With a strong scientific team, they are the first to test blockchain development so rigorously using peer to peer reviews, scientific journals and enlisting the cooperation of doctor’s in prestigious universities, such as the University of Edinburgh.
What is Cardano?
More than just a cryptocurrency, Cardano aims to be a platform on its own. The Cardano platform aims to be able to run financial applications that are used worldwide. While there are other platforms such as Ethereum and Komodo, Cardano’s development focuses on solving three main problems with current blockchain technology.
There are two basic segments to look at when considering scalability, namely the transactions per second (TPS) and size of data.
Transactions per Second
When there are more TPS, it naturally requires more bandwidth and data. As the network grows, it would require hundreds of megabytes, gigabytes, or even terabytes of data for the network to function. At its current state, blockchains like Bitcoin and Ethereum are already experiencing congestion; imagine the issues that would arise when mainstream adoption occurs. A single transaction could take days to process, which would not be ideal for everyday use.
By its very nature, the blockchain holds the data permanently. Due to its temper-proof nature, all data will be stored there, regardless of its relevance. As the blockchain grows in size, it will become less and less tractable for regular consumer hardware.
Cardano implements the Ouroboros Proof of Stake (PoS) protocol. Current blockchains like Bitcoin and Ethereum still use Proof of Work (PoW), where miners compete to create the next block by solving complex equations. In the PoS model, stakeholders in the network are randomly selected to form the next block, proportional to the size of the stake they have.
The Ouroboros Protocol is the first PoS to have been rigorously examined and found to provide the same level of security as the current Bitcoin blockchain protocol, and the scientific paper showing its legitimacy can be found here.
Cardano also aims to address the issue of a homogenous network topology, which simply means that every node is the same. As the TPS and data size increases, it is improbable that every node will be able to run all transactions.
To overcome this issue, they are introducing Recursive Internetwork Architecture (RINA). Originally written by John Day, its inception into Cardano will mean that not every individual in the network will be required to store the entire blockchain, but a compressed version of it. Much like torrents, a user will have the option to ‘reconstruct’ the full version, but does not need to keep the entire copy on their hardware. All of these are in an attempt to ensure that as the Cardano network scales, the blockchain remains accessible without being overwhelming for regular hardware.
Cryptocurrency to Cryptocurrency Networks
There are currently many networks in the cryptocurrency market: Bitcoin has Bitcoin Core, Ethereum is a smart contract platform, and financial institutions still retain their legacy systems, which are largely done in SWIFT. And each system has its own language, protocols and rules, making it hard for them to understand each other. An individual could have millions of Bitcoins, but without the ability to convert it to fiat, it would have little practical use at this time.
To convert crypto to fiat, people use exchange platforms such as Binance. This means that these gateways hold an inordinate amount of control over the finances of an individual; value from one network cannot be transferred without their permission. This goes against the core idea of a blockchain having no middleman.
Cardano aims to overcome this by integrating Psi chains, or Atomic Crosschain Swaps. Essentially, it structures the information from one chain to another in a way that allows cross-network understanding of whether a transaction is legitimate.
Cryptocurrency to Legacy Networks
Legacy networks used by financial institutions require metadata: it requires details such as how much was spent, what was it spent on, and who spent it. They are required to be compliant to financial regulations, and therefore have to perform Know Your Customer (KYC), Anti-Money Laundering (AML) and Anti-Terrorist Funding (ATF).
However, these are not well documented in cryptocurrencies. Due to the blockchain, metadata attached to transactions would be open for the public, not something that will be easily accepted; the want for privacy and anonymity is one of the driving factors of cryptocurrency.
The problem arises as cryptocurrency networks have to interact with financial networks
John has an ICO and raises 1,000 ETH, worth 800,000 USD at the time. However, he requires fiat to pay for overheads and development. He attempts to draw the money out through an exchange. However, the bank is flags it as suspicious activity as they are unable to verify where the money came from.
Cardano aims to link these networks through a voluntary submission of metadata. As and when a project needs metadata to verify attribution, individuals who wish to participate in it would be able to attach their metadata on a voluntary basis. In this way, Cardano acts as a bridge between the legacy systems and cryptocurrency systems.
Many cryptocurrencies are open-source to minimize operation costs. Any attempt to put in tolls on the protocol would make it less competitive. To survive, they usual have patronage or an ICO.
Under a patronage, a company could loan developers to the protocol. Such a situation is not ideal, as the company ends up having an unhealthy amount of control over how the cryptocurrency will be developed, which may not be in the best interest of the community.
The alternative method would be to raise an ICO. If successful, it would provide a lump sum of money for development. However, the money eventually will run dry; moreover, it could also cause the issue of unnecessary ICOs bringing value away from the token.
Cardano aims to adopt a concept that was first put forth by
How it works is that developers are able to ballot to make changes to the system, and stakeholders would vote on it. If it receives sufficient votes, payment would be released to the developer to begin working on the project. Cryptocurrencies are constantly changing: improved technology and different use-cases can arise at any time. This method ensures that the platform remains community-driven, and that there would be a reduced chance of fragmentation.
By addressing these core issues that plague current blockchain technology, Cardano aims to be the platform that facilitates true decentralization of information while maintaining a balanced relationship with the legacy institutions.