Cardano is a blockchain project which is founded by Charles Hoskinson, who is also the co-founder of ethereum, to “provide a more balanced, as well as sustainable ecosystem” for cryptocurrencies.
According to its website, ADA is the only coin which is a “scientific philosophy and research-driven approach.”
In practical terms, this also means that its open-source blockchain undergoes some religious peer-review process by scientists and programmers in the academia.
Cardano is also one of those platforms and technologies which the industry is billing as the third generation of this space, despite the fact that it is not that new – it has been around since 2015.
It is an attempt to build on the technology which underpins the Ethereum platform to create a smarter, as well as more robust smart contracts platform.
Well, that is a bit misleading.
The Cardano team is not building on the Ethereum platform – it is just an entirely new technology – but there are also some similarities between the way Cardano and Ethereum afford applications functionality.
Both of this relies on smart contracts, for instance, and both can be used to develop functional, as well as secure and decentralized applications.
Cardano is more than just a cryptocurrency, but it is a technological platform which will be capable of running financial applications currently used every day by people, as well as organizations and governments all over the world.
The platform is also being constructed in layers, which will give the system the flexibility to be more easily maintained and permit for upgrades by way of soft forks.
After the settlement layer which will run Ada is complete, a separate computing layer will be built to handle smart contracts, as well as the digital legal agreements which will underpin future commerce and business.
Cardano will also run decentralized applications or dapps services, not controlled by any single party but instead operate on a blockchain.
The non-profit foundations which run Cardano have also partnered with a bunch of academic institutions to research and review all of the aspects of its blockchain.
For instance, researchers at Lancaster University are developing a “reference treasury model” to find a sustainable way to fund future development for Cardano’s blockchain.
How is Cardano different from Bitcoin and Ethereum?
Despite the projectile increase that it has in less than just two months, ADA is slight of an outlier in the active world of cryptocurrencies.
ADA also calls itself the first third-generation cryptocurrency and aims to tackle scaling and infrastructure problems which first cropped up in bitcoin, a first-generation cryptocurrency which introduced the idea of digital coins and ethereum, which is a second-generation cryptocurrency which expanded use cases for coins to smart contracts.
Specifically, Cardano aims to solve problems which are related to scalability, interoperability, and sustainability on cryptocurrency platforms.
The first problem also refers to the slowing down of networks, as well as high fees due to increase in transaction volumes.
The algorithm Ouroboros of Cardano has been put forward as a possible solution to its scaling problems.
Ouroboros uses a Proof of Stake (PoS) method to save on energy costs, as well as enable transaction processing in a faster way.
Instead of having a copy of personal blockchains on each node, the blockchain technology of Cardano streamlines the number of nodes in the network by appointing leaders responsible for verifying, as well as validating transactions from a collection of nodes.
Subsequently, the leader node pushes transactions to the main network.
Cardano has also adopted RINA, which means Recursive Internetworked Architecture, to scale its network.
This network topology was first developed by John Day, and it also enables customized increments to heterogeneous networks.
Hoskinson also said that he wants Cardano’s protocols to reach the standards of TCP/IP, which is the dominant protocol that is used on the Internet for exchange of data.
Interoperability relates to the portability of cryptocurrency, both within its natural ecosystem and in its interface with the existing global finance ecosystem.
There is no other way of performing cross-chain transactions between cryptocurrencies currently or to conduct a seamless transaction involving cryptocurrencies and global finance ecosystem.
Exchanges, which crash or charge exorbitant fees, are the only intermediaries.
An assortment of regulations about the customer, as well as transaction identities has further distanced the cryptocurrency ecosystem from its global counterpart.
Cardano also aims to enable cross chain transfers through side chains, which conduct transactions between two parties of the chain.
Also, it is exploring some ways for institutions and individuals to selectively divulge metadata related to transactions and identities to enable some use of cryptocurrencies for trading and daily transactions.
Finally, sustainability is also about governance structures which provide incentives to miners and other stakeholders and about evolving a self-sustaining economic model for the cryptocurrency.
Additionally to this, it aims to build what its creators describe as a “constitution” of protocols to avoid messy, hard forks, like the ones that occurred in bitcoin and ethereum).
In the future, protocols will also be hard-coded into Cardano blockchains and applications that are using this protocol, such as online exchanges and wallets, will automatically check for compliance as the applications are being built.
The automation could also cut down time which is required to discuss and implement forks. Hoskinson has referred to is as “mechanization of a social process.”
What is the market for Cardano?
For now, the primary use case of Cardano is as a cryptocurrency. ADA, its cryptocurrency is just a part of the settlement layer of Cardano.
Cardano was often to as the “Japanese ethereum” and reports last year indicate that it was being made available in Japan through ATMs, as well as debit cards.
Cardano also has some ambitious plans for the future intends to move beyond the settlement layer to a Control layer, which will also sever as a “trusted computation framework” for sophisticated systems, like gambling and gaming systems.
Some other applications outlined on its website are identity management, a credit system, and Daedalus, which is a universal cryptocurrency wallet with automated crypto trading facility and crypto to fiat conversation capabilities.
It is also not clear whether ADA would play an important role in the planned systems.
As we already mentioned, the non-profit foundation which runs Cardano has built up an extensive list of partner institutions to refine its algorithms, as well as develop new governance formations.
According to Hoskinson, the partnership is mutually profitable as Cardano’s research projects align academic incentives with the cryptocurrency expectations of the industry.
Is the current valuation of Cardano justified?
As impressive its pedigree and ambitions are, the ADA of Cardano has the same flaw as other cryptocurrencies.
It also has little to show by way of implementation. The blockchain was also released only in September 2017, and the limited number of nodes within its network was all controlled by the foundation.
Hoskinson has said that its data scaling efforts will not bear fruit until the next year.
Several innovations which are in the system, such as its aim of standardizing protocols are still in research phase and will also be implemented only as Cardano’s use cases grow.
In its current state, the technology of Cardano is also unproven.
Critics have charged that an approach modeled on Proof of Stake could end up as a plutocracy, where the nodes which had the highest stakes would run very slowly.
Even as it researches to improve its algorithms, the Cardano foundation’s roadmap shows that a whole version of its technology will be delivered during the second quarter of this year.
There was a more comprehensive evaluation of its prospects which can only happen during then.
The cryptocurrency also faces fierce competition from some other cryptocurrencies in a crowded ecosystem.
Litecoin, which is a bitcoin offshoot, is aging for a smaller role for daily transactions. Dash, which has also inspired the approach to governance of Cardano, also has same aspirations.
Ripple might provide strong competition to the ambitions of Cardano of becoming a bridge between the existing financial system and cryptocurrencies.
Then, it would seem that the current price of Cardano is not justified. But, it may be unwise to dismiss the valuation of Cardano as a bubble.
The present cryptocurrency prices are based on future markets.
This also means that the traders are raking in profits which are based on future growth prospects and with Cardano – the prospect of growth is looking very attractive.
The bottom line
Cardano boasts an impressive pedigree, as well as a long-term image for its blockchain and cryptocurrency.
But, it is still in its early days. While its primary use case is as a cryptocurrency, the blockchain of Cardano also has the intention to expand beyond coins into a control layer which will provide services absent in the cryptocurrency ecosystem today.
Given that, it is still early days, and much of that depends on the execution of the vision. We are confident in the team, the technology and their ability to execute to precision, making Cardano (ADA) our number 1 pick for this year.
Price Target: 4.85
Current Price: .60