What is Cardano (ADA)?

Cardano (ADA) is a third-generation cryptocurrency and blockchain that has been built based on peer-reviewed studies, which has led it to be considered the "cryptoworld's first scientific blockchain."

Une of the most interesting projects within the crypto community is Cardano (ADA). This project is actually a rich ecosystem that is considered as a blockchain third generation and whose objective is to provide scalability and security.

To achieve these goals, Cardano has built on a long battery of very interesting technological advances. What has allowed him to achieve several and important objectives in this regard. But not only that, it has shown that blockchain technology has the ability to face the challenges of today and the future without problems.

Beginnings of the Cardano project

Talking about the beginnings of Cardano as a project, leads us to indicate in the first place, its biggest difference with the rest of blockchain projects. And it is that Cardano is considered a scientifically developed blockchain. But what does this mean?

The first scientific blockchain

Well, remember for a moment that Bitcoin it was released with a protocol and source code that was created by an unknown individual (or group of individuals). Not only that, that code and the ideas embodied were only fully reviewed by a few within the community. For an idea like that of Bitcoin, with its intention to be the digital money of the world, many might think that it is a little serious project. In fact, it is what many thought at first. The idea, however, was revolutionary and, to this day, remains firm.

But, even so, there is something vital in all the development of Bitcoin that is radically different from that “so informal form of development”. And, let's think about it for a moment, Bitcoin is the agglutination of various technologies such as asymmetric cryptography and hash functions. As well as the merkle trees, Games theory, Byzantine fault resistant protocols (BFT). On closer examination, all of these have gone through a long period of developmental review, scientific and peer review around the world. The latter is something that Bitcoin skipped, which Ethereum and many other cryptocurrencies ignored: their initial protocols were merely an idea of ​​some stranger thrown to the wind, without accurate scientific review and verification. They are all a success, but they lack those elements.

This is certainly not true at Cardano, because its development story is a story that applies the scientific method, of peer review from the first to the last word of its whitepaper and all its development. This has earned Cardano the name we indicated above: the first scientific blockchain.

The origin of the idea

The Cardano project began its development in 2015, with the creation of the company IOHK. The company was created by Jeremy wood y Charles Hoskinson. Hoskinson, who is well known in the crypto world, describes himself as a "cryptocurrency entrepreneur." In fact, Hoskinson and his recognition in the community also come from his participation in one of the great blockchain projects, Ethereum, where he was a co-founder of this cryptocurrency, until differences led him down another path.

However, this did not prevent Hoskinson, a graduate in Mathematics and a specialist in Number Theory, from having a great participation by opening academic spaces dedicated to blockchain technology. Notable among those works are his work at the University of Edinburgh and the Tokyo Institute of Technology, as well as a blockchain research project at the University of Wyoming. Experiences that would later add their grain of sand within the development of Cardano.

After two years of development, Cardano became a tangible reality. To be more exact, on September 23, 2017, the first block of this cryptocurrency was successfully mined, beginning its unalterable history.

The name of the project derives from the name of Jerome Cardano, an Italian scholar and physician known for early systematic calculations of probabilities. Your native token, ADA, derives its name from Ada Lovelace, who was a renowned English mathematician and writer, best known for her work on Charles Babbage's proposed general-purpose mechanical computer, the Analytical Engine. From this point, the clear scientific tint of the project is evident in every aspect.

In fact, from the outset, Cardano distinguished itself by its clear explanations, a clear set of milestones and development for the project. The idea behind all this was not only to clearly explain their work, but also to show that the project was aimed for the long term. And that it sought to solve problems such as scalability, improve decentralization and the security of blockchain technology. This earned Cardano being classified as a third generation blockchain.

That is, one with capabilities to send and receive value, schedule smart contracts and have a modular and easily adjustable architecture. But beyond this, Cardano has followed a clear development path, one that has allowed it to reach great milestones. And this is something that they have been able to achieve thanks to the support of IOHK and the huge scientific, user and developer community that it has united around it.

How does Cardano (ADA) work?

Cardano's operation is based on a group of well-thought-out technologies, all of them working together to make Cardano a high-speed blockchain. Among these technologies we will highlight the most important ones, so that you know them and can recognize their capabilities.

Ouroboros, the Cardano consensus algorithm

Cardano's consensus algorithm is called Ouroboros, which is a variant of the consensus algorithm Proof of Stake or Proof of Stake (PoS). The name Ouroboros, comes from a mythical symbol used in ancient times by various civilizations and by alchemists, and represents the infinite cycle of things.

However, the design of Ouroboros doesn't just respond to an oddly flashy name. But to a more serious technical aspect, and that is the fact that Ouroboros is considered a verifiable and reproducibly safe protocol. This is because it is the first protocol that has undergone extensive peer review and mathematical proofs to verify this.

This is vital because as Ouroboros is the heart of the network's mining and consensus control, its resilience must be vital to the functioning of the network. Being a PoS protocol, Ouroboros is fast, highly scalable, energy efficient, and all without sacrificing security and decentralization. In fact, Ouroboros is programmed to issue a new block every 20 seconds to the blockchain, thereby guaranteeing a high speed of confirmation..

It is precisely these last two points that will lead to the modifications of Ouroboros compared to the usual PoS protocol. Remember that in PoS, the blocks are created by the validators, who are chosen by a draw within the network. The chances of being elected increase as your participation (measured in blocked tokens) increases.

Currently there are several implementations of Ouroboros, the one used in Cardano currently receives the name Ouroboros Praos, and the next version has been named Ouroboros Hydra.

Slots and Epochs, inside Ouroboros

But in Ouroboros we can see two new concepts that are not seen in other PoS systems. We are talking about intervals (slots) and cycles (epochs). The intervals or slots in Ouroboros are time intervals that last 1 second. While the epochs or cycles, have a duration of 5 days at 432.000 slots. The production of these slots and epochs also responds to the PoS system, thus ensuring that they can be produced at all times, and under a decentralized production system.

This offers strong protection against malicious participants who seek to subvert the protocol, since its validation can only occur during its time and corresponding slot, in a time window of 20 seconds, otherwise, they must wait for a new election process to take part. In addition, of the blocks generated by the rest of the nominees, only one of them will reach the chain while the rest are rejected, chain reorganizations and the involuntary generation of forks within it decrease.

Thus we have that Ouroboros processes the transaction blocks dividing the chains into epochs, which are divided into time intervals. A slot leader is chosen for each time slot and is responsible for adding a block to the chain. To protect against adversarial attempts to subvert the protocol, each new slot leader must consider the last blocks of the received chain as transient: only the chain preceding a pre-specified number of transient blocks is considered resolved.

This is also known as delayed settlement and is the mechanism through which the ledger is passed securely between participants. At the end of this process, the leader of the time, performs the epoch, signs it and continues the process.

Stake pools, concentrating the power of staking

A Stake pool, is nothing more than a trusted node that focuses on maintaining and concentrating the combined interest of several nodes in a single entity. They are, to put it in a way, the equivalent of mining pools, only this time they do not concentrate mining power, but trust, vote and delegation to generate blocks within Cardano using the Ouroboros protocol.

Monetary policy of the project

First of all, the maximum coin issuance within Cardano is a total of 45 billion ADA tokens. This within a deflationary emission system, which is dynamically adjusted taking into account the following formulation and variables:

These elements are defined as follows:

A: Total rewards available for this season. That is, the number of coins that are still to be issued.
a0: influence factor of pool staking (can be between 0 and infinity)
z0: relative saturation size of the group, i.e. 0,5% based on a desired number of groups (k = 200)
σ: participation delegated to the group (including participation committed by owners and participation delegated by others)
σ '= min (σ, z0) - like σ, but limited to z0
s - share promised by owners
s' = min (s, z0) - like s, but limited to z0

A fairly complex system, but one that is ideal for the monetary system managed by Cardano. In fact, the usual reward per block generated is close to 750 ADA per block (in epoch 242).

CCL and CSL, Cardano's layers of operation

Another important part of Cardano's operation is that its network is actually divided into two well-defined layers, moving away from the monolithic concept of other blockchains. These layers are called CCL and CSL.

The CSL is the layer that manages everything related to Cardano's ledger or history, as well as the main set of consensus rules of the network. It is on this layer that the consensus protocol, the issuance of rewards, and the handling of network transactions take place.

However, the capabilities of the CSL do not end there, as this layer has been designed to accomplish the following tasks:

1. It handles the scripting language, necessary to carry out operations on the network.
2. Features to enhance transaction overlap protection as well as the ability to provide sidechain interoperability.
3. Support for multiple types of cryptographic signatures, including quantum-resistant.
4. Modularity and extensibility.

On the other hand, the CCL is the layer in charge of maintaining all the information about what happens with the transactions carried out on the platform. The idea of ​​this CCL is to include additional functionalities that do not affect the base consensus of the network, based on the CSL layer.

This would allow Cardano to apply additional consensus rules on this layer, allowing it to join other networks, interoperate with them, without affecting the core of its technology and facilitating the evolution of the network as a whole. In this way, Cardano will be able to count on smart contracts (with the activation of Plutus and its Goguen update), although it is not its only use or possibility.

Another capacity of the CCL is that smart contracts can be directed to the virtual machines necessary for processing. In a native way, Cardano smart contracts will be written in Haskell language, which will make them very easy to write and extremely powerful. But, CCL can expand this possibility by allowing to join an infrastructure compatible with the EVM Ethereum, allowing contracts to be written in Solidity and executed on the network, having an impact on it.

ADA, Cardano's native token

Cardano's native token as we have discussed is ADA. The idea of ​​the Cardano project is to turn ADA into a first-class token, surpassing even Bitcoin or Ethereum, by allowing cheap and secure transactions. And at the same time, being the native token of a platform with powerful scalable smart contracts.

Of course, on this path ADA has already come a long way so far, positioning itself as one of the 10 largest cryptocurrencies in the world, with a capitalization that exceeds 8 billion euros.

In this sense, the activation of the Goguen, Basho and Voltaire updates on the Cardano network will surely lead to an explosion in the value of Cardano, so its development until 2022 will be very interesting for the crypto community.

The future of Cardano

At first we told you that Cardano has a very clear development roadmap, one that they have been successfully fulfilling.

Currently, Cardano is at the Shelley age, which was activated in June 2020. Thanks to Shelley, the network was able to improve the decentralization of the network, as well as improve its scalability with the application of the Ouroboros Praos consensus algorithm. As a result, the network became more decentralized, secure, fast, and scalable. But there is still a long way to go, and this path is marked by interesting updates that we will talk about below.

Goguen, the arrival of smart contracts

Cardano's next step is to include smart contracts in its network, and that will be achieved with the arrival of Goguen. With this update, Cardano will have the ability to maintain DApps on its network which will be programmed using the Plutus programming language, an adaptation of Haskell for this blockchain. In fact, Plutus can already be reviewed and its stable version has been released.

Basho, optimizing the platform

The second major update left in the current Cardano roadmap is Basho, and it is aimed at optimizing the platform as much as possible. The main objective of this update is interoperability and the inclusion of sidechains, which will allow Cardano to offer its services in a much more optimized way and with at least two orders of magnitude in its capabilities.

In this way, Overall, the Basho era will see Cardano become one of the highest performing, resilient and flexible blockchain platforms in the industry. This will provide a network infrastructure with the ability to scale in a sustainable and secure manner, as well as the ability to add new functionality without compromising reliability at the core of the network.

Voltaire, on-chain governance for the project

Cardano's last stage is to achieve on-chain governance and with it, greater decentralization than that achieved with Shelley, as well as to achieve self-sufficiency in its development.

To do this, Voltaire will create an on-chain governance infrastructure and a decentralized treasury system, in order to maintain financing for the project and its healthy development over time. At this point, IOHK will cease to be Cardano's economic arm, and the project will have complete freedom in its fate.

Conclusions

At this point it is very clear that Cardano is a very well thought out project. The quality of its technical documents, the generation of new and interesting concepts for this technology, are just a sample of the potential that Cardano has in its possession.

Additionally, its ADA token is perhaps one of the fastest growing currencies at this time within the crypto community, taking a position above projects with more experience such as Litecoin (LTC), Bitcoin Cash (BCH) and moving closer to others such as Ripple (XRP ) and Polkadot (DOT).

Its main drawback is that this project still has a long way to go. The lack of smart contracts, and complex updates to the platform leave it behind other blockchains and cryptocurrencies at the moment. However, this weakness is rather temporary, and soon Cardano could surprise the world, when its major updates are a reality by enabling these technologies natively on its network.

In any case, Cardano is a project with a strong development, and within it many do their best to make this project one of the great references in the crypto world.

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