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Deep Dive into Cardano

1. What problems does Cardano solve?2. What is Cardano?3. How does Cardano work?4. What are ADA tokens used for?5. Who is on the Project Team?6. The History of Cardano7. The current stage of Cardano’s development

1. What problems does Cardano solve?

Cardano aims to create the best solution for the well-known blockchain trilemma:

  • Decentralization一the transfer of control and decision-making from a centralized entity to a distributed network;

  • Security一the ability of the network to withstand external attacks, keeping data unchanged through encryption;

  • Scalability一the ability of the network to withstand the load of a large number of users and maintain a high throughput of transactions per second.

2. What is Cardano?

Cardano is a blockchain platform based on Proof-Of-Stake (PoS), written in the programming language Haskell and designed to create decentralized applications based on smart contracts.

The Cardano project was launched in September 2017 and is a third-generation blockchain (or blockchain 3.0)一built on technologies first used in Bitcoin (first generation) and Ethereum (second generation). 

Cardano was conceived as an evolution of these ideas一a flexible, stable, and scalable blockchain: a platform for performing smart contracts, which enables the development of a wide range of decentralized financial applications, new cryptocurrency tokens, games, etc. 

One more feature of Cardano is its academic and scientific philosophy. The team developing Cardano has published extensive studies and research on blockchain and the technology behind this project. 

3. How does Cardano work?

Cardano has a two-layer structure: the Cardano Settlement Layer (CSL) and the Cardano Computational Layer (CCL):

  • CSL, also known as the "Byron era", records and executes ADA cryptocurrency transactions inside the blockchain;

  • CCL is a separate layer consisting of various components released in the Shelley and Goguen era and enables tokenization, smart contracts, and decentralized applications (dApps). 

Cardano's own PoS consensus protocol is called Ouroboros. It achieves consensus and validates transactions by allowing ADA holders to delegate authority to a pool that functions as a node on the Cardano blockchain. Each node can be an elected leader and confirm a block. The probability of becoming a leader increases with the number of ADAs contributed to its pool (until the pool saturation limit). Pools receive rewards for successfully validating blocks. 

Cardano is the first blockchain to use Haskell, a purely functional programming language. Such programming languages are commonly used in academia and complex software development. Cardano also uses Plutus and Marlowe—unique programming languages for creating smart contracts and Dapps.

4. What are ADA tokens used for?

ADA is the native utility token of the Cardano blockchain. The ADA token is named after the famous 19th-century mathematician Ada Lovelace (while the project itself is named after the 16th-century Italian mathematician Gerolamo Cardano). There are several uses for the ADA token: 

  • For the average cryptocurrency user, it is primarily an investment tool. You can invest or trade ADA tokens on cryptocurrency exchanges. 

  • For a professional investor,it is to use ADA to stake on cryptocurrency exchanges or special platforms. In this case, ADA is used to validate transactions on the network and participates in the PoS consensus process.  

  • The token is also used to pay transaction fees on the network (like ETH on the Ethereum network).

In the future, the ADA token will also be used as a governance token that will allow holders to vote on changes and updates of the Cardano platform.

5. Who is on the Project Team?

The founder of the Cardano project is Charles Hoskinson, one of the pioneers and most famous people in the cryptocurrency industry. Charles is the creator of several noteworthy projects. So, in 2013, after Dan Larimer published the concept of decentralized stablecoin, Charles Hoskinson helped test this theory and created a business plan. This project later became known as Bitshares. 

In addition, in September 2013, Hoskinson founded the Cryptocurrency Research Group, served as the founder-chairman of the Bitcoin Foundation's education committee, and head of the Bitcoin Education Project. From December 2013 to May 2014, Charles Hoskinson, along with Vitalik Buterin and six other founders, was the CEO of Ethereum.

In March 2015, Charles Hoskinson and Jeremy Wood founded Input Output Hong Kong (IOHK), an engineering and technology company that enables peer-to-peer technology for financial services. By that time, Charles Hoskinson had already left Ethereum after significant disputes with Vitalik Buterin over the non-profit development model for the project. 

Jeremy Wood is Cardano's second co-founder and director of strategic development for the project. At the end of 2013, he served as executive director of the Ethereum Foundation, after which he acted as a consultant for several other cryptocurrency projects. The third co-founder is Aggelos Kias, the project's chief scientist and cryptographer, who is also a professor at the University of Edinburgh.

6. The History of Cardano

In June 2014, Hoskinson left Ethereum due to disagreements regarding further developments of the project. Together with Wood, he founded IOHK, which in 2015 started the  development of Cardano.

On February 7, 2017, IOHK developers presented a white paper on the Ouroboros blockchain protocol. That same year, the Cardano ICO was held, in which 57.6% of ADA tokens were sold, and the project managed to raise $62.2 million. The official launch of the Cardano platform took place on September 29, 2017. 

Cardano's development plans are outlined in the project's roadmap. There are five stages, of which this is a particular stage in the development of the Cardano blockchain, including Byron, Shelley, Goguen, Basho, and Voltaire. Each phase focuses on the development of the technology and functionality of the platform.

The Byron era of Cardano began in September 2017 with the launch of the first version of Cardano. This phase is named after the poet, Lord Byron, the father of Ada Lovelace. 

The Byron era was aimed at building a solid foundation for the entire Cardano project. At this stage, Cardano was allowed to buy and sell ADA. The desktop wallets Daedalus and Yoroi were also launched, as well as the listing of ADA on all major cryptocurrency exchanges. 

The next phase, Shelley, is part of Cardano's transition to high decentralization. This era is named after the English poet Percy B. Shelley. Shelley was officially launched on the main network on July 29, 2020, marking the beginning of the PoS era for Cardano. 

The main idea behind Shelley is to enable ADA holders to participate in the network. They are the validators that make the PoS system of the network work. Like other PoS blockchains, Shelley allows ADA holders to delegate their shares to other validators or create stacking pools for rewards.

The third phase of Goguen is named after the American mathematician Joseph Goguen (1941–2006). The transition to this development phase was divided into four updates: Allegra (December 16, 2020), Mary (March 1, 2021), and Alonzo (September 13, 2021).

The Goguen era will open up opportunities for developers to create DApps and opportunities to create tokens based on the Cardano blockchain (similar to ERC-20 and ERC-721). Another feature is the implementation of compatibility with other existing smart contracts, regardless of differences in the coding language of their development. 

The Basho era, whose launch date has not yet been confirmed, is named after the famous Japanese poet and haiku master Matsuo Basho (1644-1694).

This era will need to scale the network with sidechains that will be used as a sharding mechanism. The network will also have to become more interoperable with other blockchains through new accounting styles that will be launched parallel to the existing Cardano UTXO model.

The Voltaire era, named after the famous 17th-century French poet, writer, and philosopher, will put the finishing touches on the development of the Cardano network. The final goal of this development is to create a fully self-sustainable and truly decentralized platform. 

Voltaire will introduce a governance and treasury system, and participants will be able to use their stakes and voting rights to guide the future development of Cardano. With the introduction of these elements of self-governance, Cardano's road to full decentralization will be complete, and the management of the network will move from IOHK to the community.

7. The current stage of Cardano’s development

On September 13, 2021, IOHK activated the Alonzo update, which for the first time allowed Plutus smart contracts to be deployed on Cardano's core network. This update marked the beginning of a new era—the Goguen era. 

The project will now have the ability to use many new scenarios for decentralized applications.

The developers point out that this is just the beginning of the journey. According to them, some early dapps can be problematic, and some can be insecure. Therefore, caution should be exercised when working with the updated Cardano network. So, the transition to the Goguen stage is finished and the implementation of smart contracts on mainnet is the main goal for Cardano’s team now.

On 28th November 2021, the first decentralized exchange - MuesliSwap, was launched in the Cardano mainnet.

Published: Dec 16, 2021
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