What is Cardano?

Cardano is a third-generation, decentralised blockchain platform that enables cryptocurrency transactions with its native token ADA along with powering decentralised applications. Cardano is the brain-child of Ethereum’s co-founder Charles Hoskinson.

Traditionally, blockchains were developed on the basis of their whitepapers. However, Cardano is an ambitious project that is based on peer-reviewed papers that are modified by experts.

ADA is the native cryptocurrency on Cardano’s platform. ADA has a max supply of 45 billion tokens of which 31 billion have been already minted at its launch. This means 14 billion ADA tokens are reserved for mining rewards.

The Cardano blockchain is divided into two layers. Cardano Settlement Layer (CSL) is used for ADA transfers and to record transactions. Cardano Computation Layer (CCL) is made for custom smart contracts.

Previous blockchain generations like Bitcoin and Ethereum faced problems of scalability, interoperability and sustainability.

Let’s have a close look at what Cardano is and how it differentiates itself in the crypto space by solving these issues.

Scalability

For blockchains to become more adaptable alongside current financial ecosystems they have to increase the number of transactions possible per second on their respective networks. To combat this scalability issue, Cardano implements Ouroboros proof-of-stake consensus algorithm. We know this all sounds rather complicated, but bear with us here. Ouroboros divides a timeframe into epochs. Epochs contain numerous 20-seconds slots. Ouroboros algorithm elects random Core nodes as slot leaders for each slot. These nodes validate transactions and add a new block to the network. This allows Cardano to process transactions in parallel. This parallel validation significantly increases the volume of transactions. Core nodes are rewarded for validating transactions.

cardano interval time
cardano split

Dividing the network

Another scalability issue is network within blockchain technologies can be bandwidth. In a blockchain network, each node downloads a copy of every transaction. This becomes impractical when the number of transactions is escalated to thousands per second because each node will require greater bandwidth to store this volume of data.

Cardano solves this problem by dividing the blockchain network into sub-networks, using something called Recursive InterNetwork Architecture (RINA). These sub-networks are connected with each other using predefined protocols, ultimately meaning the bandwidth required to validate transactions is greatly reduced.

Storage

Blockchains are inherently a form of immutable storage; This means they store every transaction that’s ever happened. Efficiently storing this ever-increasing volume data can become arduous and potentially costly for many blockchains. To solve this issue, Cardano proposes the implementation of techniques like pruning, compression, and partitioning, which enables long term sustainability and efficiency.

cardano tree cut
cardano decision

Collaborating with banks and governments

Current financial institutions are hesitant to accept cryptocurrency transactions as they are safeguarded to provide anonymity where banks require information on the sender to create an element of security.

Cardano allows crypto users to add metadata to their transactions. However, this isn’t a default feature, it’s completely up to you to decide whether or not it’s useful to add metadata to a transaction. Long term this could help bridge the trust gap between traditional institutions and blockchain technologies.

Sustainability

Cardano promises to remain sustainable by upgrading itself using  a treasury function.

The Cardano blockchain platform sends some amount of their revenue into a treasury. This ensures that even if they exhaust their ICO funds, they can still roll out upgrades. The treasury incentivises developers to roll out new upgrades.

cardano treasury