What is Cardano (ADA)
Cardano is basically a 3rd generation blockchain that is backed by scientific, peer-reviewed research. Why is this important you may ask? Well, according to Peer Review in Scientific Publications: A Survival Guide, peer review serves two main purposes:
- It ensures that only high quality research is published by determining the validity, significance and originality of the study.
- It improves the quality of the manuscripts from providing suggestions by peer reviewers on how to improve and identify any errors that needs correcting before publcations.
This ensures that whatever upgrades or releases made in Cardano are done securely while minimizing network issues and bugs in the long run. You can check out their papers in their publication library, to which a total of 114 papers or more are already published and some of them are currently implemented in the Cardano blockchain.
If you check the publication library, you'll notice a name IOHK. Cardano is founded by the Cardano Foundation, Input Output Hong Kong (IOHK) and EMURGO. Cardano Foundation is the non-profit organization which cultivates use-case opportunities and connects with policymakers, regulators and academia; IOHK is the software engineering company responsible for building Cardano; EMURGO is the technology partner for driving commercial adoption of the Cardano protocol. Each company has vital responsibilities to the growth of the Cardano ecosystem
Cardano's Development Phases can be divided into 5 phases:
- Byron era: Initial phase of Cardano, allows user to buy and sell ADA, and the release of their native wallets named Daedalus and Yoroi. Daedalus is a full node wallet, which means it requires a complete installation of the blockchain, so it's much slower to load, but it's very reliable. Yoroi is a light wallet which is much faster and convenient for users, where you can install it as a browser extension or a mobile version. Byron phase has been successfully implemented.
- Shelley era: Phase which introduces staking and delegation to participate in maintaining the security of the network. Users can earn an average of around 4 to 6% APY delegating their ADA to more than 2,000 stake pools to choose from. Cardano runs on an Ouroboros Proof-of-Stake Consensus to mine blocks (You can read more here about the comparison between Proof-of-Work vs Proof-of-Stake consensus.) It works something like a lucky draw competition where the more entries you buy, the higher the chances you win a prize. Similarly in Cardano, stake pools are elected by an algorithm to validate transactions, creating transaction blocks and add them to the Cardano blockchain. Investors like us can participate as delegators to delegate our ADA to them to increase the chances of being selected to validate those blocks like the lucky draw entries I mentioned. The more ADA delegated, the higher the chances. In fact, any stakepool regardless of how much ADA has been staked will have a chance to be selected, which makes the protocol more and more decentralized. To further decentralized the protocol, a maximum of 64 million ADA can only be staked by each stake pool (more than this limit will result in the loss of rewards), to whichthis limit will go lower in the future to push more delegators to support smaller pools instead of bigger pools to balance out the validation power across all stake pools. Thus, progressive decentralization is achieved. Likewise, a lot of the stakepools out there are mission-driven, either by raising funds for the charities they believed in, or are building useful DApps and rewarding delegators for their loyalty. Shelley has been successfully implemented.
- Goguen era: This is the phase where everyone is hyping about. This era adds the ability to run smart contracts and build decentralized apps (DApps) on a solid foundation of peer-reviewed research and high-assurance development. One of the difference with Ethereum's smart contracts is the use of a smart contract development language called Plutus, which is build on the fundamentals of the Haskell programming language. The advantage of using Plutus is that smart contracts can be carefully implemented in a precise, formally verified code that offers a high level of security. This is important as we've seen stories of smart contract vulnerabilities which leads to hacks, so a formally verified smart contract will mitigate these issues. Furthermore, Marlowe programming is a one-of-a-kind, user-friendly smart contract builder where anyone can code a smart contract without the need to have deep programming skills. As of today, smart contracts will be live on the mainnet on the tentative date of 12th September 2021. This will show how a EUTXO-based smart contracts will work in comparison to the Ethereum's account based smart contract. Read more here if you're interested in the comparison between EUTXO & Account-based model, and understand how Bitcoin's UTXO model works. Basically, Cardano is using Bitcoin's UTXO model, and then add smart contracts capability to it, thus creating transactions that are scalable in different ways, but much secure.
- Basho era: The phase that focuses on optimization, improving scalability and interoperability. Cardano is also developing sidechains, which is a layer-2 solution to offload the work from the main chain to a side chain to increase the transactions they can handle per second. With this implemented, Cardano is poised to compete with the alternative fast PoS chains such as Solana, ETH 2.0, Polygon MATIC, Elrond Gold, etc. with ultra fast transactions and negligible fees. Hydra is the name of the layer 2 solution for Cardano. Basho is still under development and they will released a demo of Hydra in one of their biggest events of the year, Cardano Summit 2021.
- Voltaire era: The phase of community governance, which means we can be our own governments, vote for proposals & the potential DApps that will be funded by a treasury system. Imagine our election day, where we normally have to vote which parties will be elected to form our government. Cardano's governance system works differently. Investors will have to go to the Project Catalyst and register to view your favourite proposals and give kudos (similarly to upvotes in Reddit). The proposals can be categorized into DApps integrations, developer's improvement proposals, scaling up Cardano's Community Hubs, Partnerships for Global Adoption and many more. Investors will also have to hold a minimum of 500 ADA in their wallets to be able to register to vote. The more ADA you have, the more voting power you'll have on deciding which proposals deserve funding and build the future of Cardano. Once they submit their votes and the results are out, voters will be rewarded with a small amount of ADA. Read the FAQ for more info.
So now you get the idea of what Cardano is. Let's list down some of the accusations made by many crypto investors out there about Cardano.
- It's vaporware.
- It's too overvalued ($90 billion market cap as of today's writing, with no live smart contracts).
- Other PoS blockchains claim they are faster and cheaper than Cardano, and already have working smart contracts.
and so on.
However, in my opinion, there are also tons of reasons as to why Cardano's current market cap is justified. Here are points as to why you might want to invest in Cardano:
- Team: Cardano has a very technical-minded people to build Cardano from the ground up. The most popular figure is the CEO, Charles Hoskinson, who is a former Ethereum co-founder, charismatic, smart and very well-outspoken with his many surprise AMAs that he conducted to communicate with the community. If you're follower of his channel, or you watched his AMAs, you'll either love him or hate him, but you can't deny that he truly cares, not just for Cardano and the blockchain ecosystem, but also to the issues around us, such as Covid-19 vaccines, Afghanistan wars, U.S. policies, etc. Even though he's a billionaire and drives a Lamborghini, he also plants mushrooms, meditates, does water fast and technology fasting every Sunday. Before he leaves every surprise AMA, he'll do a short session to donate/lend to other people in need using the Kiva platform. In fact, he also donated 293k worth of ETH to his secretary after he quit Ethereum. He also creates a video to give suggestions to dogecoin developers on how to improve dogecoin. In contrast, he also has his ranting moments when other people who hated him called him out, to which I feel is a bit unnecessary but I do understand the negativity that he has to face for building things slowly. Why do I even bother stating all these? This is because as investors, it's also important to see a person genuinely to evaluate how he leads a company. Charles Hoskinson may have his flaws, but you can see him as a genuine character and at least has these 10 skills that are listed here. The one thing he did right was that he create multiple AMAs to engage with the community to answer questions frequently to show transparency and this creates more trust in the community and people will be more willingly to invest in a person they trust.
Other popular names in the Cardano space are:
- Prof Anggelos Kiayias: Chief Scientist of IOHK and the man behind most of the research papers published in IOHK library.
- Prof Simon Thompson: Author of the book on Haskell, and a researcher on the functional programming language that is Plutus smart contracts.
- Lars Brunjes: Education director and a teacher of the Plutus Pioneer Program, which is a course for developers to learn how to program smart contracts in Plutus. The lectures are currently uploaded in the IOHK YouTube channel to access.
- Dor Garbash: Product manager and leader of the Project Catalyst. You'll see him in all of the Town Halls explaining Project Catalyst and Q&A.
- Tim Harrison: Market & Communications Director, and the host of the Cardano 360, which s a video series that gives monthly updates on Cardano's progress.
And many more people that you can find from the team list, whom each play a prominent role to Cardano's success.
2. Community: Cardano currently has one of the most mature communities I've seen and there's tons of engagement everywhere, from Reddit, Twitter to Youtube Channels where you can gather a lot of Cardano guides and resources to learn more and feel comfortable with. Cardano's subreddit currently has the most followers (588k as of today) compared to other standalone crypto subreddits. The community are also pretty helpful in answering your questions, even though you're new and you know nothing about Cardano. Best of all, they are also not afraid to call out scam projects whenever they see one (Check the latest on Flanoswap). An engaging community is also the key to bring more user adoption to the platform as it brings more trust and transparency to the investors, and Cardano is certainly on top with that.
If you want to start engaging with Cardano, you can start with these links:
Twitter & Youtube account list:
Big Pey, ADAape, Rick McCracken, Kaizen Crypto, Patrick Tobler, Cardanians.io, Army of Spies, TheCryptoDrip and many more that there's too many to list down. Most of them have YouTube Channels, and I highly recommend to start from Kaizen Crypto, as he provided a lot of very good content about Cardano and how to stake ADA videos. Rick McCracken also has his channel called The Cardano Live Podcast where he interview with other developers and platform partners relating to Cardano. If you like daily, no bullshit Cardano news, Army of Spies is the way to go.
3. Staking: Cardano's staking mechanism is by far one of the best, most user-friendly and most financially free feature out there. They are one of the only PoS blockchains that enables you to delegate to a stake pool with no lockups, no need for undelegation, redelegation is super easy & the rewards are auto-compounding. The rewards are paid every epoch (which is 5 days) and you are free to deposit and withdraw as you wish. Other PoS blockchains will require your stake to be locked, and there will be an unbonding period, normally ranging from a week until a month before you'll have access to your funds. Cardano's staking system basically works like a high interest savings account that you can earn 4 to 6% APY on average and is paid every 5 days, while others work more like fixed deposits. According to Staking Rewards, Cardano has 70% of its ADA staked or delegated to pools without lockups, this shows how much investors are trusting Cardano to deliver their promises and secure the network at the same time. The staking mechanism alone can be the reason why so many people love to buy and delegate their ADA because it's pretty much risk-free and financially free way to manage wealth, thus also probably one of the reason of the high market cap you saw.
4. DApps Ecosystem: This is one of the points that I've seen many people not invested in Cardano are also bashing about. If there's no smart contracts, what DApps are even building there right? Well, check here for the full list of DApps ecosystem that are to be built on the Cardano blockchain when smart contracts are live on the 12th of September.
- World Mobile Token: World mobile is basically a telecommunications-focused platform built on Cardano with the goal to connect the unconnected and bank the unbanked. Think of Maxis, DiGi, or Celcom, but with cheaper infrastructure and more equal financial incentives to the average users. According to them, there are nearly 4 billion people whom are unconnected globally, which is currently half of the world. World Mobile wants to solve this by connecting the people who need access to decentralized financial products and services in a sustainable way. To do this, they are releasing their native token incentive structures to onboard node operators to support the network load that a traditional mobile network operating data center would (Credits to The Crypto Drip) At the moment, they have already deployed their infrastructure in Zanzibar, while they are also setting up hardware infrastructure in Tanzania so that the people in those villages will have access to cheap Internet and financial services that can empower them to spur up their economy. More rural countries will be targeted next. Imagine you can connect your Maxis, DiGi, or Celcom anywhere in Malaysia and especially in areas where you have weak reception. World Mobile's hardware infrastructure solves this with very low cost building infrastructure. This platform itself is potentially a trillion dollar company if it's successfully deployed around the world.
- SingularityNET: It's basically a decentralized AI marketplace where you can run peer-to-peer AI services, such as Machine Learning to forecast and analyze data points, text summaries, minecraftizing services, real time voice cloning and many more, all these are also secured on the blockchain. Their goal is to create a protocol that can be interoperable with any blockchain, speed up AI development on the platform, create a regulation-compliant marketplace and laying down the most robust foundation for artificial general intelligence (Again, kudos to TheCryptoDrip for the deep dive). You also pay AGIX tokens for using these AI services, while you can also stake AGIX tokens to earn rewards. SingularityNET was running on the Ethereum blockchain, but will be the first platform to migrate to the Cardano blockchain for its scientific approach to blockchain technology, utilizing the highly-securable eUTXO smart contracts, and significantly cheaper fees than Ethereum. Furthermore, there are also upcoming DApps and collaborations building on the SingularityNET platform such as SingularityDAO - AI-powered crypto ETFs, NuNet - decentralized computing, Rejuve - AI healthcare service with the goal to improve your healthspan & Hanson Robotics - a company that creates human-like robots to help enrich the quality of our lives. For a bonus round, Dominos Malaysia also partners with SingularityNET where SingularityNET will conduct feasibility studies, deliver AI-centric workshops and offer a number of algorithms to improve Domino's business operations. This is also another trillion dollar platform plan to disrupt the AI space with the help of blockchain technology.
- ErgoDEX & partnership with Ergo blockchain: A non-custodial, decentralized exchange that allows quick and secure transfer of liquidity between Ergo and Cardano blockchains. This DEX utilizes the best of both worlds with the Automated Market Maker (AMM) and Orderbook features to optimize low and high liquidities. Cardano will be able to utilize Ergo's awesome features of oracle pools, privacy features called the ErgoMixer and their stablecoin solution called SigmaUSD. Together between Cardano and Ergo, they have created the best of PoW and PoS blockchains with smart contracts capabilities and highly scalable, secure and privacy platforms. Read more about ErgoDEX in Github.
Other notable mentions are:
- DEXes such as Sundaeswap, Minswap, Maladex, Mirqur.io, etc. Each provides different unique solutions in comparison to ErgoDEX to swap and provide liquidity with your tokens.
- NFTs such as CNFT.io, Spacebudz, Artano etc. (FYI, you can already mint NFTs without smart contracts!)
- Liqwid Finance - A decentralized lending platform on the Cardano blockchain (think Compound, Aave or Venus Protocol in Cardano). They also have some unique features such as Automated Liquidity Protocol with credit scoring & utilizing decentralized identity solutions, so you can have Credit Score to lend money just like how banks did. You can also mint qADA with your ADA and then lend them to earn LQ tokens, or use them as collateral to borrow assets. Read more here.
- MELD - non-custodial, DeFi banking protocol to which you can lend and borrow both crypto and fiat currencies, while you can earn rewards by staking their tokens or delegate to their MELD stakepools.
- OccamFi - The first launchpad solution in the Cardano ecosystem. It's currently on the Ethereum blockchain, but has a bridge where you can wrap OCC tokens to the Cardano blockchain.
- Revuto - DApp that lets you control your subscriptions such as Netflix, Spotify, Apple TV & many more. You can approve and pay your subscriptions only when you decide to do so, or unsubscribe if you don't feel like continuing with the subscription.
- Cotipay - Enterprise-grade fintech platform that empowers organizations to build their own payment solution and digitize any currency. Think Lazada & Shopee where you can use your ADAs to buy anything from these online shopping platform. Note that Coti is a blockchain on its own, while it integrates a payment solution with Cardano called ADApay.
- ProjectNEWM - Empowering musicians by allowing artists to sell partial music rights to fans and music labels via NFTs. Think yourself as the Universal Music Group, or Sony Music who technically owns 100% of all the artists rights, and now these rights can be distributed peer-to-peer between artists and fans, so that we music fans can own part of their music to support these artists and earn royalties from it.
As you can see, Cardano has a lot of very rich and unique DApps that are either waiting for smart contracts to go live to release them, or still building it as they are not just releasing their DEX, lending, NFTs and gaming solutions like you see in all other PoS blockchains, their focus on providing real-world finance solutions especially with telecoms and AI for the masses is what makes Cardano the most attractive blockchain solution out there.
Oh wait..... There's more.
- ATALA Prism: A decentralized identity solution that enables people to own their personal data and interact with organizations seamlessly, privately and securely. Governments can also utilize this feature to provide efficient government services, such as tax payments and voting on local issues by issuing digital IDs that can be stored on your own wallet. On top of storing your personal data on the blockchain, other information such as education degrees, SPM results and certificates, awards, health records, job references, invoices, asset ownership, KYC compliance, boarding pass, or even COVID vaccinations can be stored there. It's basically taking our current IC system and make it even better than before by storing more data in a blockchain system that is immutable so that no one can misuse it or wipe it out from your data records. This also prevents hackers or thieves who might steal your identity to make purchases that you never made.
- ATALA Scan: Leverages blockchain technology to tackle counterfeits, such as fake medicines, luxury items, collectibles or art, by offering a tamper-proof system to ensure every product sold is certifiably authentically. This is also why NFT technology is more than just meme culture, it's also a verification proof that the product is what it say it is. In older news, Cardano teams up with New Balance to stop counterfeit sneakers and to prove that their shoes are authentic.
- ATALA Trace: In line with ATALA Scan, supply chain traceability on the blockchain is essential which allows large companies to track their supply chain, to ensure the originality location of the resources to bring transparency and trust from the point of production to the market. It's basically VeChain built into the Cardano ecosystem, with Vechain having more serious partnerships and more marketing strength. On April, Cardano Foundation has also announce partnership with Scantrust, a supply chain traceability solution which also partners with HP, Hyperledger and SAP to allow promotion of an ethical approach to consumer goods.
5. Massive partnerships with governments & institutions
One of the biggest use cases of Cardano is the fact that governments are also utilizing Cardano's blockcahin technology in their services. Ethiopia is one of the first countries in Africa that will utilize ATALA Prism by onboarding 5 million students to give them blockchain-based IDs, which allows authorities to track every student's academic performance. This will resolve the issue of fake certifications, which is a serious problem in Ethiopia. IOHK has also signed a MoU with Mongolia's Blockchain Technology & Cryptocurrency Association to implement and foster blockchain development and education in Mongolia. Georgia also signed a MoU with a university in Georgia to use Cardano and Atala to build a credential verification system for Georgia. IOHK is also mentioned in one project called Priviledge, where consortiums partner to push the limits of cryptographic protocols for privacy and security, and it's funded by the European Union. With World Mobile, Cardano is also banking the unbanked in rural, poorer countries such as Zanzibar and Tanzania to have more people easy access to financial services.
6. Interoperability
Cardano might not be a Polkadot or a Cosmos, but it's partnership with Ergo is mutually beneficial. Ergo can utilize Cardano's PoS transaction finality and DApp ecosystem for scalability, while Cardano can utilize Ergo's oracle, privacy and stablecoin solutions to make a complete blockchain ecosystem. Nervos (CKB) has also announced a cross-chain bridge to Cardano to access different types of features unique to their blockchain system to expand their dApp and user bases. Even there's also a rumor of a partnership with Solana when Charles Hoskinson tweeted to want to learn more about their system, while previously he discussed good things about Polkadot, Algorand and many others in the blockchain space. One of the news that you don't see any other blockchain are doing is Milkomeda, where you can wrap smart contracts instead of wrap tokens to use in other blockchains. This feature brings an advantage to execute smart contracts on a sidechain, without the need to move over to the blockchain itself. Think of using any Ethereum dApps running on Ethereum using Metamask, but you can execute smart contracts straight from the Cardano mainnet which is paid in wrapped ADA which is faster, cheaper and safer, then creates a block back to the Ethereum blockchain.
I can actually go on and on, but I think these information justify well enough about why Cardano is going to be one of the biggest blockchains in the crypto space. I haven't even mention the future implementations of Cardano to build the most complete blockchain ecosystem.
On the other hand, here's also some Devil Advocate's thoughts on why you might not want to invest.
1. Slow Implementation of Ideas
While I don't see this as a problem, building a completely different blockchain system especially to Ethereum's model takes time. Other blockchain ecosystems might have better ways to solve all the issues especially on scalability, sustainability, interoperability and security faster than Cardano, but so far, all blockchain systems have their pros and cons, so it always depends on which type of blockchain fits your investment criteria best. Not everyone likes to take things slow, but it's necessary to build the best blockchain out there, and Cardano is definitely showing that.
2. Transaction fees and speed
While Cardano is definitely faster, cheaper, more scalable and secure than Ethereum's and Bitcoin's current models, much has not been said in comparison with the other PoS blockchains such as Terra, Solana, Avalanche, Elrond, Harmony ONE, Fantom and many more. Most of them are either comparable in speeds and fees to Cardano, or even faster and cheaper than Cardano. The beauty of Cardano's transaction fee calculation, where it is based on a linear equation that you learnt from your high school days (which is something like y = mx+c), where c = 0.155381ADA, x = size of the transaction in bytes and m = 0.000043947 ADA/Byte. This shows a linear relationship between the transaction size and fees, where the minimum fees is at least 0.15 ADA (which is currently around $0.39 fee as of a $2.60 price), while also making fees more predictable as compared to Ethereum's unpredictable fees due to network traffic. If ADA price increases, so do the transaction fees. However, this is also considered a short term problem, as smart contracts released, so do the transaction fees revenue, and the fees can be reduced as a balance between rewards and fees. Furthermore, with Hydra's layer 2 solution of implementing sidechains to the mix, transactions can be made off-chain and will have hyper fast and super cheap fees without sacrificing network security.
Many people also might point to why their transfers take minutes in between wallets to exchanges. That's because the transaction normally has to be approved by the exchange itself before it can reflect on your wallet. So far, for transferring ADA from wallet to wallet, it only takes a settlement time of less than 10 seconds, which is decent enough to not feel slow, while the performance is optimal to prevent spam. In summary, you'll have to decide whether near instant finality settlement times with almost zero fees that you can use now matters a lot to you, because Cardano will still need some time for layer 2 solutions to be implemented.
3. A whole new challenge for developers to built on Cardano
Due to the nature of Cardano's smart contract design, developers will be advised to master the fundamentals of the Haskell programming language before learning Plutus for a better understanding of how to build DApps in Cardano. In comparison to other programming languages such as Javascript, C++, Rust and others, it's still comparatively less popular, especially to the people who are not programmers. Coupled with the recent talk about concurrency issues, this makes it more challenging for developers to build a workaround on how to build proper DApps on an eUTXO model, to which no blockchain has ever done it successfully on a large user scale. The good thing is that smart contracts will be live for developers to test the waters and it will still take time to figure out the best solutions that fits their applications. Learn about why Cardano is using Haskell here and how concurrency works.
Summary
Cardano has been the center of love and hate from every crypto investors out there. The people who love Cardano will love its scientific, peer-reviewed methods of implementing their ideas to build a blockchain, a staking mechanism that is very very low risk and earns you rewards consistently, and the DApp ecosystem that is going to be build not just making tons of money, but is also mission-driven to help communities especially in poorer countries to have access to financial services and infrastructure and beyond. The people who hate Cardano normally makes tons of baseless noise while do not provide sufficient and technical criticism to show why Cardano is as bad as they think it is as they do not understand fully how it will be successful. It's up to you to decide whether if you think Cardano is one of the best blockchain projects out there, or it's just way too overvalued or it will never succeed.
To me, it's just a very well-thought out blockchain system that so far I have the best risk-free staking experience, that is fast and cheap enough to transact currently, a lot of very exciting and interesting dApps to participate that brings social and economical benefits around the world on top of accumulating wealth. Best of all, I never had a single failed transaction that loses my money, nor is there a network issue of sorts. It's overall simple to use and worry-free. That's the key to mass user adoption. Hopefully, once smart contracts are live, developers are able to execute their applications seamlessly, even though there will be roadblocks and some minor bugs here and there with a new type of blockchain model that hasn't been tested on a large scale. Cardano will be the reason every other blockchain will elevate their own game and make the whole crypto space a much more decentralized, secure and scalable ecosystem.
That's all for this article. You'll be surprised that I only covered maybe half of what Cardano really is about because I haven't gone through the technical discussions behind how Cardano works in detail. I'll leave some useful links down below to get started on this:
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