Since the beginning of cryptocurrency, developers have strived to take the next step toward the evolution of this domain. And as Bitcoin established the first generation of cryptocurrency and Ethereum the second, Cardano is trying to lead crypto into the third generation.
But what is Cardano?
The “Ethereum Killer,” some say. But countless projects are claiming that.
However, in Cardano’s case, quite a few things may turn this project into a true competitor for Ethereum.
So, what is Cardano?
Cardano is a proof-of-stake blockchain platform initiated by Charles Hoskinson and Jeremy Wood under The Cardano Foundation, IOHK, and Emurgo. And, of course, on top of this platform resides the ADA cryptocurrency.
In essence, the project aims to become a smart contracts platform for decentralized applications that can fit the needs of a high-demand global market.
The Cardano project started its development in 2015 after Charles Hoskinson and Jeremy Wood left the Ethereum team. And after two years of research and peer reviews, in 2017, they launched the first phase of the project. On September 29, 2017, the ICO raised approximately $62 million.
But as mentioned, the project was in its first phase out of a total of 5 phases.
And although Cardano was launched as a platform without many functionalities, to begin with, the idea of a third-generation blockchain, improved scalability, interoperability, and sustainability caught the eye of the public.
How does Cardano work?
Cardano employs a proof-of-stake algorithm called Ouroboros and is incentivized through ADA. Although it’s far from its final form, the project seeks to bring innovation specifically into three areas cryptocurrencies are usually lacking.
First is scalability
It’s not the first time a project has attacked the low speed of Bitcoin, the wasted resources required for a robust proof-of-work consensus, and the database that only gets bulkier and harder to manage.
Therefore, Cardano employed a proof-of-stake algorithm called Ouroboros.
The Ouroboros algorithm is a system to reach a consensus upon ADA transactions in which nodes stake cryptos to create new slots.
The staking process is organized in epochs consisting of 432,000 one-second intervals called slots. Typically, each epoch lasts almost five days, and a snapshot is created at the end of it.
Sidenotes – Snapshots capture the distribution of staked ADA to pool members and utilize it to determine how much reward every individual is owed.
In the staking process, the algorithm randomly chooses a slot leader from the stakeholders (the node owners that keep a particular ADA stake). The slot leader selected will then confirm transactions and earn rewards in ADA.
The chance is correlated to the number of coins held by a node. Naturally, whales may seem to have an advantage, but the algorithm allows people to delegate their stake.
The algorithm is supposed to address two layers:
- The Cardano Settlement Layer (CSL);
- The Cardano Computation Layer (CCL).
The CSL is meant to stock data regarding the actual transactions. The CCL is meant for the reason behind the transactions. Namely, CCL is addressing smart contracts.
Through scalability, Cardano can process many transactions without messing up the network performance. This technique also provides increased bandwidth, allowing transactions to carry substantial supporting data that can be readily controlled inside the network.
For instance, Cardano brings and implements various techniques such as data compression and works in bringing Hydra, which will enable multiple side chains functionality.
Cardano’s interoperability guarantees the most multi-functional environment for financial industry operations by allowing users to engage with many currencies across several blockchains.
Cardano is being designed to facilitate cross-chain transactions, various token types, and widely used smart contract languages.
Blockchain projects are mostly data silos. Although nowadays, DeFi projects allow for the creation of tokenized versions of other cryptocurrencies, converting a cryptocurrency to another without a third party is not yet possible.
In this regard, Cardano is looking to allow cross-chain transfers by implementing side chains that run along with the leading chains via a two-way peg.
Furthermore, in this matter, updates made lately on Cardano brought an ERC-20 converter to redeploy tokens from Ethereum to Cardano, which went live on Mainnet on April 18, 2022.
Third comes sustainability
ICOs redefined what crowd-funded projects used to mean. Unfortunately, money tends to run out, especially when developing advanced functionalities.
In this regard, Cardano wants to implement a Treasury that gathers small transaction fees to distribute funds to promising projects.
This way, developers can propose new features and projects and get voted through a DAO-like future by the Cardano community. Afterward, the developers won’t have to focus on an ICO to gather additional funds.
Developments on Cardano
The project, as a whole, sounds good. However, although Cardano has been online since 2017, the project has not reached its full potential.
So, let’s take a look at Cardano’s roadmap.
Byron (September 27, 2017)
The Byron era brings to life the first crucial technology developments of Cardano, launching the mainnet and enabling users to trade and transfer ADA.
Shelley (July 29, 2020)
The Shelley era came after a long wait and started as a hard fork in the summer of 2020. From the centralized Cardano, where a few selected entities did the mining, the project turned to the decentralized Cardano, where the staking is transferred to as many community nodes as possible.
Shelley also comes with introducing a delegation and incentives scheme, a reward system meant to drive stake pools and community adoption.
Goguen (December 2021)
The Goguen era is supposed to be the update that will turn Cardano into a smart contracts platform. And that’s because the mid-December hard fork is supposed to introduce smart contracts capabilities. With this event, Goguen adds the ability to build decentralized applications on Cardano’s solid foundation of peer-reviewed research and high-assurance development.
Goguen comes with Plutus, a purpose-built smart contract development language and execution platform that uses Haskell’s functional programming language. And for the less technical users, I introduced Marlowe, a high-level, domain-specific language (DSL) for financial contracts.
The Basho does not have an exact release date (given that the Goguen era is still in its early stages) but is expected to be around in 2022. Still, it will open the gates of interoperability and scalability. It will come to bring significant developments around performance improvements and introduce sidechains.
The final era of Cardano’s initial plan addresses the sustainability of a blockchain project. The Voltaire era will be the one to add to Cardano a treasury system and governance in which network participants can use their stake and voting rights to influence the future development of the network.
The updates for Cardano in 2022
The platform’s roadmap only shows the significant developments for the year; however, Cardano undergoes numerous more updates. So far, 2022 has brought Cardano challenges and many accomplishments, and it does not end there.
Here are some of the initiatives launched by Cardano this year:
At the beginning of 2022
SundaeSwap, one of the most popular Cardano-based decentralized exchanges, has been available on the platform since December 2021. SundaeSwap is a Cardano DEX natively scalable that offers decentralized exchange rates and automates liquidity provision.
However, the platform experienced some issues initially, with customers complaining about transactions failing and not receiving their switched tokens. Despite the difficulties with the exchange, the ADA blockchain hit a record of around $80 million at the same time as the incident.
Further, IOHK unveiled Hydra, their Layer 2 scaling solution; there is no definite timeframe for the formal release; it might take 6-12 months and may not be available until late 2022 or even 2023. Hydra may be moved closer to the Cardano Basho period, which aims to increase scale.
Hydra will strive to expand the Cardano blockchain by lowering latency and increasing throughput transactions per second (TPS). Hydra will allow each staking pool to process 1000 TPS, and with over 3000 staking pools, Cardano will soon be able to process over 3 million TPS. Moreover, the IOG developers raised the Cardano block size by around 12%.
Updates for February 2022
Cardano’s blockchain network got smart contract features and support with the most recent successful update, the Alonzo hard fork in the Goguen era. Bringing an updated, better usage of open, programmable, and low-cost transaction platforms to suit their blockchain requirements, scalability, sustainability, and interoperability.
This accomplishment has also helped bridge Cardano dApps with Yoroi Wallet’s Cardano ADA customers moving ahead EMURGO, the creators of Yoroi Wallet – the forthcoming plan to create Yoroi dApp Connector to allow interactions between Cardano dApps and Yoroi users. However, the dApp Connector capability is currently available exclusively to Cardano developers. This phase brings Yoroi users closer to connecting with Cardano dApps via Yoroi Wallet.
Updates made in March 2022
In March 2022, Cardano unveiled its $16 million ADA Fund8 for its innovation engine named Project Catalyst; the initiative entails the Cardano Treasury gathering and sponsoring fresh proposal ideas or projects every three months. Project Catalyst began as an experiment in collaboration, competitiveness, and human potential and has now grown to become the world’s biggest decentralized innovation fund.
The primary goal is accelerating ecosystem expansion by giving resources to support new possibilities. However, the ADA price will be affected simultaneously, which is a sign of recovery for Cardano and its members who realize that the price is determined not only by the market but also by the project, which concentrates on growth and development.
Grayscale will offer a smart contract fund for Ethereum competitors, including Cardano, towards the end of March 2022. The Grayscale Smart contract platform ex-Ethereum fund, popularly known as the ticker symbol GSCPxE, will give 24.63% fund and exposure to Cardano (ADA).
During the same time, WidsomTree releases crypto ETPs covering a variety of cryptocurrencies, including Cardano’s ADA, which is listed on the Swiss stock exchanges SIX and Borse Xetra. These crypto ETPs are conventional investment products that provide simple crypto exposure.
On the same note, a considerable transaction volume on Cardano in March skyrocketed in 2022, implying no institutional interest in the blockchain network. This year, the volume of significant transactions on the Cardano blockchain has risen by more than 50 times.
This volume refers to aggregated volume from transactions denominated in Cardano’s ADA token worth more than $100,000. Since the beginning of the year, the number of significant transactions has climbed from 1.35 billion ADA per day to a growth of 69 billion ADA worth $81.4 billion.
The Chicago Mercantile Exchange, or CME, said in early April 2022 that it was exploring providing a futures product for ADA and other popular cryptocurrencies. This is a significant occasion since the CME is the same exchange that notably launched Bitcoin futures at the end of 2017, kicking off the previous bull run.
Shortly after, the CME said it would add reference rates for ADA and ten other cryptocurrencies. This is relevant at the moment since a reference rate is necessary for CME to list a future product, implying that Cardano futures for institutions are possible soon.
Singularitynet, a Cardano project, finally published its widely anticipated ERC20 token converter in late April, allowing tokens and native assets to be moved between Ethereum and Cardano.
The most important thing to remember is that the ERC 20 converter presently only supports Singularitynet’s Agix tokens.
Finally, IOG engineers increased network block size by 10% to 88KB in the most recent upgrade, resulting in 500 TPS and 7 to 10 smart contract TPS for Cardano.
Cardano released Daedalus 4.10.0 earlier this month, which built up the display of nameless native tokens and handover support for the Windows development environment and fixed a pairing issue for the Ledger Nano S on Windows. The Hydra team released version 0.5.0. This update includes some features related to handling rollbacks and the possibility of using ed25519 signatures.
Also, this month, voting finished on Project Catalyst’s Fund8. Project Catalyst produces a fresh pipeline of technical, business, creative, and community-focused projects – funded to deliver their proposed ideas that have been voted for by the Cardano Catalyst community. Fund9 opens in early June.
Updates made in June 2022
In June, the node team released the brand-new Cardano node version 1.35.0, the foundation for the Vasil upgrade. This release enables the use of new Plutus capabilities after the Vasil upgrade, including node and CLI support for reference inputs, reference scripts, inline datums, and collateral output.
Input Output (IOG), the development lab for the Cardano blockchain, didn’t release in late June’s Vasil hard fork on the Cardano testnet because of technical bugs. The developers said, “After some consideration, we have agreed NOT to send the hard fork update proposal to the testnet today to allow more time for testing.”.
Vasil, a network upgrade that would surge scaling capabilities on Cardano, thereby increasing transaction speeds and lowering fees, was slated for a late June release on Cardano’s test network. Hard forks refer to a network upgrade in which blockchains validate and produce new blocks with predetermined rules.
July, August, and September 2022’s updates
In July, it was released Plutus-apps v.0.1.0. This alpha release targets a Cardano Network with the Vasil HF (node v1.35.3). It will allow dApp developers to test their existing PlutusV1 application on a network that has been forked to support Babbage-era features. Therefore, do not expect this release to work on the Cardano mainnet until the Vasil HF because our transaction library submits Babbage-era transactions with PlutusV1 or PlutusV2 scripts.
On September 14, the community released the latest version of the Daedalus wallet (version 5.0) with several important fixes. Some of these essential fixes are related to debugging: The upgrade would fix several issues, such as errors when choosing syncing wallets while redeeming incentivized testnet (ITN) rewards. Further, the upgrade would eliminate older Daedalus executables in the previous versions after auto-update.
Plutus, the smart contract platform of the Cardano blockchain, also received a significant update. Plutus V2 scripts introduced with Vasil provided higher transaction throughput and increased cost efficiency.
This increased the value and capability of the Cardano network remarkably. Overall, these developments fell in place with the upcoming Vasil hard fork scheduled for September 22.
After the cancellation of launching the Vasil hard fork on the Cardano testnet in June, The Cardano blockchain’s Vasil hard fork upgrade was scheduled to take place on its main network (mainnet) on September 22, Input Output (IOG) said. And so It happened. On September 22, Cardano’s Long-Awaited Vasil Upgrade Goes Live, bringing “significant performance and capability” enhancements to the blockchain!
Vasil is also expected to deliver the second version of Plutus, Cardano’s smart-contract language, which will help developers create faster and more complex decentralized applications on the chain.
Cardano vs Ethereum
Some consider that the actual winner will be the crypto project that will prove to implement an accurate & reliable proof-of-stake consensus system. And Cardano is not the only ‘Ethereum killer’ competing in this race. There is also Solana, XRP, and Polkadot, which follow Cardano’s evolution.
Ethereum 2.0 was scheduled for January 2020 but continues to be postponed. Still, the Beacon Chain upgrade was introduced on December 1, 2020, with the actual change being the Merge that will combine the Beacon Chain with the Ethereum mainnet sometime in 2022.
The crypto community members have started opening up nodes and organizing themselves in staking pools. And Cardano is entirely in the same situation, although it opened up betting with Shelley on July 29, 2021.
In May 2022, Ethereum Beacon Chain Explorer showed us that the staking network already surpassed 375,023 active validators and 12 million ether staked.
As for Cardano, the Cardano PoolTool network comprises over 1 million stake addresses and over 10,81 billion ADA at stake representing 73.34% of the total amount of supply.
Regarding staking returns, network performance, and functionality, the verdict tends to go more to Cardano than Ethereum.
The criticism surrounding Cardano
No doubt, the Cardano project comes with an astonishing initiative to bring innovation to the crypto and blockchain world. Yet, the more complex it is, the more it is bound to have experts find faults in it.
And such is the case with Cardano.
The first critique of Cardano is that it’s still a blockchain in development and some of the most attractive claims are just theoretical. And until the Shelley update, voices were even articulating that the Cardano development stopped. But it has been proven wrong as the Cardano already has many updates that have come up in 2022 already with the Goguen era.
The scalability claims are also critiqued as Cardano can deliver around 500 transactions per second with the latest updates made for the simple transaction and 7 to 10 for the smart contract transaction. At the same time, cryptocurrencies like Ripple’s XRP already offer 1,500 tps.
And as for security, Cardano has been accused that it did not solve the double-spending problem. Even though Cardano is secured by over 3000 staking pools that function as its validator nodes; as a result, this process makes Cardano one of the most decentralized cryptocurrencies. Cardano’s k parameter, which decreases staking rewards when there is too much stake in a single pool, incentivizes the creation of new staking pools.
- Cardano is the blockchain platform initiated by Charles Hoskinson and Jeremy Wood under The Cardano Foundation, IOHK, and Emurgo. ADA is the native cryptocurrency of the Cardano blockchain.
- Cardano employs a proof-of-stake algorithm called Ouroboros and is incentivized through ADA. Although it’s far from its final form, the project seeks to bring innovation into scalability, interoperability, and sustainability.
- Cardano’s roadmap comprises five eras: Byron, Shelley, Goguen, Basho, and Voltaire. Currently, the project is in the Goguen era and will soon cross into the Basho era.
- There have been many updates regarding Cardano and its evolution, making the blockchain more powerful.
- The match between Cardano and Ethereum will finally be judged by how successful will the PoS implementation be. Solana, XRP, and Polkadot are competitors in this race as well.
- Regarding criticism, most of Cardano’s claims are still theoretical, but the project’s developments will bring more and more of these claims to reality.