In this guide we will be covering the basic information of Cardano as well as some more in-depth information to help you get a better understanding of the blockchain.
A quick definition of ADA:
Cardano is an open source cryptocurrency network with a proof-of-stake blockchain that can be used for things like building smart contracts.
You can buy ADA in many ways and on many different platforms. Some of the more commonly platforms with a wide range of payment options are:
Cardano (ADA) is a decentralized third-generation proof-of-stake blockchain platform that is home to the Cardano cryptocurrency. It is the first blockchain platform that evolved from the philosophy of science and research-first methods.
The Cardano platform was designed from the ground up and verified by an industry-leading combination of top engineers and academic experts in the blockchain and cryptography fields. Sustainability, scalability and transparency are the centre of attention. Cardano is a completely open source project that aims to provide an inclusive, fair and flexible infrastructure for financial and social applications worldwide. One of its main goals is to provide reliable and secure financial services for people who currently do not have access rights.
Cardano is designed with safety as one of its basic principles. It is written in Haskell, a functional programming language. In functional languages like Haskell, the use of pure functions to build systems is encouraged, which leads to designs that can easily isolate and test components. In addition, the advanced features of Haskell enable us to adopt a variety of powerful methods to ensure the correctness of the code, such as implementation based on formal and executable specifications, extensive property-based testing, and running tests in simulations.
They were generated to solve the main problems that caused decentralized currencies. The main focus is to create a currency that can be used to transfer funds from one place to another without any centralized intermediary. Cryptocurrencies such as Bitcoin derive their value from guaranteed scarcity, rather than being owned or controlled by a single individual or company. This is called centralization. However, the main disadvantage of the first generation is the inability to control transactions.
By introducing Ethereum, the second-generation blockchain technology overcomes the previous shortcomings. It turns the blockchain into an infrastructure that can carry more content than simple currency transactions. These contracts contain all terms and conditions that are transparent to all participants, that is, the user’s consent will automatically take effect, thereby guaranteeing trust. Similarly, the first generation has some shortcomings, and even the second generation has some shortcomings, such as scalability, sustainability, and interoperability. The third generation aims to overcome all these shortcomings.
In terms of information and contact flow, the third-generation blockchain is very useful. They will be able to allow different blockchains to talk to each other. In the third generation, we have a technology platform called Cardano. Next to being a cryptocurrency, does it also hold the probability to run financial applications that organizations and governments currently use every day. The platform is built in layers, which allows the system to be flexibly upgraded and easy to maintain.
The Cardano team strives by a set of principles and philosophies. They did not propose an appropriate roadmap or white paper. Instead, they focus on accepting “a collection of design principles, engineering best practices, and ways to explore.”
The above mentioned principles come directly from the Cardano (ADA) Team.
Now that we have mentioned the philosophy behind Cardano, let’s take a look at the three elements in detail that Cardano is aiming to solve.
When people say “scalability,” they always think of transactions or throughput per second. However, according to Hoskinson, this is only part of the problem. In general, scalability is a three-headed snake. One needs to take care of three independent elements:
Bitcoin manages 7 transactions per second, and Ethereum manages 15-20 transactions. For a financial system, this is absolutely unacceptable. Cardano hopes to solve this problem through their consensus mechanism Ouroboros. It is a provably safe equity proof algorithm. In fact, we conducted a peer review and approval of Ouroboros during cryptocurrency 2017. As mentioned earlier, Ouroboros is a proof-of-stake algorithm.
So how does the network affect scalability? The transaction carries data. Therefore, as the number of transactions increases, the demand for network resources also increases. The concept is very simple: if the system is to scale to millions of users, the network will need 100 terabytes or exabytes of resources to sustain itself.
At last, we can perform data scaling. The blockchain stores eternal things. Every relevant or irrelevant small data will be permanently stored in the blockchain. With the expansion of the system, more and more people flood in, and with the influx of large amounts of data, the blockchain becomes larger and larger. Now, remember that because the blockchain is made up of nodes, the blockchain is running. Each node is a user who stores a copy of the blockchain in its system. Do you see where the problem is? As the blockchain becomes larger and larger, it will require more space, which is unreasonable for ordinary users with ordinary computers. Cardano hopes to solve this problem is to implement a simple philosophy that “not everyone needs all the data.”
The non-profit foundation responsible for Cardano brought together a network of scholars and scientists from different universities, including the University of Edinburgh and Tokyo Institute of Technology, to review its protocol before launching. It is a third-generation cryptocurrency and smart contract platform that claims to be able to improve the scalability issues that the first-generation (BTC) & the second-generation (ETH) faced.
What is Cardano’s answer to this problem?: Ouroboros!
Cardano’s platform is divided into two layers. The Cardano Settlement Layer (CSL) is used to settle transactions using ADA (Cardano’s cryptocurrency). Whereas the control layer will be used for smart contracts. Cardano’s hierarchical structure makes sure that it can be used as a medium of exchange and to generate smart contracts. In addition, the platform aspires to be interoperable with the mainstream financial ecosystem. The core of the Cardano platform is Ouroboros, which uses a proof-of-stake protocol to mine coins. The protocol has been customized to reduce energy consumption and time to make new coins.
In a typical proof-of-stake algorithm, the node with the largest bet (or the highest number of coins) creates a transaction block in the blockchain. However, the Ouroboros algorithm implements the algorithm in a different way. Broadly speaking, it works as follows. Ouroboros divides physical time into echoes that are made up of slots, which are fixed time periods. Slots are similar to factory shifts. In Cardano, the time range contained in the time slot will be different and can be modified in the algorithm. The epoch progresses in a cyclical manner: when one epoch ends, another epoch begins to operate.
Each epoch has a slot leader, the slot leader is selected by stakeholders or nodes that have generated coins in the past. The person in charge of the slot machine (slot leader) is responsible for creating and confirming the transaction block to be added to the Cardano blockchain. If the slot leader fails to create a transaction block in one epoch, the next chosen slot leader will have an attempt on it in the next epoch. A minimum of 50% of the blocks needs to be produced within the given epoch.
The transactions in the blocks which are produced by slot leaders will be approved by input endorsers. Input endorsers are the second set of stakeholders that are responsible for running and maintaining the protocol. There can be a numerous number of endorsers within a given epoch and their election is based on the amount of holding stakes.
To make sure the results are unbiased, there are two inputs configured into the election system.