Analogous to how Ethereum Cardano is based on the market?

In the past, the editor briefly introduced the old public chains ETH, EOS, TRX, and the emerging public chains solana, polkadot, and Avalanche. Today, I will analyze Cardano, which is the familiar Ada for our friends .

Cardano basic concepts

(Cardano/ ADA ) is a decentralized third-generation proof-of-stake blockchain platform.

Although it shares features and applications with other blockchain platforms such as Ethereum, Cardano differentiates itself from other platforms by focusing on peer-reviewed scientific research as the cornerstone of platform updates.

Cardano uses a cryptocurrency called “ada”. Cardano released products for identity management and product traceability.

Cardano uses Ouroboros, a proof-of-stake algorithm, to create blocks and verify transactions that occur on its blockchain.

Three organizations are responsible for the development of Cardano: IOHK, Cardano Foundation and EMURGO. The first two are non-profit foundations, and the third is a for-profit entity.

IOHK, which is responsible for building Cardano, works with a team of scholars distributed around the world to generate research and review platform updates before implementation to ensure they are scalable.

Cardano has an impressive pedigree and long-term vision for its blockchain and cryptocurrency, but it is still too early.

Although Cardano’s initial use case was as a cryptocurrency, its blockchain intends to expand its scope from coins to a control layer that will provide services that are missing in today’s cryptocurrency ecosystem.

Given that it is still too early, a lot depends on the implementation of the vision.

How is Cardano different from Bitcoin and Ethereum?

ADA calls itself the first and third generation of cryptocurrency.

Aiming to solve the problems of scale and infrastructure that first appeared in Bitcoin, the first-generation cryptocurrency that introduced the concept of digital coins and Ethereum (the second cryptocurrency, which expanded the use case) coins to smart contracts. 

Specifically, Cardano aims to solve issues related to scalability, interoperability, and sustainability on cryptocurrency platforms.

The first problem is that due to the increase in transaction volume, the network speed is slow and the cost is high. The Cardano algorithm Ouroboros has been proposed, which can solve the scaling problem.

Ouroboros uses the Proof of Stake (PoS) method to save energy costs and speed up transaction processing.

Cardano’s blockchain does not specify a single copy of the blockchain on each node (which is common in Bitcoin), but simplifies the nodes in the network by appointing a leader responsible for verifying and validating transactions in the set of nodes quantity. Subsequently, the leader node pushes the transaction to the main network.

Cardano has also adopted RINA (Recursive Network Architecture) to expand its network. This network topology was originally developed by John Day, which allows for customized increments of heterogeneous networks.

Hoskinson said that he hopes that Cardano’s protocol will meet the TCP/IP standard, which is the main protocol used to exchange data on the Internet.

Interoperability is related to the portability of cryptocurrencies in their natural ecosystem and in the interface with the existing global financial ecosystem.

Currently, there is no way to conduct cross-chain transactions between cryptocurrencies, and there is no way to conduct seamless transactions involving cryptocurrencies and the global financial ecosystem.

Exchanges that crash or charge high fees are the only intermediaries, and various regulations related to customers and transaction identities have further distanced the cryptocurrency ecosystem from its global counterparts.

Cardano aims to achieve cross-chain transfer through side chains, which can be traded between two parties under the chain.

It is also exploring ways for institutions and individuals to selectively disclose metadata related to transactions and identities in order to be able to use cryptocurrency for transactions and daily transactions.

Finally, sustainability is about governance structures that provide incentives for miners and other stakeholders, and the development of self-sustaining economic models for cryptocurrencies. 

In addition, it also aims to build the protocol “constitution” described by its creators to avoid chaotic hard forks (such as those that occur in Bitcoin and Ethereum).

In the future, the protocol will be hard-coded into the Cardano blockchain, and applications that use the protocol (such as online exchanges and wallets) will automatically check their compliance when building applications.

Automation can also reduce the time required to discuss and implement forks. Hoskinson calls it “the mechanization of social processes.”

Learn about Cardano

“Ada” is Cardano digital currency to the 19th century British mathematician and Countess Ada Lovelace (Ada Lovelace) named, she is recognized as the first computer programmer.

The co-founder of Ethereum, Charles Hoskinson, started developing Cardano in 2015 and launched the platform in 2017.

Cardano positions itself as an alternative to Ethereum. Both platforms are used for similar applications, such as smart contracts, whose goal is to build a connected, decentralized system.

Cardano considers himself an updated version of Ethereum and painted himself as a third-generation platform on the second-generation vouchers of Ethereum.

The blockchain platform has another goal, which is to provide banking services to people in the world who have no bank accounts.

The main application of Cardano is identity management and traceability. The former application can be used to simplify the process of collecting data from multiple sources.

The latter application can be used to track and review the manufacturing process of the product from the place of origin to the finished product, and it is possible to eliminate the market for counterfeit goods.

Cardano products

The organization behind Cardano has released three products: Atala PRISM, Atala SCAN and Atala Trace .

The first product is sold as an identity management tool and can be used to provide access to services. 

For example, it can be used to verify credentials to open a bank account or obtain eligibility for government assistance.

The other two products are used to track goods in the supply chain journey away .

Cardano is also developing a smart contract platform that will be used as a stable and secure platform for developing enterprise-level decentralized applications. 

In the near future, the Cardano team plans to use a democratic on-chain governance system called Project Catalyst to manage project development and execution.

They will also use Project Catalyst to improve their financial management system to fund future costs.

Cardano’s algorithm

The core of any blockchain platform is the algorithm it uses to create blocks and verify transactions. 

Cardano uses Ouroboros, which uses a Proof of Stake (PoS) protocol to mine blocks. The agreement aims to minimize energy consumption during block production. 

It achieves this purpose by eliminating the need for hashing functions or a large amount of computing resources. Hashing power or huge computing resources are the core of the Proof of Work (PoW) algorithm function used by Bitcoin.

In Cardano’s PoS system, staking determines the ability of nodes to create blocks. The stake of a node is equal to the number of ada (Cardano’s cryptocurrency) it holds for a long time.

Broadly speaking, Ouroboros works as follows. It divides physical time into periods composed of slots, which are fixed time periods. Slots are similar to the work shifts in a factory. 

Currently, an epoch lasts five days and a time slot lasts one second, but these numbers are configurable and can be changed after updating the proposal. Times work in a circular fashion: when one ends, the other begins.

Each slot has a slot leader selected by the “lottery” system. In this system, the higher the bet, the better the chance of winning the lottery.

The slot leader is responsible for the following tasks:

  1. Verify the transaction.
  2. Create transaction blocks.
  3. Add newly created blocks to the Cardano blockchain.

     

Ouroboros requires a small number of ada holders to be online and maintain a good internet connection. In order to further reduce energy consumption, the algorithm includes the concept of equity pool.

Ada holders can organize themselves into equity pools and select some representative equity pools during the implementation of the agreement, so that even if some of them are offline, they can easily participate and ensure block creation.

Precautions for Cardano mining

The share pool is a reliable server node that represents contributing ada holders committed to running the 24/7 protocol.

The equity pool holds the combined equity of various stakeholders in one entity, and is responsible for processing transactions and producing new blocks.

In the Proof of Work (PoW) system, the economic incentive for miners to participate in the network and create blocks is the reward for cryptocurrency and transaction fees .

Ouroboros collects rewards from an era and distributes them to equity pools and stakeholders.

Everyone will be rewarded according to the proportion of their shares contributed during the period, which means that higher shares will receive more rewards.

What is the market for Cardano?

Currently, Cardano’s main use case is as a cryptocurrency, and ADA is its cryptocurrency and is part of Cardano’s settlement layer.

Cardano is often referred to as “Ethereum in Japan”, and last year reports indicated that it has been marketed in Japan through ATM and debit cards.

Cardano has ambitious plans for the future and intends to move from the settlement layer to the control layer, which will serve as a “trusted computing framework” for complex systems such as gambling and gaming systems.

Other applications outlined on its website include identity management, a credit system, and Daedalus. Daedalus is a universal cryptocurrency wallet with automatic encryption transaction functions and encryption-to-fiat conversion. It is not clear whether ADA will play an important role in the planned system. .

As mentioned earlier, the non-profit foundation that runs Cardano has established an extensive list of partner institutions to refine its algorithms and develop new governance structures. 

According to Hoskinson, this partnership is mutually beneficial because Cardano’s research project aligns academic incentives with the expectations of the cryptocurrency industry.

Is Cardano’s current valuation reasonable?

The pedigree and ambition of Cardano (ADA) are impressive, and it has the same flaws as other cryptocurrencies. It has almost no way of implementation.

The blockchain was only released in September 2017, and a limited number of nodes in its network are all controlled by the foundation.

Hoskinson has said that its data expansion work will not be fruitful until 2019.

Many innovations of the system, such as the goal of its standardized protocol, are still in the research stage and will only be implemented as Cardano use cases grow.

In its current state, Cardano’s technology is also unproven.

Critics accuse the method based on the proof-of-stake model may eventually become the rule of the rich, in which the node with the highest stake will run the show . 

Even while conducting research to improve its algorithms, the Cardano Foundation’s roadmap indicates that the full version of its technology will be released in the second quarter of this year.

Only in this way can a more comprehensive assessment of its prospects be made.

In a crowded ecosystem, cryptocurrencies also face fierce competition from other cryptocurrencies. Litecoin is a fork of Bitcoin and is playing a similar role for daily transactions.

Dash inspired Cardano’s approach to governance, but has the same desire.

Ripple may be in strong competition with Cardano’s ambition to become a bridge between the existing financial system and cryptocurrencies.

In this way, the current price of Cardano is unreasonable.

However, it may be unwise to treat Cardano’s valuation as a bubble. The current cryptocurrency price is based on the future market, which means that traders are profiting based on future growth prospects.

What is special about Cardano?

Similar to Ethereum, Cardano is a smart contract platform, but Cardano provides scalability and security through a layered architecture.

Cardano’s method is based on the philosophy of science and peer-reviewed academic research, so it is unique in the space itself.

Criticism of Cardano

Ouroboros calls itself “the first provably secure stake proof algorithm.” This statement is based on two properties of the transaction ledger: persistence and liveness.

Persistence assumes that a transaction is “stable” if an honest node has sent it as a broadcast to the rest of the network. This attribute uses a new security parameter which is a measure of the security of the ledger .

Liveness and persistence complement each other. According to this property, after a certain predefined time in the algorithm, the broadcasted honest transaction becomes “stable” in the network node.

This overview of Ouroboros’s paper outlines several “reasonable assumptions” made by the creators of the algorithm to design it.

For example, they assume that the nodes in their network are not non-existent for a long time. In addition, the desynchronization node in the calculation is not assumed to contain more than 50% of all transactions.

Critics say that the assumptions made to achieve these features are wrong. For example, they say that these attributes are assumed to be synchronized between ledgers at any given point in time.

According to them, such expectations are “unrealistic for global blockchains.”

This may not be the case if some nodes are offline, or if the slot leader missed a transaction during its time period. Others pointed out that 51% of denial-of-service attacks, which can cause most networks to go offline, is another convenient assumption.

Ouroboros algorithm has also been criticized for failing to fully solve the double-spending problem .

There is a danger that the input endorser responsible for approving slot leader transactions may eventually approve the same set of transactions from two different slot leaders.

Some people say that it will take several years to implement the sharding technology being tested on the Ethereum blockchain to solve this problem.

end

BM said in his article: “Cardano is a 400-pound bulletproof vest. What use is it even if it is bulletproof?” The implication is that even if Cardano’s design is impeccable, it is In the face of practice, too bloated design may not be easy to use.

Cardano is a typical technological revolution initiated by the academic school . The projects are first to have a paper, and then “double-blind (anonymous submission, anonymous review)” review, and finally the technology is realized, which is in sharp contrast with the EOS practice school. .

I don’t dare to make any judgments about the future, but I can be sure that these two projects will definitely promote the implementation of blockchain technology.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/analogous-to-how-ethereum-cardano-is-based-on-the-market/
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