Your simple guide to Cardano – Part II

Table of Contents

In Part I, we established what Cardano is and how it compares to Bitcoin and Ethereum. We also established how the network’s Proof of Stake protocol functions and adds to Cardano’s sustainability and security. Now buckle up as we consider Cardano from another angle – that of its speed, capacity, and use cases.

Tipping the scales between blockchains

The speed with which blockchain networks can process transactions is not great at the moment. Lower speed makes networks sluggish which can ruin the user experience for many and can considerably drive up the costs of network usage. And if blockchain technology is ever to replace our current financial system, it would have to reach its speed or even surpass it at a fraction of the price. Compared to VISA’s current TPS (that’s “transactions per second”) which is hovering around 1700 TPS, Bitcoin is able to process a maximum of 7. Ethereum’s maximum is four times higher than Bitcoin’s, but still nowhere near the capacity of VISA transactions. 

Many have proposed solutions to Bitcoin’s scalability problem (so famous it has its own Wikipedia page!), but so far nothing definite is being done. Ethereum, however, has recognized the need for scalability and is planning to increase the network’s capacity through a series of scaling solutions, like sharding. Sharding is a way of splitting the network into smaller partitions called “shards”. With shards, miners or stakers won’t have to store all the data across the network to validate transactions but only some of it. Sharding would increase transaction speed to 100,000 TPS according to Vitalik Buterin

And then you have Cardano. This blockchain network has achieved a transaction speed equal to 257 TPS way back in 2017. And the number will only keep rising thanks to Hydra.

Hydra: A layered solution

As you probably know, there was a lot of research done to back up the Cardano ecosystem. One such research was carried out with the sole purpose to solve the scalability problem of blockchain networks that could be added on top of their previous infrastructure. After five years and many efforts, the researchers came up with “Hydra: Fast Isomorphic State Channels.”

Now, state channels are a layer-two scaling solution. Layer-two solutions are envisioned to improve the throughput of the entire network by taking over the validation of a bulk of transactions. Their goal is to decrease the network’s load by moving some of the transactions off-chain. But many off-chain solutions cannot just use the same code as the main chain. As you can imagine, changing the code brings about its own set of issues since most of the infrastructure needs to be adapted to accommodate the additional layer. This, however, is not the case with Hydra. 

Isomorphism is a word derived from ancient Greek – isos meaning “equal” and morphe meaning “form/shape.” Hydra is an isomorphic solution, that is, a solution “identical by form” to the mainchain and to its parts. Layer 2 can be added to the mainchain without any changes to the code and can multiply or “grow more heads.” As the number of network users increases, so does the number of heads. 

So what makes transactions mainchain-worthy? If you guessed it has something to do with transaction value, you’re right! Analyzing the network, the researchers found that the majority of everyday transactions made are small – they account for only 5-10% of the network value. To increase throughput they propose moving these low-value transactions off-chain.

The Hydra heads have enormous capacity. A single head could process around 1000 TPS. That’s 1000 TPS per staking pool. Add enough staking pools and the network is ready to surpass anything currently in widespread use! 

But Cardano offers more than mere transaction-making. 

What Cardano can offer

Within the Cardano ecosystem, besides making transactions using $ADA (Cardano’s currency) you are able to:

  • send, receive, burn, and create NFTs and native coins;
  • stake $ADA;
  • vote on which project should receive funding on Project Catalyst (the more $ADA you have, the greater the voting power!);
  • receive rewards through staking and voting;
  • take a part in improving Cardano through CIP;
  • create and manage a stake pool;
  • verify the authenticity of products, articles, files, etc;
  • embed metadata into a transaction;
  • embed Cardano into a working system (like a website or a service).

As you can see, saying Cardano is just a blockchain network would greatly underestimate its potential. Much like with other amazing inventions, we are not yet fully aware of all the use cases of Cardano. We were able to discern some of them in one of our previous Lessons, but so far we are able to make only educated guesses. 

Additional components

Cardano has many components, but going into detail for every one of them would turn this Lesson into a Not-so-simple guide to Cardano. If you want us to systematically explain any one of them, feel free to leave your suggestions in the comment section below!

What this means for you

Cardano is a network that is as potential-rich as research-based. It can easily replace many ecosystems that we use in our daily lives as it provides solutions that are scalable, transparent, permissionless, and secure. 

Similar to Cardano, Studyum was also founded on these principles and ideas. This makes Cardano the perfect launchpad for a project of Studyum’s nature, scope, and ambition. We want to create a learning environment that empowers students in more ways than one. Establishing a platform that combines individualized approaches to learning with scalability has only now become possible through blockchain and other technology. 

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