Cardano (ADA) is a blockchain platform (similar to Ethereum) that is currently still used as the basis for trading the cryptocurrency “ADA”, but for which much larger scale is planned in the near future. On the basis of scientific research into cryptosystems and taking into account the deficits of older systems, a cryptographic platform will be created in the coming years that combines performance, security, and functionality.
From the superficial observer’s point of view, Cardano is simply another platform that serves as the basis for the cryptocurrency ADA. ADA has been tradable since October 2017 and acts as a voucher, i.e. it is used as a voucher in exchange for services and goods. Cardano is backed by three companies and institutions: IOHK (Input Output Hong Kong) by former Ethereum co-developer Charles Hoskinson, the Swiss Cardano Foundation and Emurgo, a Japanese incubator in the crypto sector. This powerful alliance has set itself the goal of developing and expanding Cardano. According to its own statement, Cardano should become a (or rather the) third generation cryptocurrency, after Bitcoin and Ethereum.
How does Cardano work?
The technical basis of Cardano is Ouroboros, the blockchain algorithm of the system. (Ouroboros is the name of a symbol in occidental mysticism; a snake that bites into its own tail to form a closed circle.) Ouroboros is a Proof of Stake algorithm. This means that new blocks are created by the node of the network on which the highest stake lies in wallets. Of course, this would create an oligarchy (rule of a few) of individual, particularly financially strong nodes. This is 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 the stake for each node (only those nodes on which ADA really lies are decisive, i.e. for which the stake is really greater than 0, the so-called stakeholders). The sum of all stakes then always results in 1 and the list of all these values forms a probability distribution. The algorithm then randomly selects a candidate from the stakeholders, whereby the probability of the choice corresponds to the value of its stake. This candidate then becomes the creator of a new block.
What does Cardano want to achieve?
At first glance, the plans for the further expansion of Cardano are reminiscent of Ethereum itself: In an entire crypto ecosystem, Smart Contracts and Decentralized Apps (dApps) are to be implemented on the blockchain in addition to the classic function as currency. The target user group ranges from individual users to large banks and companies; and the system should even be equipped for payment transactions by states, central banks and supranational organizations.
In order to achieve these ambitious goals, Cardano is trying to distinguish itself from other cryptocurrencies with a number of innovations. For example, the developers claim that Cardano is the first cryptosystem to be developed on a fundamentally scientific basis: Functionality and performance are constantly checked and further developed by a peer group of experienced developers and researchers from the cryptoscene. The main task here is to identify, analyze and avoid the large deficits and shortcomings of earlier systems. The focus here is also on adapting the currency to the needs of large organizations. This means two things: On the one hand, the security of payment transactions must be maximized and guaranteed at a high level, because loss, theft or misbooking are no options for the expected amounts. On the other hand, the anonymous aspect of the cryptocurrency must also be reassessed and regulated, since public institutions
Cardano’s fundamental orientation places this new system close to existing cryptocurrencies. From a technical point of view, the final result should resemble Ethereum, with smart contracts and other active elements on the blockchain. Also, many Cardano developers seem to come from the Ethereum environment. With regard to the target group, however, it will be easier to think of role models such as Ripple or OmiseGO, and banks and companies are already showing great interest in the system. However, the newcomer seems to think in even greater terms. Not only money transfers between banks, but also any amount of money should be transferable between any actors. The theoretical and technical basis is there, and Cardano can be trusted for the future to conceive the principle of cryptocurrency from scratch and to establish it on a new, previously unknown level. Whether Cardano’s promises will also be fulfilled by future developments, however, will have to be seen in the coming years. The Cardano roadmap can be viewed here: Cardano Roadmap