Cardano Aims To Create a Stable Cryptocurrency Ecosystem

Still struggling to move over bitcoin? A new cryptocurrency is in the town known as ADA token from Cardano. Launched in September 2017, the ADA token remained under scrutiny until the end of November. From there the cryptocurrency jumped by 1,520 % with a market cap of $18.8billion and it settled for the fifth most valuable cryptocurrency as of now. Following are some of the words providing an insight into the token.

What exactly is Cardano?

The cryptocurrencies had chaotic growth trajectories, even after they skyrocketed to prominence the last couple of years. Their ecosystem has a bad rep as a result of hard forks due to scandals, hacks, and disagreements.

Founded by Charles Hoskinson, the co-founder of Ethereum, it is a blockchain project intended to provide a more balanced and sustainable ecosystem for the cryptos. The website claim that ADA is the only coin backed by scientific philosophy and a research-driven approach. This means that open-source blockchain is subjected to rigorous peer-review by scientists and programmers.

Cardano is run by a non-profit foundation partnering with some academic institutions that research and review the aspects of its blockchain. By developing a reference treasury model, researchers at Lancaster University is finding a sustainable way to fund future development for Cardano’s blockchain.

Cardano differs from Bitcoin and Ethereum in these terms.

ADA has shown a projectile increase in less than two months although it is kind of an outlier in the volatile cryptocurrency world. It is said to be the first third-generation cryptocurrency that has aimed to tackle the scaling and infrastructure problems prevalent with Bitcoin that is the first generation crypto introducing the digital coins as well as the second-generation crypto known as Ethereum that expanded use cases for coins to smart contracts. This brings the idea behind Cardano to be a solution for all problems related to scalability, interoperability, and sustainability on the cryptocurrency platform.

Regarding the problems faced by the cryptocurrency, the first and foremost is the slowing down of networks and high fees as a result of an increase in transaction volumes. The algorithm behind Cardano is Ouroboros that is a probable solution for all scaling problems. 

Ouroboros is an algorithm that utilizes Proof of Stake (PoS) approach for energy and cost-saving enabling faster transaction processing. Without a copy of individual blockchains on each node (as is the case in Bitcoin), Cardano has a blockchain that streamlines the number of nodes in a network that appoints leaders who are responsible for verification and validation transactions from a collection of nodes.

Finally, the leader node is responsible for pushing transactions to the main network.

With its adoption, RINA (Recursive Internetworked Architecture) has helped Cardano scale its network. The topology was developed by John Day enabling customized increments to heterogeneous networks. To quote Hoskinson, Cardano’s protocols have to reach the standards of TCP/IP which are the dominant protocol used for the exchange of data on the internet.  

The portability of cryptocurrency within the ecosystem and in the interface with the existing global finance ecosystem depends on its interoperability. No way to currently perform cross-chain transactions between the currencies or to carry out the seamless transaction that involves the global finance ecosystem. The only intermediaries currently functioning are exchanges that are prone to crashes or those that charge exorbitant fees. The main reason that has distanced the cryptocurrency ecosystem from the global counterpart is a batch of regulations about customer and transaction identities. 

It is the success of Cardano that has enabled cross-chain transfers through side chains, that conduct transactions between the parties off-chain. The current trend is exploring the institutions and individuals, that divulge metadata related to transactions, and identities enabling the use of the currencies for trading as well as daily monetary transactions.

Eventually, it is all about governance structures providing incentives to the miners and stakeholders and evolving into a self-sustaining economic model of cryptocurrency. It also aims in building a constitution of protocols avoiding messy hard forks according to its creators.

The protocols hardcoded into the blockchains and applications using the protocol like the online exchanges and wallets readily check as it is being built. It can effectively cut down the time required to discuss and implement forks. That is referred to as ‘mechanization of a social process,’ by Hoskinson.

What Is The Market For Cardano? 

Being the primary use case as a cryptocurrency, ADA is part of Cardano’s settlement layer. Often known as the “Japanese ethereum” and reports last year indicating it was being made available in Japan through ATMs and debit cards. It intends to move from a settlement layer to a control layer, thus serving the trusted computational framework for systems of the like of gambling and gaming systems. This is a very ambitious plan for the future of Cardano. Similar applications underlined on its website are identity management, credit system, and Daedalus, a universal cryptocurrency wallet that is an automated crypto trading facility and crypto to fiat conversion capabilities. The role of ADA is however vague and unclear though important as a planned system.

To refine the algorithms and develop new governance structures, the nonprofit foundation running Cardano has listed partner institutions. The partnership is intended to be mutually beneficial as Cardano’s research projects have academic incentives together with the cryptocurrency industry’s expectations according to Hoskinson.

Is it possible to justify the current valuation of Cardano?

Though impressive, the flaws of Cardano’s ADA is similar to that of other cryptocurrencies with very little to show by the implementation. Released in September 2017, it has a limited number of nodes with the network controlled by the foundation. The expert opinion states that the data scaling efforts will be successful only by 2019. There is a lot of research going into the research phase, with innovation in the system aiming to standardize protocols and the use cases are in the growth stage being implemented while it grows. Cardano’s technology by far remains unproven.

It faces competition from the other currencies too. Litecoin, Dash, Ripple are among those who pose a grave danger for the crypto as of now. They prove a strong bridge between the financial systems and the cryptocurrencies. It remains to see that Cardano’s current price is not justified yet. But dismissing the value as a bubble would be unwise. The present prices are based on future markets meaning the traders are making profits based on future growth.

The final word. 

The currency rightly has an impressive pedigree with long term vision for blockchain and cryptocurrency. It remains to be seen whether the initial use case expands beyond coins into a control layer providing services absent in the present ecosystem. Much remains to be seen depending on the execution of vision being in the early stage.