“Programmatic Excellence”
Cardano is a new cryptocurrency, released in late 2015 to provide a new infrastructure layer for blockchain payments.
Rather than being another Bitcoin spin-off, it’s actually got a large foundation behind its development (IOHK – Input Output Hong Kong). This foundation has a series of expert developers who have used a number of core scientific principles to create a new type of cryptocurrency.
Unfortunately, information about the founders & their backgrounds is scarce, leading many to label the coin a scam.
However, the fact it is running and trading mean this is not the case. The most important point to consider is that whenever you are looking at a new coin (such as this), understanding the underlying reasons why it was created – as well as who designed it – are just as important as its functionality.
To this end, the functionality and ideas behind this coin are very deep and take a lot of explaining. Quite why many retail traders have been buying it is beyond us… but either way, this article should explain the veracity of the coin and where it originated.
As ever, we need to stipulate that this is NOT an endorsement for it, nor a recommendation to buy.
What is Cardano?
The goal for Cardano is to create a “marketplace” for “smart contracts” (small decentralized applications). This puts it well out of the scope of being a currency and lends itself to having a large array of potential uses, from providing decentralized asset leasing to public equity buyouts.
Whilst this sounds good on paper, the problem is that in order to pull it off effectively, there are a number of pieces that have to be added to the puzzle. Namely, the ability for the system to create a completely decentralized system that can process, manage and power millions of potential scripts.
To do this, Cardano categorized itself as 3rd generation blockchain technology…
- Bitcoin was the first generation of crypto technology – peer-to-peer financial transactions without an intermediary.
- Ethereum took blockchain technology further by implementing smart contracts that allowed payments/transactions under certain conditions (such as if an asset hit a particular price on the public markets).
- The problem with 1st and 2nd generations of blockchain technology was every time there was an upgrade, it lead to a split in the technology (known as a hard fork).
This is evidenced with Bitcoin Cash & Bitcoin Gold, both spin-offs of Bitcoin & offering very little by way of differentiation. In short, these forks were meant to be demonstrations of updates that the core Bitcoin system should have had anyway… but as there’s no central administration driving the Bitcoin movement forward, no one is in a position to implement any updates on the core branch.
Cardano plans to improve the performance and scalability of the various blockchain powered services by introducing a layered system that can process a large number of transactions independently of each other.
The way it does this is to first introduce a new way to mine its coins.
Coin mining in the cryptocurrency world is basically where you have a network of computers (nodes) who compile all the new data (transactions) that have been performed into a new block on its blockchain. Each success block that’s added to the chain is met with rewards in the form of coins.
The designers of Cardano created their own system (Ouroboros) which allows for a truly random mining system (to encourage a larger and more diverse processing network) through which the system should be able to run much smoother and more effectively than most other crypto networks.
On top of this will lie a multi-layered system through which the various smart contracts (decentralized applications) will be processed. For example, if someone is relying on the price of gold to hit $1,500 before triggering a sell order, the system will be able to handle this entirely autonomously.
The system was released through an ICO which raised approximately $63m in Bitcoin in 2015. Whilst this isn’t as important as adoption, it shows that enough people believed it to be valid enough to warrant an investment.
Who created it?
Cardano was created by the IOHK (Input Output Hong Kong) company which seems to be made up of a number of people, most notably Charles Hoskinson – the once CEO of Ethereum before leaving the team due to philosophical differences.
Whilst relatively little is published about the company behind the coin, several factors are obvious – they are based in Asia (presumably to stay clear of the SEC) and are primarily made up of blockchain veterans.
Unlike a number of other coins, this seems to have been created as a philosophical venture much more than one driven purely by the greed spawned from the Bitcoin price surge. As such, it could be worth checking out.
Why does it exist?
As can be read in their White Paper, the Caradano system was built to…
– Separation of accounting and computation into different layers
– Implementation of core components in highly modular functional code
– Small groups of academics and developers competing with peer reviewed research
– Heavy use of interdisciplinary teams including early use of InfoSec experts
– Fast iteration between white papers, implementation and new research required to correct issues discovered during review
– Building in the ability to upgrade post-deployed systems without destroying the network
– Development of a decentralized funding mechanism for future work
– A long-term view on improving the design of cryptocurrencies so they can work on mobile devices with a reasonable and secure user experience
– Bringing stakeholders closer to the operations and maintenance of their cryptocurrency
– Acknowledging the need to account for multiple assets in the same ledger
– Abstracting transactions to include optional metadata in order to better conform to the needs of legacy systems
– Learning from the nearly 1,000 altcoins by embracing features that make sense
– Adopt a standards-driven process inspired by the Internet Engineering Task Force using a dedicated foundation to lock down the final protocol design
– Explore the social elements of commerce
– Find a healthy middle ground for regulators to interact with commerce without compromising some core principles inherited from Bitcoin
Trajectory
As with other cryptocurrencies, the main indicator of Cardano’s success is whether it’s being adopted in the mainstream.
It’s important to remember that this is not a currency in the same way that Bitcoin is meant to be (still isn’t), which means that if you’re looking to find the next Bitcoin, it isn’t going to happen with this.
Cardano is to Ripple what Ethereum is to Bitcoin. In other words, the people behind Cardano are focused on building an infrastructure layer much rather than a currency.
This is reflected (like Ripple) in its low coin price.
Whilst the currency (decryption token) aspect of the system is essential, the team behind the coin have built an entire backend architecture to manage the various transactions, their storage and processing. In other words, adoption for this system looks like volume rather than velocity (price).
To this, end the growth of Cardano has all the hallmarks of a growing & legitimate cryptocurrency. Not only is the system receiving praise in the market, but a number of higher level clients are close to coming on board with the solution.
As such, when considering whether the coin is investable, not only these factors need to be considered, but also the underlying reality as to whether the coins themselves will eventually lead to a profit.
Obviously, the Bitcoin hype train is too far down the track for that to matter. But with the new altcoins, where buying the right one could multiply your money as much as 10,000%, identifying the new breakout winners is essential.
The general sentiment with the likes of Cardano is to examine the underlying revenue model they have moving forward. Ripple and Ethereum have teams of full time developers working on their projects – powered by an enterprise level service to integrate their technology into various institutions. Cardano (at present) does not have this.
Ultimately, what is trying to be said is that when looking at Cardano, try and imagine where it *could* be, rather than where it is. Its growth in transactions is relatively strong, with around a 20% month-on-month growth rate for transactions carried out in the currency.
