If you’ve ever seen a list of cryptocurrencies, you know that there are thousands. And you might wonder if there’s any differences between them, or if they’re just “reskins” of existing technology. In the case of Cardano, it is truly technologically different from competing coins. It incorporates meaningful innovations based on academic research and thoughtful development.
In this article, we’ll cover what makes the Cardano blockchain different from other leading blockchains like Bitcoin and Ethereum. We’ll touch on key features, users, and the reasons behind the decisions made by Cardano’s developers. In the end, we hope you’ll have a deeper understanding of Cardano’s technological underpinnings.
What is Cardano Blockchain Technology Designed to Do?
Cardano was launched in 2017 by Ethereum co-founder Charles Hoskinson. One of the main reasons he branched out on his own was that Hoskinson wanted to solicit private venture capital funding and operate his cryptocurrency as more of a traditional business. He also wanted to make the backend of transactions more efficient and sustainable.
To that end, he worked with Aggelos Kiayias, a Greek cryptographer, computer scientist, and professor at the University of Edinburgh. Kiayias developed the first provable secure proof-of-stake (PoS) consensus protocol, which he called “Ouroboros.” Cardano uses the Ouroboros protocol to implement its proof-of-stake approach to transactions. Unlike Bitcoin, which uses proof-of-work, Cardano users have the power to add to the blockchain based on how much skin in the game they have. The bigger their stake, the better the chance that their staking pool will be selected to validate new blocks. They are paid regularly for this activity, just like Bitcoin miners are paid for solving complex equations under the proof-of-work system.
Thus, the Cardano blockchain is designed to handle transactions in a way that, at the time, was different than other leading cryptocurrencies. And the results were positive enough that some other crypto networks have since made the switch to PoS protocols (notably, Ethereum).
Key Features of the Blockchain on Cardano
- Efficiency and Sustainability. Thanks to the PoS protocols in place, Cardano is a highly efficient network. Studies suggest that Cardano crypto consumes over 99% less energy than Bitcoin. This is because Bitcoin mining requires vast amounts of electricity to solve cryptographic puzzles. Cardano skips that wasted energy.
- Scalability. Cardano’s ability to scale is again based on the PoS system it relies on. It also features layered architecture that separates transactions and smart contracts into two separate “buckets” (more on this below).
- Security. Because Ouroboros was rigorously peer-reviewed and mathematically verified to be secure, Cardano enjoys reliable security. Additionally, Cardano’s research-driven development approach, in general, ensures that every update undergoes thorough testing and formal verification, minimizing security risks.
Aside from these main features, Cardano is also interoperable with other blockchains and traditional financial systems, uses decentralized governance to promote long-term adaptability without toxic infighting, and facilitates the development of dApps (a section on this point is found below). These features and more have kept Cardano in the top 20 crypto networks worldwide for many years.
Cardano Hydra: Positions the Blockchain for a Meteoric Rise
Cardano operates two layers of its blockchain, and this structure is meant to facilitate rapid growth when possible.
Layer 1 can be thought of as the base layer, where core tasks happen. These include transaction validation, consensus mechanisms, and security. This is where the actual blockchain operates,
Layer 2 is where solutions like the Hydra protocol operate. Hydra is designed to significantly boost the scalability and performance of the Cardano blockchain. Hydra revolves around “Hydra heads,” which are parallel, off-chain channels that can handle multiple transactions concurrently. Each Hydra head operates independently, executing smart contracts and transactions (around 1K/sec) and then syncing with the main blockchain.
By processing transactions off-chain, Hydra reduces the load on Cardano’s main chain, allowing for faster and more efficient operations without compromising security. The number of Hydra heads can increase with the number of users. Therefore, the potential transaction throughput could reach millions of transactions per second under optimal conditions. This makes Hydra an essential part of Cardano’s long-term strategy for handling increasing demand.
Who Uses Cardano Blockchain Technology?
Cardano is used by a ton of different sectors, each turning to Cardano for different reasons:
- In finance, Cardano supports platforms like Meld and SundaeSwap to offer decentralized lending, borrowing, and trading services.
- In education, Cardano is used by Atala PRISM in Ethiopia to create tamper-proof, verifiable academic records for millions of students.
- For supply chain management, Scantrust uses Cardano to enhance transparency and traceability, helping track product authenticity.
- In healthcare, DigiPharm utilizes Cardano to implement transparent, value-based healthcare payment models.
- Cardano’s governance systems, such as Project Catalyst, enable decentralized decision-making and funding for projects.
- In agriculture, blockchain solutions like AgriLedger help farmers verify product authenticity and streamline supply chains.
- For environmental sustainability, Veritree leverages Cardano to track reforestation efforts and manage carbon credits with transparency.
Crypto solutions like Cardano are used effectively by a wide variety of parties around the world.
Cardano Blockchain Development Services
Businesses and projects looking to utilize Cardano can access a wide range of development services offered by Cardano blockchain developers and the related Cardano blockchain development companies. These services include projects like smart contract development. This is where developers use Cardano’s native languages, Plutus and Marlowe, to create secure and efficient contracts tailored to automate processes for decentralized applications.
Cardano can developers create custom blockchain solutions to meet specific business needs, which can involve private or consortium blockchain implementations across sectors like finance, healthcare, or supply chain (as we saw in the section above). Developers provide services to set up and manage staking pools for businesses interested in staking.
Other services include tokenization and NFT development using Cardano’s native asset capabilities, integration services (connecting existing traditional systems and Cardano’s solutions), and even consulting services that help businesses make optimal use of Cardano.
Understanding the ADA Blockchain
The native cryptocurrency of the Cardano blockchain is called ADA (thus, this is the name for the coins on Cardano blockchain networks). Fun fact: it’s named after Ada Lovelace, a 19th-century mathematician now recognized as one of the first computer programmers. ADA is used in a few critical ways that facilitate the functioning of the Cardano ecosystem:
- Transaction Fees. ADA is used to pay for transaction fees on the Cardano blockchain.
- Staking and Consensus. Holders can “stake” their ADA by delegating it to staking pools or running their own, which enables the network to function. In return, they earn a small percentage of rewards based on their participation (akin to what you might get from a high yield savings account).
- Governance. ADA holders can participate in Cardano’s governance by voting on protocol upgrades and changes. This gives stakeholders a voice in the platform’s future development.
- Smart Contract Interaction. ADA is also used within Cardano’s smart contract functionality, acting as a means of exchange for dApps and other decentralized services built on the network.
It’s pretty straightforward: ADA is integral to Cardano’s functioning, enabling everything from secure transactions to decentralized governance while also incentivizing participation through staking rewards.
The Future of Cardano Blockchain Technology (and ADA Prices)
Cardano is a crypto network that has achieved a great deal and still shows promise of much more. Technologically, its leadership shows a real appetite for smart development, and we expect to see Cardano towards the front of the pack when it comes to innovation. If new features hit the crypto world, Cardano will either have played a part in creating them or will be suggesting them to their users and submitting proposed changes for a democratic vote.
As for ADA pricing, Changelly is predicting increases for the final quarter of 2024 and gains through 2025. While investors must do their own homework before diving in, there’s definitely no shortage of green lights if you’re looking for them.
That’s it for our explanation of Cardano blockchain technology. If you’ve got anything to add, we’d love to hear about it in the comments section!