What is Cardano?

An In-depth Look

Grand schemes, and big dreams, are exciting. They get the blood pumping. They get the masses rallying behind a cause. They capture the imagination.

And yet, we can't just stumble from revolution to revolution. As interesting as that would be, it wouldn't be particularly practical. If we are not going to give revolutionary ideas a chance — if we are not going to nurture and develop them beyond their early stages — then what is the point of having revolutionary ideas at all?

Back in 2008, the idea of the blockchain was revolutionary. In 2009, the launch of the Bitcoin network turned this revolutionary idea into a revolutionary reality. Great, but here's the thing about that revolutionary reality: it's not finished.

It doesn't need overhauling. It doesn't need tearing down and replacing. It needs developing, fostering, nurturing, encouraging, coaxing — whatever you'd like to call it. Let's not turn our backs on the revolution for something newer and shinier — let's see it through.

This is the thinking behind Cardano. Cardano is a digital platform designed to host smart contracts and to make them easier for the average person to use. In doing this, Cardano is not reinventing the wheel. Instead, they are taking the wheel and making it more manageable, affordable and practical for the broader global community.

And that's something that really should be applauded.

So, let's delve a little deeper into what Cardano truly is and explore how it is changing the crypto landscape for the better.

What is Cardano? An in-depth look

Early days: Preliminary ethos and scope

Cardano is often touted as being similar to Ethereum in how it is structured and how it operates, and there is a good reason for this — Cardano was founded by Charles Hoskinson, who was the co-founder of the Ethereum network.

In many senses, the network was developed as a response to the general uneasiness surrounding cryptocurrencies and the blockchain. One of the key oppositions to cryptocurrencies is the perceived instability of the market, particularly among investors with a low risk appetite — which is pretty much anyone who is not completely out of their mind.

Yes, the term Bitcoin Billionaire is a real and legitimate one, and, yes, the term came about because savvy early adopters made literally billions of dollars from Bitcoin investment, but this does little to calm nerves. You see, investors don't like the idea of something that explodes in value, especially when that value is based upon something as intangible as a digital currency token. It makes them nervous, and rightly so.

In fact, Hoskinson himself has raised serious concerns about the long-term viability of the crypto-market. He believes that the overwhelming diversity of the modern currency landscape is both a positive thing and a risky one; far too many of these currency networks will simply sink without a trace.

"What's going to occur is a lot of these ventures that don't have strong fundamentals, don't have good tech, or just unrealistic projects, they will eventually run into some major wall they can't quite overcome,” he said in an interview with CNBC back in 2018. “They will fracture up and you will see a lot of them are certain to fail."

This concern is one of the driving forces behind a more reliable network and a currency that is designed to resist the volatility and uncertainty displayed by rival players in the market — Cardano and its ADA currency token.

But there is another factor driving the identity of Cardano: broad accessibility.

The technology of smart contracts and the structure of the blockchain represent enormous potential across a great many different applications. And yet this potential remains in the hands of the world's financial and technological elite. The disadvantaged communities and emerging economies that could be benefiting from this technology are being excluded en masse.

Cardano — and the team behind the network — is out to change this.

The Cardano difference: What sets the network apart from the rest?

Cardano uses the Ouroboros algorithm.

Sustainability

We've already heard about how sustainability has been baked into the very identity of Cardano since day one, but how exactly is this sustainability being achieved?

• The treasury

One of the methods used to ensure long-term sustainability is the deployment of the ADA treasury. Rather than relying on initial coin offering fundraisers, the Cardano network seeks to secure perpetual stability and functionality with a treasury wallet. Access to this treasury wallet is automated, based upon the smart contract system. Basically, if a development proposal meets all the necessary criteria — including approval, sustainability, genuine needs, etc., — the funds are released to the developer.

• Reduced energy consumption

Of course, sustainability is a word with a number of different meanings. We can talk about sustainability in terms of a network that sustains itself, or we can talk about sustainability in terms of environmental protection and care. The vast amounts of computing power — and, therefore, vast amounts of electrical energy — required to run the Bitcoin network have been major causes for concern among environmentalists, or, indeed, to anyone with a realistic view of what needs to be done to protect our planet.

Cardano uses the Proof of Stake system to achieve network consensus (more on that later) rather than the much more energy-intensive Proof of Work system used by networks like Bitcoin. This eases the burden that cryptocurrency networks currently place upon our environment.

• Science-backed development

Cardano is developed using peer-reviewed research and a scientific approach to computer network design. This careful and considered approach provides an antidote to the often rushed, haphazard and cavalier feel of the modern crypto-market.

But this science-backed element is designed to be more than just reassurance for potential investors. Instead, it is hoped that this method of development will bring about a more effective set of results, advancing the medium of cryptocurrency ever further.

Scalability

A huge problem facing modern cryptocurrency networks is that of scalability. Basically, the blockchain storage structure, coupled with the Proof of Work consensus system, makes for a very slow network when that network is scaled up. And, such "scaling up" is quite important when you want to make a viable alternative payment system.

We've already touched upon the solution that Cardano has adopted — Proof of Stake. Built into the Cardano structure is the Ouroboros algorithm, a piece of coding designed to manage node activity on the network so that the "always on" situation of Bitcoin is avoided.

What's this got to do with scalability?

Well, unfortunately, to answer this we have to look at the failings of the Bitcoin network. As this network grew, its ability to handle high transaction volumes decreased. Why? Because the Proof of Work model is just too cumbersome to do the job at such high volumes. Proof of Stake is far more streamlined and efficient, making for a much snappier experience for users, even as the network grows.

At the moment, this still lags behind the ultra-fast speeds expected from modern internet connections, but the Cardano team has this kind of connectivity in their sights. The team has developed its own network architecture known as RINA, or Recursive Internetworked Architecture. RINA is helping Cardano to evolve and develop in terms of speed and reliability, truly pushing the boundaries of what is possible from a decentralized network.

Global usage / fungibility

If space was the final frontier for the various Star Trek captains and their crews, then "real world" fungibility is the final frontier for cryptocurrencies.

To put it simply, the boom-times experienced by Bitcoin and its legions of early investors were never really intended. Sure, they put BTC and other crypto-networks on the map, but they also made crypto a vehicle for investment and speculation rather than a full-fledged alternative currency.

As we've discussed, if any of these crypto networks and their associated coins are to have a long-term future, they need to have real-world applications beyond investment. In short, these currencies need to be genuinely useful to the man and woman in the street.

Other currencies are already seeking to achieve this by building or supporting applications that run in tandem with their networks. However, the team behind Cardano hopes to go a step further, basically recalibrating the structure of the network in a way that supports "real world" transactions.

This includes the development of side chains (something we will be looking at in a bit more detail in the next section). These side chains make the blockchain structure much more efficient and manageable, making it ideal for ordinary transactions.

But there needs to be more than this. There needs to be a fleet of applications and interoperable devices and tools that bridge the gap between a crypto network like Cardano and users out there on the street, conducting transactions in brick-and-mortar stores or other forums.

Cardano is aiming for this situation. The team is developing the Plutus programming language that will be used to develop smart contracts. These smart contracts will work with supporting applications to complete transactions in a reliable and speedy manner.

The Cardano structure

So how does the whole thing work? For this last section, let's take a look under the hood and get a little bit more up close and personal with Cardano.

As usual, know that what something does is just the beginning. You need to know how it's done.

The Settlement Layer

The settlement layer of the Cardano network is all about the nuts and bolts of crypto transactions. This is where transaction amounts are recorded and where the decentralized network distributes funds in accordance with smart contracts and other transaction rules.

In the Cardano universe, this settlement layer is known as the Cardano Settlement Layer, or CSL — which is nice and easy to remember. It is basically built upon a blockchain prototype but with a Proof of Stake consensus model rather than the Proof of Work model utilized by Bitcoin.

We've already discussed this, so we'll keep it brief. The decision to opt for Proof of Stake rather than Proof of Work was a shrewd one. It makes the network inherently more scalable and effectively future-proofs it. Rather than increasing the burden on the network, each new user actively adds to the computing power of Cardano, paving the way for long-term expansion.

The Computation Layer

In the Cardano network, it is the computation layer that is arguably the most interesting. While the CSL handles the nuts and bolts and heavy lifting of transactions, it is the Cardano Computation Layer, or CCL, that deals with the reasoning behind the transactions and the rules that govern them.

Users can utilize this layer as they craft specific rules and guidelines for transactions and smart contracts. This is where the Plutus programming language will come in handy, making the CCL, and the Cardano network as a whole, useful indeed across a variety of applications.

The Side Chains

The CSL and the CCL make up the bulk of the Cardano structure, but side chains also play an important role. We've already looked at these, but as they are so crucial to the function of the network, it's worth going over them in a bit more detail.

Basically, these sidechains are developed using the KMZ protocol and are designed to facilitate movement of funds and assets between any networks that share this protocol. This means easy movement between the CSL and the CCL, as well as any other supported network or network level.

This means that third parties can interact with the network without needing to disclose or access private information. These side chains lay the groundwork for Cardano's function as far more than just a vehicle for investment but as a genuinely viable alternative currency structure.

Hopefully, this has given you some insight on what makes Cardano so special. The network is still developing but it promises to offer exactly what we crypto-fans need — a stepping stone, a bridging point and an opportunity for decentralized currencies to really show themselves off to the wider world.

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