of 45 billion, meaning only this number of coins can be produced. And out of which more than 32 billion are in circulation, among which nearly 70% are staked on the pool. Nearly 2.5 billion ADA was kept reserved for the IOHK team after the launch of the network. Further, 2.1 billion ADA was given to one of its partners, Emurgo and 648 million was given to the non-profit organization The Cardano Foundation.

Collectively, 16% of the ADA’s total supply were allocated for the founders of the project and the remaining 84% was distributed among the investors. The token was released after the five rounds of public sale between September 2015 and January 2017. The ADA price during the pre-launch sale was just $0.0024 that surged to as high as $2.4 in early 2021. 

Where Can You Store Your ADA Holdings?

 The digital coins can be stored in cryptocurrency wallets, these are used to store cryptocurrencies. There are many types of wallets like hot wallets, cold wallets, used on different platforms like smartphones, and desktops. 

Cardano also offers its wallets to store ADA, which are:

Daedalus Wallet

It is a full node desktop wallet developed by IOHK. It downloads a full copy of the Cardano blockchain and independently validates every transaction in its history. The Daedalus wallet offers maximum security.

Yoroi Wallet

The Yoroi wallet is EMURGO’s one-click install, lite wallet for Cardano. In the case of this wallet, it is not necessary to download a copy of the blockchain’s history. Which makes it simpler, and faster to store and transact the holdings. It is a perfect day-to-day wallet for users.

How Does the System Work Efficiently?

The ecosystem works, as a decentralized team works across three independent entities to ensure that the platform stays true to its purpose. The three entities work as partnerships, which we have listed below.

  • Cardano Foundation.
  • Input Output Hong Kong (IOHK).

The IOHK develops the technology, the Cardano Foundation is responsible for the supervision of development and promoting the ecosystem. While EMURGO drives commercial adoption. This is how the ecosystem ensures the efficient working of the network.

As previously mentioned, Cardano aims at solving three main problems, which are: scalability, interoperability, and sustainability. The ecosystem, works in the following manner, to counter the loopholes.

The Cardano network tends to achieve interoperability by being the internet of blockchains, this way it can seamlessly move assets across multiple chains. In order to make the network acceptable by banking systems, the network allows users to attach metadata of their transactions if they wish to.

Additionally, in order to make the ecosystem sustainable, the makers have introduced a treasury that will receive a small percentage of every transaction that takes place on the network. This keeps the network sustainable.

What’s Next For Cardano – Network Roadmap

The roadmap is an abridgement of the development of the ecosystem, which has been classified into five eras. Each of the eras symbolizes a set of functions. The eras will be released in sequences, while work for the same is carried out parallelly

Byron era

The Byron era symbolizes the foundation of the network, the era allowed users to buy and sell the ADA currency. The era also saw the delivery of Daedalus and Yoroi wallets. The era brought in a community of like-minded people.

Shelley era

The Shelley era symbolizes decentralization, this era is designed to bring in low-risk transitions without any interruptions in the service. The era aims at making the network multiple times more decentralized than its competitors. Shelley also introduced incentive programs in the ecosystem.

Goguen era

The Goguen era is for smart contracts, which enables the ability to build decentralized applications. The era will enable users from both technical and non-technical backgrounds to create smart contracts. It will also empower the creation of fungible and non-fungible tokens.

Basho era

The era will bring optimization in the network, improving the scalability and interoperability of the network. The aim is also to improve the adoption of applications with higher transaction volumes. The era is set to make Cardano a high performance, resilient and flexible blockchain in the industry.

Voltaire era

With the Voltaire era in place, Cardano will be a truly decentralized network. The era will introduce a voting system and a treasury system. The participants will be able to vote their development proposals for the network using their staking. While the treasury system will help keep the network running.

Cardano Smart Contracts

Cardano released the smart contracts on the 12th of September, as part of the Alonzo hard fork upgrade, from the Goguen era. Smart contracts are nothing but digital representations of contracts. With the launch of smart contracts, Cardano enters into tough competition with the leader Ethereum. 

The only difference between the Cardano smart contracts than that of Ethereum currently, is ETH works on PoW and ADA on PoS. And as ADA works on PoS, it requires a minimum number of validators to be online, unlike the PoW where it requires huge resources. However, Ethereum is also in a process of its migration from PoW to PoS and once done, experts expect a reduction in ETH gas fees too. 

The upgrade did receive backlash over the use of the Haskell programming language. However, the platform has seen over a hundred smart contracts running within 24-hours of its release, and many projects are lined up boom on Cardano blockchain.  Hopefully, the adoption will only increase in the time to come.

Benefits and Use Cases of Cardano Platform

The ecosystem restores the trust in global systems creating a more secure, transparent, and sustainable base for individuals to perform transactions and exchanges, for systems to govern, and for the enterprises to grow.

Cardano is modular for a broad range of use cases, solving problems across multiple industries, and disciplines. In order to ensure the longevity and health of the network, the platform features an incentive program that rewards users as stake delegators or stake pool operators, for their valuable inputs to the organization.

The blockchain has multiple use cases, which we have listed down below:

  1. Education.
  2. Retail.
  3. Agriculture.
  4. Government.
  5. Finance.
  6. Healthcare.

The platform aims to be modular and scalable, offering its platform to ‘N’ number of use cases, which the blockchain network in general aims at serving. The Cardano network tends to achieve the same, with its proven capabilities more efficiently than its rivalries.

Summing up, Cardano has emerged as one of the prominent cryptos in space. The platform is home to several applications and aims to transform decentralized applications massively, as the focus of the platform is on the fundamentals of the industry. The market cap of the coin at press time is over $76 billion. The coin has the potential to bring positive impacts on the value of the digital currency.

Qadir AK and Nidhi Kolhapur and Sahana Vibhute

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

Published by
Qadir AK and Nidhi Kolhapur and Sahana Vibhute

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