As we’re inevitably approaching the start of the IDO stage, an energy in the community is becoming more and more noticeable. There is a clear wave of excitement over the Cardano-Studyum bridge and what it means for the further development of the Studyum project.
Remember, for a bridge between two networks to be possible, one needs to consider all kinds of things:
- network restrictions,
- their current security state and potential security issues,
- the way they complete transactions and exchange data, and
- how deep and vast user knowledge and familiarity with the networks are.
Bearing in mind these prerequisites, it should be only too useful to find out more about the networks themselves. This is why we dedicate this Studyum Academy Lesson to overview what Cardano is, how it functions, and what makes it more scalable, sustainable, and faster than other blockchain networks.
What is Cardano
Cardano is, in simple terms, a blockchain platform. In less simple terms, it is a collection of protocols through which you can “store, transform, and manage value, identity, and governance.”
Much like Bitcoin, and more like Ethereum, Cardano relies on blockchain technology to provide its users with transparency and security independent of any central authority. We’ve already discussed what blockchains are (massive online databases of interconnected blocks of transactions) and what they are trying to accomplish (to provide a more transparent and private alternative to our current bank-dependent financial system) in our previous Studcademy Lesson [LINK]. As a blockchain platform, Cardano is also devised to be:
Now, every blockchain network aims to have most of these characteristics to a certain degree, but Cardano has come further than networks before it in this sense which is why it is also often referred to as the third generation cryptocurrency. Due to its Proof-of-Stake algorithm (more on this later!) Cardano is currently the most famous and largest green cryptocurrency by market cap.
Cardano’s currency, ADA, was named after the Countess of Lovelace, Augusta Ada King, a rather prolific mathematician. She developed the first-ever algorithm and received another official title – that of the very first programmer.
The Cardano network uses a layered blockchain which makes updating the system much easier and faster compared to many other blockchain networks. It has been steadily advancing through its five progress stages, gradually introducing features to make the network even more secure, decentralized, scalable, and permissionless.
Ouroboros – Proof of Sustainability, Security, Stake
The protocols Cardano is made up of are open-source and patent-free. An example of such a protocol is Ouroboros – a transaction verification method alternative to Proof-of-Work (PoW) protocols.
To read more about the technical details behind the protocol, you can turn to the scientific paper that introduced it. However, let’s review in short bullet points how Ouroboros functions and improves upon the networks before it.
Ouroboros is a Proof-of-Stake (PoS) algorithm that verifies transactions by having Cardano users purchase the currency and “stake” it as a guarantee. Compared to the currently prevalent PoW protocol (i.e. mining), PoS offers a solution that is faster, more sustainable, and more secure.
Sustainability. Unlike mining, staking requires minimal computational power. It was devised to offer even small investors a chance to receive incentives by participating in the verification process, resulting in a more involved and active community.
When staking, users set aside a certain amount of ADA which is then used for verifying other transactions. Once the transaction has been verified and a new block has been added to the blockchain, the participants receive rewards as incentives. There is no upward or downward limit to how much ADA an investor can stake, but it should be noted that the greater the amount, the greater the return after the block has been added to the chain.
Security. Cardano is currently in its second stage – the Shelley stage – whose main goal is to make the network more secure by establishing around 1000 staking pools. The lower the number of the pools, the more of a security risk it is. Fewer mining pools mean more users have combined their resources to verify transactions and add blocks to the blockchain. To attack the network, one needs to take control of over 50% of the mining hash rate. It doesn’t take a genius to conclude who will have an easier time accomplishing this: miners of a pool competing against 20 or 1000 other pools.
One infamous example of a series of 51% attacks happened in August 2020. Ethereum Classic, a blockchain network forked from Ethereum, suffered three 51% attacks all in the same month.
According to Vitalik Buterin, PoW protocols have a greater chance of suffering a 51% attack by default and with greater damage:
“The reality is they could attack [a PoS-based network] *once*, and then they either get slashed or (if censorship attack) soft-forked away and inactivity-leaked, and they lose their coins so can’t attack again. In PoW, on the other hand, a successful attacker can just attack over and over again, with no possible way to delete their hardware without deleting everyone else’s hardware. This is an underrated key fundamental advantage of PoS over PoW.”
Other things to come
Cardano is a sophisticated network that aims to implement the latest findings and advancements into its system. Coming September 12, it will launch the “Alonzo Purple” upgrade, effectively enabling smart contracts, dApps, and DeFi capabilities. Being heavily dependent on research, the platform’s goal is to minimize the decision-making biases and rely on the objective results of multidisciplinary research.
Join us in our next Studcademy Lesson as we delve into the workings of a layered blockchain network, the wallets used within the Cardano ecosystem, its use cases, and additional components!