Zug (Switzerland) Cardano is a relatively new blockchain technology project in the cryptocurrency space, created by Ethereum co-founder Charles Hoskinson. It is an open-source project for decentralized applications focused on a provably secure and peer-reviewed computation layer for the cryptocurrency ADA.
The non-profit organization behind Cardano has assembled a network of academics and scientists to closely examine the further developments of the Cardano protocol. Cardano is still in an early stage of development. The main goal is to create a platform for complex programmable value transfers that can be developed with a functional language and offers scalability and security. The basic principles are scientific approach, transparency, modularity, openness towards regulatory authorities and institutions as well as availability of the source code.
Together with the associated token ADA, which is traded on many crypto exchanges, Cardano has characteristics and capabilities similar to modern crypto projects, which are more than just a digital currency and have many uses. With a scientific approach and methodical advancement, Cardano stands out from Ethereum and similar programmable crypto platforms. Thanks to the “Proof of Stake” consensus mechanism used, the Cardano network is also less energy-intensive than some comparable projects.
Important block size update
Cardano developers continue to work on increasing network capacity and announced the next update of the two key parameters on Twitter. The team will increase the block size by another 8KB – from 72KB to 80KB, which will significantly increase the throughput of transactions. The increase of around eleven percent represents a much-needed optimization as more transactions can now be added to the new blocks. Packing more transactions into a single block ultimately means more transactions can be processed per second. Cardano developers will also increase Plutus script storage units per transaction to 14 million from the current 12.5 million. Plutus scripts are pieces of code used by the Cardano blockchain to validate specific actions.
Anticipating an increase in traffic and interest in Cardano, the Cardano development team has been working on improvements that will increase Cardano’s throughput capacity. Cardano has been struggling with congestion issues after launching large dapps, and improvements in network capacity are crucial.
To meet the demand for more native blockchain scalability, IOHK took a cautious and incremental approach to making small improvements that should pave the way for larger changes. Cardano developers believe that continuous monitoring of “real world” performance and the cumulative impact of parameter changes is an important part of the optimization process.
The continuous improvement also increasingly arouses the interest of investors. Although Cardano is not one of the so-called altcoins, it can still be traded in many crypto exchanges. Analysts see good prospects for investors in the coming year, as interest in the coin is steadily increasing.
An important entity of Cardano is the Cardano Foundation, a non-profit organization based in Switzerland. The foundation is the legal owner of the Cardano protocol, owner of the “Cardano” trademark and the official representation of the network to the outside world. The task of the Cardano Foundation is on the one hand to oversee the entire ecosystem, but on the other hand also to create and research standards and regulations, to grow and maintain the Cardano community, and to do marketing.
Input Output Hong Kong, IOHK for short, is responsible for the technical implementation and further development of Cardano. IOHK is a company that develops and implements cryptocurrencies and blockchains – and Cardano is the key project of IOHK. One of the founders of IOHK is the mathematician Charles Hoskinson, who, together with Vitalik Buterin, was part of the founding team of the well-known crypto platform Ethereum. At the end of 2014, Hoskinson left the Ethereum team, took a biannual sabbatical and then accepted the call of Jeremy Wood, another Ethereum colleague, to found Input Output Hong Kong and use his experience to develop new crypto projects.
Cardano pursues an innovative goal that sets the project apart from Bitcoin, Ethereum and other cryptocurrencies or platforms: A scientific approach to researching and solving problems and weaknesses of previous blockchain-based crypto projects. The development and further development is therefore subject to strict specifications.
Among other things, potential changes must undergo extensive peer review. This is a scientific quality assurance process in which several independent experts check the further developments – similar to the international standard in research, drug and vaccine development and other scientific areas.
How Cardano works
The technical basis of Cardano is Ouroboros, the system’s blockchain algorithm. (Ouroboros is the name of a symbol in Western mysticism; a snake biting its own tail, forming a closed circle.) Ouroboros is a Proof of Stake algorithm. This means that new blocks are created by the node of the network that has the highest fortune (stake) in wallets.
Of course, this would create an oligarchy of individual, particularly financially strong nodes. That’s why the developers have refined the procedure for Cardano. They define the stake as the sum of the ADA values on a node divided by the total amount of ADA at all. This results in a number between 0 and 1 for each node for the stake (only those nodes on which ADA are actually located are decisive, i.e. for which the stake is really greater than 0, the so-called stake holders). The sum of all stakes is then always 1 and the list of all these values forms a probability distribution. The algorithm then randomly selects a candidate from among the stake holders, with the probability of the choice being equal to the value of their stake. This candidate then becomes the creator of a new block.
Cardano versus Ethereum
Cardano and Ethereum look very similar at first glance. Both platforms can do much more than simple cryptocurrencies like Bitcoin, Litecoin and similar early implementations. The intention to serve as a blockchain-based platform for dApps and smart contracts unites Cardano and Ethereum, making both crypto projects versatile tools. In detail, however, there are some differences between Cardano and Ethereum, which is also due to the fact that Cardano was founded later than Ethereum and was therefore able to take into account errors and weaknesses of ETH.
One of the biggest differences between Cardano and Ethereum is the consensus algorithm. Just like Bitcoin, Ethereum currently relies on the Proof-of-Work algorithm (PoW), in which miners use a lot of computing power to solve cryptographic puzzles in order to confirm transactions and reach a consensus within the network. In return, they get a reward in the form of freshly mined coins. The proof-of-work algorithm is considered extremely secure, but has one major disadvantage: it is extremely energy-intensive.
Profitable mining not only requires a lot of powerful graphics cards or special mining devices, the mining rigs consume a lot of electricity. Since a large part of the world’s electricity is still generated from fossil fuels such as coal, CO2 emissions and air pollution are always points that are criticized for PoW coins such as Bitcoin and Ethereum. Not only from many media and financial institutions, but also from people like Elon Musk, who sent the Bitcoin and Co. price plummeting in May 2021 with a critical tweet.