In today’s post I am going to take a look at one of my favorite alt-coins, Cardano (ADA). I think this crypto and it’s underlying technology is pretty great, and could help to solve some of the issues other cryptos are running into. It leverages it’s own blockchain, and of course has it’s own native currency ADA.
For the usual disclosure, I am not a financial advisor, I don’t even work in finance at all. My day job is as a telecommunications software engineer. Treat everything you read here as some educational resources and not financial advise.
A Brief History
Cardano (ADA) was created by Ethereum (ETH) co-founder Charles Hoskinson after he left due to a dispute with Vitalik Buterin. Development on the project began in 2015, and it was launched with an initial coin offering (ICO) in 2017. The platform is named after Gerolamo Cardano, with the crypto named after Ada Lovelace.
Development of the project is overseen by the Cardano Foundation, and is created as an open source project. It does not go the traditional route of using a published white paper, instead it uses peer-review and other design principals to drive it’s roadmap.
Cardano (ADA) has some pretty big targets it is trying to hit, such as building out a global payment system that would leverage the blockchain.
Technical Details
Cardano (ADA) uses a Proof of Stake (PoS) consensus protocol which is named Ouroboros. It has a multi-layer approach to its blockchain. The first layer is it’s settlement layer, which is similar to how Bitcoin (BTC) operates, and is where the ADA currency is managed.
The second layer is the computation layer, which is closer to how Ethereum (ETH) operates, and is where the smart contracts will reside once they go live. Currently smart contracts are not available on the Cardano (ADA) mainnet, but they have recently deployed the new Elonzo testnet, which does have the smart contracts functionality, and assuming all goes well with that testing, we could be seeing smart contracts going live by the end of the summer.
Peer Review
I eluded to the fact that Cardano (ADA) approaches things differently, using peer review and not a white paper, but I want to take a minute to really highlight this fact, because it is something that sets it apart from a lot of other projects.
What a lot of teams will do is write a white paper up, develop their project, and maybe have some security audits and whatnot along the way. They run things in a more or less self-contained way with maybe a little community input as to what they want it to do, but not necessarily how they go about doing it.
What Cardano (ADA) does differently is they actually assemble a team of experts to go review all of their proposed changes and make sure that everything they are planning, and everything they are implementing, is as good and secure as it possibly can be. It’s obviously not a fool proof plan, but it sure makes it a lot less likely of any major defects just sliding past in clear view.
Solving Problems
What Cardano (ADA) aims to do is solve three big problems that was found in older blockchain technologies. Those are sustainability, scalability, and interoperability.
Scalability
The scalability issue actually has three sub-issues under it that Cardano (ADA) aims to address. These would be increasing the number of transactions that can be processed on the network per second, the amount of bandwidth the network uses, as well as the amount of storage that is needed to store and manage the blockchain.
The way Cardano (ADA) looks to address the transactions per second part of the scalability issue is in their Ouroboros protocol. The way it works is the time is divided into epochs, which are further divided into slots. The network elects a slot leader for each slot, and that is who gets to create the block for that slot. The speed can be increased by slicing an epoch into more slots, and by running multiple epochs in parallel.
It addresses the issue of network bandwidth by separating the network into smaller chunks that can communicate with each other as necessary, but otherwise run as smaller, self contained units, that only need to process the transactions with in it. This significantly lowers the amount of traffic each node needs to handle.
Storage is still fairly cheap, so the issue of storage has not been fully address, but there are multiple approaches being discussed by the team for the future, such as compression, partitioning, and pruning.
Interoperability
Cardano (ADA) wants to be “the internet of blockchains”, in that it wants to be able to facilitate handling transactions across different blockchains using different cryptocurrencies. It aims to let you do things like transfer your Bitcoin (BTC) into Ethereum (ETH), without rolling through an intermediate.
The blockchain also allows you to attach additional metadata to a transaction, such as names and what the transaction was for, in order to make it more appealing to things like banks and governments. These optional parts of a transaction should hopefully facilitate greater acceptance with the more traditional money systems.
Sustainability
The problem a lot of cryptos run into after they launch, is their capital runs out. They have their initial coin offering (ICO), they get a large starter fun to get the company off the ground, but when it runs out, how do they get more? Do they create a new coin, run another ICO? Do they sell traditional shares in their company? How can they continue to pay their staff to innovate and grow the system?
The way Cardano (ADA) addresses this is that by having a treasury that takes a small portion of the transaction fees and stores them into a special wallet, which is more like a smart contract than wallet. Developers can submit proposals to the community, which include how much they want to fund it from the treasury, and if the community approves it, then the funds are transferred out to the team.
Price Action
If we discount the recent market crash, we can see that Cardano (ADA) has seen some pretty healthy growth over the last few months since the start of the year. The high on 1 Jan 2021 was $0.1847, while on 16 May 2021 it hit the all time high (ATH) of $2.47, before the market took it’s crash.
Assuming that the market does indeed recover, and we do not end up in an overall bear market, I see no reason that Cardano (ADA) won’t pick up where it left off and continue it’s nice climb up the price charts. With a market cap of only $50 billion, it does have some room to grow.
Conclusion
As you can see, the Cardano (ADA) project is trying to do things very differently than many others in the crypto space. They are trying innovative new approaches into solving the problems that currently exist, and are laying the groundwork for what could be a very diverse and useful ecosystem.
I’d highly suggest you do some further research from here, and consider adding Cardano (ADA) to your crypto portfolio.
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Want some more content right now? Check out some of my previous posts:
Proof of Stake (PoS)
Smart Contracts: Code Is Law
Crypto Wallet: How To Pick One
Originally Posted On My Website: https://ninjawingnut.xyz/2021/06/09/ada/
