Cardano claims to be the first blockchain platform “to be founded on peer-reviewed research and developed through evidence-based methods.” During my research for this article, I have found Cardano to be much more than simply another cryptocurrency. Rather, it has the goal of becoming a comprehensive blockchain protocol built with the best research in mind. In this article, I’d like to share a basic overview of what Cardano is, why it is different from existing projects, and my final impression of the project.
What Cardano / ADA Is
The first point of clarification that needs to be made is that Cardano is NOT the same thing as ADA. Cardano is the blockchain platform, and ADA is the native currency. In reality, it's fine to use the terms interchangeably, but for this analysis, it's important to make the distinction that Cardano is not simply a cryptocurrency. It is a comprehensive blockchain with a native crypto (ADA) being only one part of this larger system.
Although Cardano is indeed an entire ecosystem, I believe that the most pressing concern on the minds of many readers will be the actual cryptocurrency (ADA), so that will be addressed first. The ADA cryptocurrency is a proof of stake cryptocurrency which means that it has all the inherent advantages that other proof of stake cryptocurrencies have over proof of work. This includes less concentration of power, more environmentally friendly, more accessible for small investors, etc.
Ouroboros - Speed and Security
However, Cardano’s proof of stake mechanism is distinct from other proof of stake mechanisms in that the developers have scoured the best available academic literature to develop Cardano’s proprietary Ouroboros protocol. This consensus mechanism offers several security and scalability benefits over existing methods.
As of 2019, Cardano’s base Transactions Per Second (TPS) was quoted as 250. Even comparing base TPS to base TPS, Cardano can handle more than 16 times the transactions per second of ETH, but that’s not all.
Cardano’s model has inbuilt scalability through the use of epochs, time slots, and slot leaders. It’s a bit technical, but basically, the blockchain can be sub-divided into smaller units with different leaders confirming different sub-units for faster confirmation. In contrast to ETH 2.0’s “Sharding” which is/will/could/maybe possibly someday require an entire update to the system, Cardano’s ability to scale is built into the protocol from the start. If the in-built scaling ability isn’t enough, Cardano has been developing the layer 2 solution “Hydra” in which each new user that connects to the network generates 10 heads for data and transactions. Thus, the system actually gets faster as it scales and is claimed to support a million TPS.
Security is just as important, if not more so than speed, and Cardano has developed a unique PoS system that it claims is mathematically proven to be secure so long as at least 51% of the network participants are honest actors. This remedies one of the main concerns with other PoS systems which is that they are less secure than Proof of Work consensus mechanisms. According to blockchain author Donald McIntyre, traditional PoS systems have a fault tolerance of 33% vs 50% for PoW systems. Thus, Cardano’s ability to maintain integrity even if 49% of the participants are malicious actors would seem to give it a considerable security advantage over existing PoS systems and their 33% fault tolerance.
An Entire Blockchain Ecosystem
Although the native currency is the image most strongly associated with a blockchain, Cardano offers more than just a highly secure PoS based cryptocurrency. According to the vision, Cardano realizes that blockchains have the power to solve not just financial, but social and technological challenges as well.
As part of this solution, Cardano has devised a road map that includes rolling out a variety of features to further develop its comprehensive blockchain, one of the most important being the implementation of smart contracts in the Goguen phase.
The Importance of Smart Contracts
In my opinion, the importance of smart contracts can not be understated. I believe that the key reason that ETH is currently the “one to beat” is mainly due to it being the first to implement smart contracts. Smart contracts transform a blockchain from a simple way of moving money to a way of ensuring automatic execution of contracts, enabling DeFi, supporting the concept of “money legos", and allowing developers to build decentralized, autonomous programs that can exist and thrive independent of political, social, and ideological boundaries.
Therefore, I think it is absolutely imperative that any cryptocurrency or blockchain project which hopes to compete with King ETH has a well-developed smart contract programming language as well as a highly motivated team of developers skilled in that programming language. Thus, I find it promising that Cardano has developed and implemented its Plutus smart-contracting language, which is now in the testing stages.
Cardano also aims to make smart contract programming accessible to a wider range of business and financial professionals through its Marlowe smart contracting language which is promised to make writing smart contracts easier for people with a non-technical background. As someone who has tried, and failed, to successfully learn Solidity, I believe that the implementation of an accessible, high-level, easy to learn smart contracting language could give Cardano a considerable edge over existing smart-contract compatible blockchains.
Features on the Horizion
The following features that I'm going to describe are part of the Cardano roadmap which have not currently been implemented. Although a lot of these features are incredibly promising and exciting, I think it's also important to remember that it's easier to promise than it is to deliver. Not that I think Cardano can’t deliver; rather, I think it is just always important to keep that caveat in mind.
At some point, Cardano hopes to introduce support for a multi-currency ledger which will allow users to create their own Cardano compatible tokens. This would be similar to how the ERC-20 standard allows users to create tokens that run on top of the Ethereum blockchain or Bitcoin Cash with its SLP tokens. Again, this is a critical step because it would allow Cardano to move beyond simply being a simple way of exchanging money and enable support for a whole host of digital assets such as NFTs, tokenized real estate, DeFi, governance tokens, etc.
In phase 4 (Basho) Cardano intends to implement sidechains, and in Phase 5 (Voltaire) Cardano will implement a governance and voting system as well as a treasury system that will collect funds from transactions. These funds will then be used to promote and develop Cardano and will be allocated based on the decentralized governance process. I think this would be a huge step forward as far as decentralizing the blockchain because it would make the blockchain itself very self-sustaining. In an ideal situation, this would also take the power out of the hands of the founding team and place it into the hands of the actual users, much the way that DeFi tokens have done for DeFi governance.
Cardano aims to become a comprehensive blockchain, and it is hard to list all the features (achieved and planned). I have tried to condense the most important aspects of the project here, but given the magnitude of the project, it is inevitable that I have left some out in the interest of time and brevity. That being said, I'd like to close this article by giving my final thoughts.
Cardano claims to be built on the best available scientific and academic literature, and that is readily apparent as I was conducting my research for this article. Everything I have seen on their website is well written, well explained, and presented very nicely. Maybe it's the nerd in me, but I find it fascinating how even the different phases of development are named after historical figures.
I think the project is extremely ambitious, but I also believe that the goals are intuitive and make sense. It isn’t a hype project that promises to change the world with vague slogans. Rather, it is a scientifically designed blockchain ecosystem that attempts to solve real issues within the crypto world (low TPS, inaccessibility of Smart Contract programming, flawed blockchain governance). It also appears to be more regulation-friendly by allowing metadata to be included in transactions - this could give it an edge in securing government approval in certain areas.
As much as I like the goals of the project, I also have to be honest that it is still in the early phases. For example, Cardano hopes to move into DeFi, but just taking a quick look at DeFi Pulse shows that the vast majority of DeFi activities are still Ethereum based. This isn’t meant in any way to put down Cardano; it’s simply to say that betting on Cardano means that you are betting on the strength of the team, the nobleness of the vision, and the work of the devs to compete against the established, demonstrated results of other chains. Its a choice between past performance and future potential.
Is that a good bet? That is something that each investor has to decide for themselves, but I do believe Cardano is a strong contender. It has a great community and the documentation and presentation on the website is immaculate. They have listings on most major exchanges which I view as a sign of the team’s ability to navigate the listing process and achieve demonstrable results. According to data from 2019, Cardano was one of the most actively developed projects, even exceeding ETH development activity. If that trend continues, ETH might be king, but not for long.
In one of Cardano’s documents, they state that “Once a standard is set it will probably stick around, regardless of whether it is suboptimal.” Although this was intended to apply to Cardano’s development of a settlement layer, I believe it applies equally well to Cardano’s future vs other projects. On paper, and even based on demonstrated results like TPS, Cardano does offer a whole host of benefits that are not available in current blockchains. However, it is very difficult to understate the impact of inertia bias, and history is full of examples of obtuse, inefficient methods winning out over newer, innovative methods simply because of inertia bias.
As with everything else in crypto, the choice is up to the individual. Cardano offers a host of benefits and improvements, but it has an uphill fight to displace the reigning king. Will those benefits be enough, or will inertia bais win out? Only time will tell, and there are countless projects all trying to de-throne the king. At this point, I can’t confidently say which project(s) will come out on top, but I do think Cardano has strong fundamentals, a great vision, and is well worth looking into.