What Is Cardano? A Complete Guide
What is Cardano? In a world where thousands of different cryptocurrencies exist, what really separates the best from the rest? Or better yet, how are the crypto newcomers challenging the well-established mainstream players like Bitcoin and Ethereum? A simple answer: third generation blockchain. This guide will explore the history and current and future use cases of Cardano (ADA).
WHAT IS CARDANO? A BRIEF HISTORY
In 2017, the Ethereum co-founder, Charles Hoskinson launched Cardano (ADA). Debuting with a market capitalisation of approximately $600 million, ADA drew significant traction during the 2017 and 2018 crypto hype. During this period, ADA achieved a peak market capitalisation in excess of $30 billion. A market wide contraction after this saw ADA pull back to a market capitalisation of $10 billion.
Regarded as a third generation blockchain, ADA improves on prior generations by implementing a layered design architecture. This architecture addresses the key issues plagued by second and first generation blockchains, specifically that of provisions for scalability, security and interoperability. Having contributed to the development of Ethereum, Hoskinson understood these technical limitations and sought to address them in Cardano.
In achieving this, the Cardano blockchain implemented two core components. Firstly, a settlement layer acts as the place where token holders can send and receive ADA with minimal transaction fees. Secondly, a computational layer contains a set of protocols. These protocols are the backbone of the blockchain, and helps facilitate the operation of smart contracts and to ensure security.
Unlike other cryptocurrencies, Cardano emphasises on a research-driven approach to design, having enlisted the help of cryptographers and mathematicians for development purposes. The developers of Cardano believe this strategy will propel adoption of its technology.
WHAT IS CARDANO? THE USE OF ADA
Cardano is designed to be the optimal platform for large-scale, mission critical decentralised applications (DApps) that can underpin the world economy in the future. As such, the platform is built to achieve the necessary high-assurance functions, such as scalability and interoperability, required for real-world applications.
Aside from using it as a store or transfer of value, there are two primary use cases of ADA. Firstly, holders can delegate their stake to a pool allowing them to contribute to the network and be rewarded proportionately. The amount of stake delegated to a pool is the primary reason the protocol elects who should add the next block to the chain.
Secondly, holders can also use their ADA in voting. Unlike other mainstream blockchain networks, token holders vote and decide on alterations to the protocol – not miners. To this effect, holders can use their ADA to vote on such protocols, ensuring all holders have a say.
In the future, ADA will also be used to operate smart contracts on the Cardano blockchain. Currently, smart contract development for Cardano has begun and is expected to be finalised in the first half of 2021. Once complete, developers will be able to utilise ADA to create smart contracts and applications that run on the blockchain.
IS ADA SAFE TO INVEST IN?
ADA is a token that has received significant attention and quickly positioned itself as a top 10 cryptocurrency by market capitalisation. In employing a unique layered architecture as a third generation blockchain, there is no doubt this attention has been warranted.
Compared to other mainstream cryptocurrencies such as Bitcoin and Ethereum, Cordano is still relatively new to the crypto scene. Although having implemented a number of features that improve upon second generation blockchain, development is still continuing. Given these factors, investing in ADA is still largely speculative and would be appropriately held within a diversified crypto portfolio.
Aside from this, it is refreshing to see a blockchain project take an academic approach to developing new technologies.
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