Ever heard of Cardano 👂? It’s of the largest cryptocurrencies (digital assets) in the market at the moment. With a blockchain that is adaptable, sustainable, and scalable for running smart contracts, Cardano is intended to be the next generation of the Ethereum concept. But what is Cardano doing that’s unique in the cryptocurrency space, and how can you benefit? Read on 👀 to find out!
What Is Cardano? The Basics
Cardano is a third-generation blockchain project (also known as blockchain 3.0). It was introduced in September 2017 by Ethereum co-founder Charles Hoskinson. A group of computer scientists 👩💻 and cryptographers from the University of Edinburgh, Tokyo University 🎌, and other institutions conducted peer-reviewed research that served as the foundation for Cardano’s consensus process.
Cardano was made to be a decentralized network with scalable, safe transaction validation and significant buying power 💪. Cardano’s makers also want it to be the most ecologically friendly blockchain platform out there.
Cardano builds on the first-and second-generation blockchain technologies invented by Ethereum and Bitcoin. Bitcoin is the biggest cryptocurrency out there, with ETH not far behind. Instead of the energy-intensive proof-of-work approach now employed by Bitcoin and Ethereum 1.0, its energy consumption is reduced with a novel proof-of-stake consensus process called Ouroboros. Note that through the ETH2 or Ethereum 2.0 upgrade, Ethereum is also switching to a similar proof-of-stake method to reduce the amounts of energy it uses 😱. More on that in just a moment.
Cardano Smart Contracts
Cardano smart contracts enable the creation of a variety of decentralized finance apps, new crypto tokens, games, and more 🤩. To use them, you have to have ADA, the native cryptocurrency of the Cardano blockchain. You can buy ADA fungible tokens on crypto exchanges like Coinbase. You can then use ADA to transmit and receive payments, store value (perhaps as part of your investment portfolio), stake coins, and pay transaction fees on the Cardano network.
With the release of smart-contract functionalities in the second quarter of 2021, Cardano got one step closer to its objective of giving developers a blockchain platform that is strong, secure, scalable, and extremely energy-efficient. The decentralized applications blockchain runs a variety of current apps. Additionally, developers can work on Cardano projects using the well-known Solidity programming language 👌.
Separate Layers in Cardano
The Cardano Settlement Layer (CSL) and the Cardano Computational Layer are the two distinct levels that make up the Cardano blockchain (CCL). Yes 😁, we know that’s a lot of acronyms, but bear with us. By dividing the blockchain into two levels, the Cardano network executes faster transactions of up to a million transactions per second 😲!
CSL: The CSL includes the balances and account ledger 🤑. This is where the transactions are validated and, yes, settled by the Ouroboros consensus mechanism.
CCL: Through the use of smart contract operations, all computations for apps 🤳 operating on the blockchain are carried out at the CCL layer.
Proof of Work, Proof of Stake
Without a middleman like Visa or PayPal, decentralized application platforms have to police 👮 themselves via a ledger of accounts. Proof of work is the system most popular cryptocurrencies and platforms use, but proof of stake (like Ouroboros) is an efficient alternative. Here’s how both these systems work.
Proof of Work
Proof of work, the original cryptographic consensus process, is a consensus method used in original Bitcoin mining 💰. Huge amounts of processing power are needed for proof of work, and this computational power is provided by online “miners” striving to be the first to complete a challenging arithmetic problem. The winner receives the privilege of updating the blockchain with the most recent confirmed transactions in exchange for a certain sum of cryptocurrency.
Proof of Stake
Proof of stake protocol uses a network of invested participants called validators rather than a network of miners. Validators stake their own ADA in place of miners who contribute computing power 👊. The crypto asset stake can safeguard the network and validate complex transactions like this:
- The network chooses a winner based on the quantity and duration of ADA that each validator has in the pool, rewarding the players who have spent the most 😎.
- Other validators can vouch for the accuracy of the most recent block of transactions after the winner has validated it.
- The blockchain is updated by the network once a predetermined amount of attestations have been made.
- The network distributes rewards in ADA in proportion to each validator’s stake.
Despite the significant obligation of becoming a validator, interested parties can still receive ADA incentives by “delegating” a portion of their cryptocurrency to a staking pool managed by a third party. This is sort of like a form of investment and doesn’t really require any Cardano development expertise 🤑.
What Is Cardano’s Future?
Through the introduction of community-driven governance and an automated treasury 🏺 system to finance the network’s growth, the Cardano foundation intends to achieve complete decentralization as one of its core principles. This decentralization phase would require a functional approach to reduce its energy expenditure for an energy-efficient blockchain network. Built on generations of blockchain technology and with many bright minds 🧠 behind it, Cardano and its ADA-native tokens seem promising.
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