A brief guide to understanding Cardano

Bitcoin was a technological revolution when in 2009 the first decentralized one-to-one payment system was created using Blockchain technology. Years later in 2015, Ethereum would break paradigms with the implementation of a programming code to a Blockchain, which allowed its users to create smart contracts with personalized transactions and the development of decentralized applications. In the words of one of Ethereum’s co-founders, Charles Hoskinson, “Ethereum is like when Javascript hit the browser”, However, despite the technological milestone represented by the first and second generation of crypto assets, they posed some challenges in terms of technology that, to date, has limited exponential growth, Bitcoin Cash, Ethereum Classic and Ethereum 2.0 are examples of protocols that try to fix these growth or scalability issues.

Another of the protocols created is Cardano, which is a third-generation Proof-of-Stake blockchain and has its native token, ADA, which were created in 2015 by Hoskinson, and launched on the market in 2017. Since its inception Cardano was planned to solve all the problems that the previous two generations have, focusing on three big issues: scalability, interoperability and sustainability. Cardano has a vision to fix each of these categories in a way that inherits the best qualities of the first and second generation while adding new concepts and technologies to the ecosystem. These are the main axes of this protocol and that is why it is expected that this will be the Blockchain that will dominate the market in a few years, below, it is explained in a general way what each of the issues that Cardano raises consists of. solve and optimize.

  1. Scalability Speaking in terms of crypto assets, scalability can be understood from 3 approaches:
  • Transactions per second (TPS): It is the notion of how many operations can be put in a block in a finite period of time.
  • Bandwidth or Network: A protocol is required that is capable of supporting all the data that passes through it, it is a common problem for companies and companies, this could be something more complicated to solve in a decentralized ecosystem.
  • Data: Each time a transaction is confirmed, regardless of its relevance, it is recorded in a block, so it is expected that over the years the databases will grow to petabytes as the transactions per second increase, that is, a problem because one of the principles of Blockchain is that each node has a copy of the entire blockchain and in the long term this is not user-friendly.

Cardano proposes to solve each of the previous points. Among its proposals, it is scalability: Ouroboros, It consists of a proof-of-stake protocol that consists of a system made up of proven security guarantees, where global networks can grow in a sustainable way; additionally, seek to be friendly with the environment since a huge amount of energy is not required to validate a transaction. For the creator of Cardano, Ouroboros is more secure, scalable and more energy efficient than any other protocol that has existed before.

Regarding bandwidth and Data, they solved this with “Recursive Internetwork Architecture” (RINA), which is a new way of structuring networks that enable a heterogeneous network that still maintains privacy and transparency, while scaling more efficiently and maintaining network stability as it grows, RINA can operate as a scalable network that does not require all nodes to process and save each transaction, making it more friendly to community members.

  1. Interoperability. It is evident that there will not be a single cryptoactive that dominates and is above all, today there are a great variety of blockchains and tokens with particular characteristics, each of these systems has its own programming language and protocols that are unable to understand each other, This is somewhat contradictory if you want to have a stable decentralized ecosystem, the ideal is that each blockchain has the ability to communicate with other protocols in a simple way. On the other hand, thinking that, if the crypto-asset industry is sought to coexist with the traditional financial system, it is evident that there will be regulation in some of the points; Therefore, if it is expected that we have a regulation of crypto assets, it is necessary that the technology has the capacity to establish communication with all the participants of the financial system.

In that sense, Cardano aims to be able to observe and understand the transactions that are happening in multiple systems and blockchains, for example, verify that the condition of a smart contract paid with Ether is fulfilled in the Ethereum network, Cardano seeks to be able to move through all blockchains in an agile way; For this, the proposed solution is through “Non-interactive proof of work” (NIPoPoW), which are short and independent chains that a computer program can inspect to verify that an event occurred in a PoW blockchain, without the need to download or verify all data, which optimizes the process of checking operations and conditionals.

  1. Sustainability Sustainability refers to the way in which all the development made to the blockchain will be paid, Cardano intends to generate a treasure system that rewards the community that works developing and promoting the network, this will be achieved with democratic voting mechanisms, where users will be able to decide which project is most important to the protocol and who should be paid for their services, if a developer wishes to apply for funding, they must first determine the funds necessary to carry out the work, then they must create and submit a proposal that includes the details of the improvement, finally the community members review the detailed proposal and vote for its approval. The treasury works as a smart contract over which no one has control, the funds are deposited and extracted automatically under certain conditions in a digital fund, this aims for the community to continue developing the Blockchain as they are rewarded for their work through a fair and sustainable governance system.

From the beginning, Cardano set itself a great challenge: to be the asset that solves the problems encountered in the first two generations. This project goes beyond the markets, its objective is to create a decentralized economy, a system that is scalable, interoperable and sustainable, that is friendly to the environment, inclusive, universal and democratic.

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A brief guide to understanding Cardano

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