[ADA Knowledge] What is Cardano ADA? Blockchain Visionary

Table of Contents

What is CARDANO?

Abbreviation: ADA
Type: Infrastructure
Industry: Blockchain
Total Supply: 45,000,000,000
ICO Price: 0.0026
Launch Date: 2017
Mining: N/A
Official Website: Click here
Whitepaper: Click here

What has changed in the blockchain world after Ethereum was proposed?

The emergence of Ethereum 2.0 significantly increased the practical value of this new technology. Many projects built decentralized applications (Dapps) or issued their own cryptocurrencies on top of Ethereum using smart contracts. Over time, the network became congested, transaction processing speed slowed down, and the drawbacks of decentralized platforms began to surface. Furthermore, because Ethereum still uses the PoW verification mechanism, the energy consumption of mining machines verifying transactions over the year is as high as the annual electricity consumption of a small country, becoming another criticized issue.

Cardano believes that blockchain and cryptocurrencies should be more easily applied by enterprises or the financial system. They set out to create a public chain that can support thousands of transactions per second, a platform that allows government agencies and enterprises to trace system data, and even achieve democratic governance. Therefore, they focus on building a third-generation blockchain that is more suitable for large-scale applications, emphasizing Scalability, Interoperability, and Sustainability.

How to Solve the Issues

Scalability – Ouroboros PoS
Overall, the Ethereum blockchain's performance was dragged down by the PoW mechanism, and as more nodes join the network to maintain security and network consensus, transaction speeds decrease. To improve efficiency, Cardano decided to use the PoS verification mechanism to reduce the time needed to achieve consensus. The PoS mechanism allows nodes with more tokens to have a higher probability of becoming accounting nodes. Currently, it locks transaction speeds at around 20 transactions per second, and in test networks, it has achieved transaction speeds of up to 250 transactions per second using the PoS mechanism.

Additionally, to ensure randomness and optimize efficiency, they will use their in-house developed PoS-like verification mechanism, "Ouroboros PoS." It is claimed to have unlimited scalability while ensuring network randomness. Ouroboros means tail-eating snake, symbolizing cycles in Western culture.

Interoperability
Currently, main chains cannot exchange information with other main chains, making cross-chain token and message exchange a challenge. The lack of interoperability between centralized information systems of traditional financial institutions and decentralized blockchain networks makes information exchange and verification a significant challenge. Founder Charles Hoskinson vividly explains the importance of interoperability with a clear analogy.

Suppose a blockchain company raises funds through an ICO and wants to cash out by opening a bank account. The bank, in order to conduct KYC (Know Your Customer), will ask about the source of these funds.

The company finds it difficult to explain the source of these funds and can only say they were obtained through the sale of virtual currencies to anonymous individuals on the internet. Financial institutions find it difficult to inquire about the identities of token buyers, and even if wallet addresses are found online, identities cannot be verified, making it challenging for decentralized networks to be quickly applied in the current business system.

They promise to use Sidechains to support cross-chain message exchange and be able to meet the KYC requirements of the current traditional financial system through e-wallets or other authentication support, becoming the Internet of Blockchain.

Sustainability
As mentioned earlier, current main chain projects usually use the PoW verification mechanism to ensure network security, but the drawback is the extremely high energy consumption, which is not conducive to the long-term development of the platform. They use the PoS mechanism to solve this problem, where miners stake a certain amount of tokens as a guarantee to prevent malicious miners from attempting to alter transaction results, eliminating the problem of high energy consumption and making the platform more suitable for long-term development.

After Ethereum experienced a hard fork, some community members believed that artificially changing the platform's development violated the decentralized nature of blockchain. As a result, they stayed on the original chain and became "Ethereum Classic," creating two different versions of Ethereum. The team believes that such forking behavior will reduce the platform's sustainability. To enhance consensus among all community participants regarding the platform and maintain its decentralized nature, the development team proposed the "Cardano Improvement Proposal," which will allow token holders to vote on different proposals to determine the platform's future direction.

Token Functionality
Its token is called ADA, like most main chain projects, ADA can be used as a value storage cryptocurrency for transmission and can be used as a fee payment to miners when executing smart contracts in the Cardano network. The total supply of ADA tokens is capped at 45 billion and will not be increased.

Key Figures

Partners

There are three main organizations operating behind this project: the Cardano Foundation, responsible for community management; IOHK (Input Output Hong Kong), in charge of development and operations; and EMURGO, the project incubator:

Cardano Foundation
Dedicated to accelerating the platform's large-scale application, the Cardano Foundation communicates with various enterprises and projects to establish a strong community, provide education, assistance, and other services to quickly increase supporters, developers, and applications within this ecosystem.

IOHK
As the primary development organization, IOHK has a strong research team and development resources. Founder Charles Hoskinson has a strong research foundation to support platform construction, ensuring the overall ecosystem's development and security. The IOHK research team alone consists of more than a dozen people, working on various projects such as the native wallet DAEDALUS and programming language HASKELL simultaneously.

EMURGO
As the incubator for the Cardano project, EMURGO provides funding and technical assistance. Recognizing that the success of main chain projects depends on how many developers truly develop applications on their platforms, EMURGO assists developers with good ideas to quickly deploy their applications on the platform.

Development Challenges

Although positioned as the early third-generation blockchain pioneer touting scalability solutions, the current development progress still lags significantly behind in terms of large-scale commercial applications. Transaction speeds are still limited to around 10-20 transactions per second. Even though the Ouroboros PoS mechanism claims to achieve thousands or even tens of thousands of TPS, in the current high-throughput main chain projects like EOS and Zilliqa, which are introducing new generations, its competitive advantage is gradually diminishing.

Behind the scenes, the three organizations Cardano Foundation, IOHK, and EMURGO have had internal disputes, but aside from these market noises, the Cardano Foundation, which actually owns the Cardano and ADA trademarks, has signed a contract with the development team IOHK that is only valid until 2020. In other words, if the Cardano Foundation is dissatisfied with Charles Hoskinson's research and development at IOHK by 2020, they can choose not to renew the contract, which could lead to significant changes in the project's development direction at that time.

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