Cardano Review – Third-Generation Blockchain
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Ethereum and decentralized finance have seen explosive growth since the summer of 2020, along with Bitcoin and the crypto market. But Ethereum hasn’t solved the scalability problem yet, and due to rising demand, the transaction fees on the Ethereum blockchain skyrocketed. This leaves users jumping ship and looking for alternatives.
Cardano might just be the solution users and developers seek, often called the “Ethereum-killer.” Besides solving Bitcoin’s excessive energy usage problem through its innovative consensus mechanism, it will soon challenge Ethereum’s position as the king of smart contracts and the Defi ecosystem. So, let’s dive deeper and discover how Cardano aims to achieve its vision and dethrone Ethereum.
In this article
What is Cardano?
Cardano is a proof-of-stake blockchain platform. It is the first blockchain founded based on peer-reviewed research, with researchers and academics spread worldwide. Smart contracts were added in 2021 to the protocol, opening the doors to various applications like decentralized exchanges, NFT marketplaces, stablecoins, oracles, DeFi, and so much more.
Charles Hoskinson, the founder of the Cardano project, was one of the co-founders of Ethereum (ETH). He left Ethereum in 2014 after a dispute about accepting venture capital, which was his view, instead of staying a non-profit, as Vitalik Buterin envisioned it. Charles went on to start the Cardano project in 2015, raising just over $62 million, selling ~25.8 billion ADA for $0.0024 per token. After two years of research and scientific development, the blockchain was finally launched in 2017.
The project is named after the Italian mathematician Gerolamo Cardano. And its native token, the cryptocurrency ADA, is named after English mathematician Ada Lovelace, widely viewed as the world’s first computer programmer.
Cardano calls itself a third-generation blockchain. Bitcoin is considered a first-generation blockchain, and Ethereum is a second-generation blockchain through the implementation of smart contracts. Cardano aims to solve the biggest problem blockchain platforms have: Scalability.
Cardano’s development is separated into three organizations: Input Output Hong Kong (IOHK), the Cardano Foundation, and EMURGO. IOHK is responsible for developing the Cardano protocol, while the Cardano Foundation oversees and supervises the overall project. Lastly, EMURGO focuses on business development and driving adoption.
How does Cardano work?
Being a blockchain, Cardano requires a mechanism to achieve consensus between all peers about the present state of the distributed ledger. Bitcoin (BTC) and Ethereum use proof-of-work to achieve consensus, which depends on computing power. The computing power used to secure the Bitcoin blockchain is so massive and energy-intensive that, according to Cambridge University, Bitcoin consumes more energy than countries like the Netherlands or the Philippines.
Cardano, instead, uses proof-of-stake (PoS) as a consensus algorithm called Ouroboros. Cardano Blockchain Insights says the token is 47,000 times more energy-efficient than bitcoin.
Ouroboros first divides transactions into epochs, which are five days long. Each epoch is subdivided into time slots, each 20 seconds long, with a leader elected by the stakers for each slot. The leader is responsible for adding a block containing the transactions to the chain. In exchange for staking ADA to secure the blockchain, stakers get ADA as a reward. Annualized, stakers get about 7% returns on their staked ADA.
Cardano can process over 1,000 transactions per second (TPS).
Cardano's roadmap
It was divided into five eras to keep track of the development: Byron, Shelley, Goguen, Basho, and Voltaire.
Byron
After two years of research and hard work, the Byron era started with the launch of the Cardano blockchain in 2017. It allowed users to buy and sell ADA and demonstrated the Ouroboros consensus mechanism. It also marks the launch of the full node Daedalus wallet, made by IOHK for desktop use, and the light wallet Yoroi, by EMURGO.
Shelley
Launched in 2020, a focus on decentralization marks the Shelley era. During the Byron era, staking was federated, and through the Shelley hard fork, staking was shifted to the community, with staking rewards added.
Goguen
We are heading towards the Goguen era, which will see smart contracts integrated into the blockchain. The first milestone has already been reached, with smart contracts launched on the testnet in May 2021.
Basho
The Basho era focuses on optimizing scaling and interoperability. The main feature is the introduction to sidechains, which are capable of interacting with Cardano’s main chain.
Voltaire
Lastly, the final era focuses on governance to become a self-sustaining system. Through voting and a treasury, stakeholders will be able to influence the future development of the network.
What is Cardano worth?
Cardano is currently the eighth largest cryptocurrency, according to CoinMarketCap. It has a market cap of $21.35 billion, and the token is 75% of its total supply cap.
How to buy and store Cardano
As one of the biggest cryptocurrencies in the world, Cardano can be found on various exchanges and investment brokers. These include Coinbase, eToro, Kraken, and Binance.
You can buy ADA tokens once you pick an exchange and deposit funds in it. Indicate the amount you want to buy and place an order. After the purchase, you can keep your ADA tokens on the exchange, especially if you intend to trade with them regularly or withdraw them to your cryptocurrency wallet, which is safer.
You can store your ADA tokens on Cardano’s native wallets, Daedalus or Yoroi, or any other options available, like software and hardware wallets. The hardware wallets by Ledger and Trezor are considered the safest options.
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Should you invest in Cardano?
As always, there is no clear-cut answer to this question. Cardano has many points that speak for it while also having negatives. I’ll discuss the positives and negatives so you can decide if it’s worth investing in.
Cardano is already one of the biggest cryptocurrencies around. Besides smart contracts, it boasts a huge community of raving fans and developers, ready to spread the word and start developing on it.
Cardano vs. Bitcoin vs. Ethereum vs. Dogecoin
Crypto | Price per coin | Market cap | Consensus mechanism | Maximum supply | Coins in circulation |
Cardano (ADA) | $0.60 | $21.35 billion | Proof-of-stake | 45 billion | 33 billion |
Bitcoin (BTC) | $52,324 | $1.01 trillion | Proof-of-work | 21 million | 19.63 million |
Ethereum (ETH) | $2,829 | $339.89 billion | Proof-of-work | Infinite | 120.1 million |
Dogecoin (DOGE) | $0.087 | $12.46 billion | Proof-of-work | Infinite | 143.09 billion |
FAQs
Is Cardano better than Bitcoin?
Cardano is hardly comparable with Bitcoin, and it has different objectives. While Bitcoin is focused on being a store of value, Cardano focuses on scalability and interoperability, featuring smart contracts and a proof-of-stake consensus mechanism.
Why is Cardano so cheap?
Cardano might appear cheap when compared to Bitcoin and Ethereum because of a a much higher number of ADA tokens in circulation. The best way to compare cryptocurrencies is by checking their market cap, which is the number of coins in circulation times their price.
How do I stake ADA?
You can stake ADA on many exchanges, and also from your own cryptocurrency wallets. Cardano’s native Daedalus and Yoroi wallets both offer staking within the wallet.
Can you lose money staking ADA?
Your staked ADA is completely safe and remains in your possession. You can’t lose ADA by staking. You can lose money by the devaluation of the ADA token though, so keep an eye on it.
The bottom line
Cardano has had impressive achievements while focusing on a slower rollout of new features based on peer-reviewed research. It is still in its early days, and the question is if Cardano’s third-generation blockchain is enough to overtake Bitcoin and especially Ethereum. Ethereum has had an early start compared to Cardano and has attracted a huge community and funding, cementing its place in the DeFi ecosystem. Given Cardano still has a lot to deliver, its future depends on the execution of the vision and whether it can successfully lure developers and users away from other blockchains.
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Writer
Claudio is a freelance copywriter specialized in finance and cryptocurrencies. Besides writing, he is interested in biohacking, trading cryptocurrencies and being curious.
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