Cardano is a 3rd generation open-source, decentralized blockchain platform based on a proof-of-stake protocol that unlike other popular protocols does not incentivize huge amounts of energy consumption and thus is considered a greener alternative.
Charles Hoskinson, a mathematician and a cryptocurrency pioneer based in the USA, began developing Cardano in 2015. Together with a team of enthusiasts and professionals they managed to launch the platform and its primary token ADA in 2017. The driving force behind the platform is IOHK, a company founded by Charles Hoskinson. There is also the Cardano Foundation, a legal custodian responsible for the supervision of the Cardano project. The company Emurgo is a global technology partner responsible for driving the commercial adoption of the Cardano platform.
Cardano has several development phases. At the moment of writing this article (Aug 2021) the blockchain is fully decentralized. Smart contracts which are vital to enabling DeFi and decentralized applications will be launched on September 12, 2021. That event will make Cardano a good alternative to current 2nd generation platforms like Ethereum.
There are many aspects that set apart Cardano from other popular platforms. Let’s list some of them below.
Cardano is the first network founded on peer-reviewed research and developed through evidence based methods. That means that all critical aspects of the platform are first specified through academic papers which go through a peer review process so that any idea might be challenged before it is integrated. https://iohk.io/en/research/library/
Proof-of-stake is a popular alternative to the original proof-of-work protocol that previous generation blockchains utilize. The main benefit of proof-of-stake is it’s low requirement on energy, running at a fraction of the power cost of equivalent proof-of-work blockchains. Bitcoin alone uses insane amounts of energy as each miner competes to mine a block. This has a negative impact on the environment and that is one of the main reasons other popular blockchains like Ethereum are moving away from the proof-of-work protocol . In proof-of-stake protocols an algorithm picks the nodes which produces blocks based on the amount of stake, performance and other parameters.
Cardano by design has a multi-asset ledger which means that other tokens are natively supported by the protocol without need for smart contracts to enables this functionality, like on the Ethereum network. This alone has big impact on security, simplicity and lower processing fees.
The proof-of-stake protocol allows everyone to safely stake ADA with any public stake pool and earn rewards without locking up the tokens. When delegating ADA tokens to a stake pool, investors increase the pool’s chances of producing a block. The main point with Cardano’s proof-of-stake protocol is that the investors tokens are never locked up, and never leave the wallet, thus making it very secure to stake ADA. The tokens can be freely moved. When blocks are produced the stake pool earns rewards which are then paid out to all delegators. The amount of rewards depends on the amount of tokens in the wallet.
Governance in Cardano is a mechanism where every token holder holds a stake in the network and is entitled and incentivized to vote on proposals to develop or upgrade the blockchain and it’s ecosystem. In traditional open-source systems the core developers are the ones who make the decisions and that model works well for a small number of people. For large communities this process actually may slow down development due to disagreements and diverse views on the future of the project.
The Cardano treasury system’s main goal is to provide sustained funding for long term development and maintainance of
the Cardano blockchain and it’s ecosystem. This is one of the most crucial features of the Cardano platform as it will
allow continuos improvements to the platform through a decentralized community controlled voting system. The decision
which initiatives get founded is determined through a voting system where every ADA holder can participate. The voting
power of each ADA holder is proportional to the corresponding stake. The treasury itself collects funding through three
sources, a percentage of rewards from each epoch, a percentage of the monetary expansion, and through donations.
Treasury paper: https://eprint.iacr.org/2018/435.pdf
Making great technology is just one gigantic ingredient of a widely accepted and utilized system. Having a great vision, understandings of the current financial and governance systems and having a strategy how to outperform those legacy systems is the only way to receive mass adaption within regulated markets and the masses. Having a good understanding of the actual financial systems, the team behind Cardano has already thought of what features and processes a decentralized blockchain must have in order to comply with the strong policies and regulations in the financial system. Without these features mass adoption in the financial segments would never be possible.
Cardano’s long term vision is to enable economic empowerment for those who need it most. Implementing brake through technologies in world regions where people lack the basic services like identity, banking, voting and others, should contribute to their prosperity. People in developed countries already have those basic services and adaption would be much more difficult. In long term, the undeveloped regions implementing their services based on modern technologies will catch up to current western standards and probably even outgrow them, thus proving the superiority of blockchain based technologies. That eventually will lead to world adaption of the new technologies.
Cardano launched its first projects in Africa partnering with governments to transform the education system and giving digital identity to the people, which are the first milestones for greater goals.
This article just scratches the surface of what Cardano is and what it will do.
Please see below a 12 minute long explainer video where Charles explains what Cardano is after he was asked on Twitter. (This video is recorded in May 2021, before smart contracts were part of the network)