Cryptography is no longer an obscure and restrictive world where Bitcoin reigns as the highest authority. More and more, digital currencies are finding very concrete applications to this technology and the scientific community is presently showing interest in their development. Built on peer-reviewed academic research and scientific philosophy, this is where the Cardano (ADA) project stems from.
Find out more about this smart contract platform and its token in our Cardano guide.
The Cardano cryptocurrency – Introduction and definition
Praised for its level of security and for its scalability, Cardano (ADA) is built on a layered architecture and is the first of its kind. The project shares some common traits with Ethereum and was conceptualized by one of the famous platform’s co-founders, Charles Hoskinson. His aim in imagining the Cardano blockchain was to use Ethereum as a base and to make it more relevant, more evolved. The system is so advanced that it takes no less than three organizations to maintain its formidable proportions: The Cardano Foundation itself, IOHK (Input Output Hong Kong – a research and development company) and Emurgo (a Japanese developer, supporter and incubator of blockchain-related commercial ventures).
The reason Cardano (ADA) has obtained the backing of so many actors is that it is quite unlike any other blockchain project. According to Hoskinson, it constitutes what could be described as a third-generation blockchain. While Bitcoin addressed the creation of a completely different kind of money and decentralized transfers, Ethereum and smart contracts made blockchain technology even more relevant. To that end, it developed a solution to exchange any type of asset, be it money, shares, property and more. The main issue first and second generation blockchains faced, however, was scalability, which Cardano and its proof of stake algorithm were created to solve.
Unlike its predecessors, the system aims for a “High Assurance Code” conditioned by peer-reviewed academic research and scientific philosophy.
This results in a number of principles on which designs, best practices and exploration avenues are based. For example, Cardano’s website lists among its fundamentals:
Separate layers dedicated to computation and accounting
Modular functional code for the implementation of core components
Interdisciplinary teams and InfoSec experts
Peer-reviewed research competing against developers and academics
A decentralized funding mechanism
These are only a few of the tenets Cardano (ADA) abides by.
How does Cardano (ADA) work?
To achieve the scalability other systems lacked, Cardano addresses throughput (transactions per second), data scaling and network.
While Bitcoin verifies transactions through proof of work and Ethereum uses standard proof of stake, one of the advantages of Cardano is that it relies on a provably secure proof of stake algorithm called Ouroboros. The main issue with proof of work is that it requires enormous amounts of energy in order to function, which means that the more powerful a mining setup is, the more likely it is to find the correct hash. Thus, large mining farms have an immense advantage over individuals or small mining pools. As a result, proof of work is not as decentralized as it once was.
Proof of stake prevents such monopoly by virtualizing the mining process entirely, having validators lock up some of their coins as stakes before validating them to add to the chain. They do this by betting on a block being correct and receive a transaction fee when they are right. Cardano (ADA) and its Ouroboros algorithm examine the token distribution within the ecosystem and deduce what is known as “epochs” from a source of random numbers. Each one lasts about 20 seconds and is subdivided into smaller slots for which a Leader is randomly selected. Every Leader chooses a single block to add to the chain. The Slot Leaders themselves are elected among the Cardano (ADA) stakeholders by the ones who were picked previously. A multiparty computation process ensures adequate arbitrariness throughout the procedure. Thus, to select the next Slot Leaders, the electors must perform a “coin tossing” action and compare their results with the other electors’ until they agree on the value.
The commitment phase involves an elector generating a random value (which is kept secret) to form a “commitment” which contains the proof of secret and the encrypted shares. The commitment is signed using the elector’s private key and labeled by attaching the epoch number and the elector’s public key. This makes it completely identifiable, and the electors collect each other’s commitments to make them part of the chain.
As the commitments still hold a secret value, a reveal phase then consists in using a key-like value – called an opening – to unlock them. Each elector adds their opening to the chain. This is followed by a recovery phase, which happens once the electors have both the commitments and the openings between their hands. In the event of an elector releasing their commitment without a corresponding opening, the secret value it holds will be reconstructed by the honest electors thanks to Ouroboros’ Byzantine Fault Tolerance protocol. By revealing the secret values the commitments hold, the electors then generate a “seed” which is shared between them all. This seed constitutes the random element for the selection of the next epoch’s Slot Leaders.
To make sure the Cardano (ADA) system scales well, the relevance of the data is observed. Instead of making all the data available to everyone at all times, only the elements necessary to ensure a transaction is legitimate are kept on the network. Partitioning is also employed and allows users to only store the data that is relevant to them.
The ADA Token
Cardano (ADA) dreams of a world where cryptocurrencies can be transferred cross-chain. Thanks to a concept of sidechains, where the main chain has secondary ones running in parallel to it creating interoperability, this is achievable.
The ADA Token is considered a third-generation cryptocurrency because the blockchain it is associated with undergoes as strict peer-reviewed process. Powering the Cardano blockchain, the token serves as stakes (which is cited as one of Cardano’s drawbacks) in the system’s approach to governance and may be exchanged in transactions in much the same way as other altcoins. It can be traded quickly and reliably and supports Smart Contracts and applications. At the time of writing, ADA occupies rank 11 at the Market Cap.
Why use Cardano?
Cardano (ADA) could be used to run a wide array of financial applications that governments, corporations and individuals around the world utilize on a regular basis. Thanks to the platform’s layered architecture, it is highly upgradable and provides an ideal tool to manage smart contracts or to run Dapps, opening up such sectors as banking or aerospace to cryptography. Gambling and gaming systems, identity management and more could also be facilitated by ADA.
As the Ouroboros Hydra protocol could theoretically support up to a million secure transactions per second, its potential far outweighs that of VISA, for instance, which can conceivably handle a maximum of 24,000. Micropayments or insurance contracts could greatly benefit from this highly evolutive solution.
How to buy Cardano (ADA) on Bitit?
Cardano news has generated interest in the currency, making it a compelling crypto asset which many would like to acquire whether or not they want to participate in its blockchain’s validation process. Purchasing Cardano (ADA) from Bitit is a very simple procedure and allows you to have your ADA tokens at your disposal within minutes. Create an account in a few easy steps, head to Bitit’s Dashboard to check how much ADA you may receive for the amount you wish to spend in your own currency and proceed with your order. Your tokens are sent to your own wallet directly.
How to store Cardano (ADA)?
Cardano (ADA) comes with its own wallet solution which allows users to create a free paper wallet (considered very secure) and to carry out transactions natively. This is a very convenient option for those wishing to use the token to its full potential.
This does not mean that there are no other reliable wallets. Hardware wallets such as the Ledger or the Trezor are excellent alternatives, as are the somewhat less secure mobile wallets such as Exodus. As always with cryptocurrencies, it is not recommended to store large amounts of tokens on anything but a cold wallet.