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The need to give clarity to every detail is very vital when it comes to understanding what Cardano is.
Cardano is a public blockchain platform that makes use of proof of stake protocols instead of the computational proof of work schemes to validate transactions and carry out a computational analysis.
What is blockchain?
A blockchain can be defined as a distributed database shared among the nodes of a computer network. Blockchain stores information electronically in a digital format. When it comes to cryptocurrencies, blockchain helps to provide a secure and decentralized record of transactions thereby eliminating the need for a third party.
As a database, blockchain gathers information together in groups known as blocks. Blocks hold sets of information and have a certain storage capacity. When filled, the blocks are closed and linked to the previously filled block. This then forms a chain of data which is regarded as blockchain.
Cardano is an open-source code meaning it is run on a source code that is made available for possible modification and distribution. Cardano as an open-source model is decentralized as it allows for open collaboration. As a public blockchain platform, Cardano can conduct peer-to-peer transactions using its internal cryptocurrency known as ADA.
Cardano makes use of Ouroboros which utilizes a Proof of Stake (PoS) approach to save energy costs and enable faster transaction processing.
Cardano’s history and development
Cardano was established in 2015 by Ethereum co-founder Charles Hoskinson and was finally launched in 2017. The project is supervised by the Cardano Foundation based in Zug, Switzerland. Cardano is named after Italian polymath Gerolamo Cardano and the cryptocurrency itself was named after English mathematician and writer, Lady Ada Lovelace. For the Cardano blockchain, Lovelace is the subunit of Ada. What this means is that 1 Ada = 1,000,000 Lovelaces.
What you need to know about Cardano’s proof of stake protocol
For better clarifications, we will examine one of the well-known cryptocurrencies and blockchain networks. This will be used to clarify the difference between the proof of stake protocol used by Cardano and the proof of work protocol used by Bitcoin, Ether, and others.
Ethereum just like Cardano is an open-source blockchain network. Just like Ether is the native cryptocurrency linked specifically with the Ethereum blockchain, ADA is also seen as the native cryptocurrency linked to the Cardano blockchain network. However, while Ethereum makes use of proof of work to execute transaction contracts, Cardano uses proof of stake protocols.
This, therefore, begs the question, what is proof of work and what is proof of stake protocols, and what is their usefulness to the blockchain technology? Before that, it is important to know what a smart contract is.
A smart contract is a transaction protocol that simply uses a computer program or software to automatically execute, control, or document legal events following the terms of a contract.
With a smart contract, there is no need for any intermediaries to process transactions. It also eradicates fraud losses and malicious/accidental transactions from ever happening.
Proof of work
This is one way of verifying the authenticity of a computational calculation. There are two parties when it comes to proof of work protocols. This includes the prover and the second party known as the verifiers. The proof of work concept has often been criticized for various reasons including its high energy consumption among others.
Proof of stake protocol
This is a blockchain protocol that works by selecting validators concerning their quantity of holdings in a particular cryptocurrency. Proof of stake is essentially important because it eliminates the computational cost that comes with using proof of work.
Therefore, to guarantee the security of the blockchain, Cardano makes use of the proof of stake protocol. The protocol mandates validators to have some quantity of blockchain tokens. Therefore, before an attacker can mount an attack on the Cardano blockchain, he/she must have acquired a large fraction of the tokens.
The Better Prospects Cardano Can Offer Compared With Bitcoin, Ethereum and others. Cardano has a lot to offer when it comes to digital assets. These offerings are not only viable in a short while but the future as well. It is good to note that Cardano is one of the few blockchains that relies on validating transactions using proof of stake.
Taking a closer look, the world excessively frowns at the proof of work protocol due to its environmental implications and its excessive consumption of energy. Beyond doubts, popular cryptocurrencies like Bitcoin and Ether which mainly rely on proof of work seem to currently be at a disadvantage going forward.
In May 2021, Cardano reached a market capitalization of $77 billion. It achieved this feat using a clean source known as the proof to stake. According to founder Charles Hoskinson, Cardano used 6 Gigawatts hours (GWh) annually. This implies that the platform used less than 0.01% of the 110.53 TWh used by the Bitcoin network.
The fact that Cardano isn’t using the energy-consuming proof of work protocols for validation reflects highly in its less volatility over the past few months. Ever since reaching its all-time high of $68,789.63 in November 2021, Bitcoin the world’s most popular cryptocurrency has followed a sporadic downward trend. Bitcoin is however not the only cryptocurrency to be faced with this mishap as many describe it.
Despite the downward value cryptocurrencies have been subjected to, Cardano has been able to maintain a relatively good run all along the weeks.
The price of Cardano (ADA-USD)has continued to rise while the broader cryptocurrency market continues to slip. In the second week of January, the price of ADA-USD was up by 9.5% at $1.24. It is very important to note that the price of ADA-USD fell more than 30% since November. However, unlike other cryptocurrencies that are finding it hard to regain their value, Cardano appears to rebound at a faster pace.
Cardano’s ability to rebound at a faster tempo compared to other digital currencies puts it a good advantage over others. Its quick rebound is caused by several factors that keep getting better. These factors include the numerous milestones it has been able to achieve and is still going to achieve in the nearest future.
Some of the milestones reached include ADA-USD exceeding 20 billion. transaction mark with no downtown in more than 1,500 working days. Another milestone is Cardano now having more than 1 million digital wallets worldwide.
The launch of the Adacash reward token is also very important to the growth and recovery from its devaluation. Less than a month after it was launched, the token reach a market cap of $30 billion.
Future milestones set to be launched in the nearest future will help accelerate Cardano’s growth and help stabilize it against milestones. One of the future milestones includes a non-fungible token (NFT) marketplace and an exchange for decentralized finance (DeFi) transactions.
Another upcoming project will see Cardano launch the “Hydra” upgrade which will help fast-track the processing time for transactions on the ADA-USD blockchain. A faster process will therefore help make Cardano more useful when it comes to decentralized finance and smart contracts.
The fact that ADA-USD is more energy-efficient and superior when it comes to facilitating DeFi transactions and smart contracts make it one of the more useful digital tokens, and an attractive option for investors to put their money on.
Despite the high volatility of cryptocurrencies in general, ADA-USD remains a worthwhile gamble for everyone to acquire. Due to its persistent evolvement and continued growth, some analysts have predicted that the digital currency will shortly unseat Ethereum as the leading blockchain technology for decentralized finance, smart contracts, and NFTs.
The value depreciation of most cryptocurrencies may even grow worse with the current course of events some of which include the ongoing war between Russia and Ukraine, and the move from the U.S. government to create stiffer monetary policy within the sector.
Cardano’s ability to however recover quickly from major decline and devaluation puts it at a better advantage over other cryptocurrencies. Cardano’s ADA is a good crypto to invest in. However, just like other cryptocurrencies, it is laced with high volatility.