What is Cardano (ADA) and How Does it Work? Cardano Roadmap and Outlook

Cardano Coin
Image Source: TechStory

Let’s take a look at Cardano, a popular Proof-of-Stake blockchain that was launched in 2017 as an alternative to existing proof-of-stake blockchains like Ethereum and Polkadot.

What is Cardano? 

Charles Hoskinson and Jeremy Wood founded Cardano in 2017. Charles Hoskinson is also one of Ethereum’s co-founders. 

Cardano is a proof-of-stake blockchain that aims to combine pioneering technologies and provide unrivaled security and sustainability to dApps, systems, and society. It is based on peer-reviewed research and built using evidence-based methods.

Cardano’s aim is to redistribute power from unaccountable structures to the margins, to individuals, and to be an enabling force for positive change and progress. 

According to the Cardano team, Cardano did not start with a comprehensive roadmap or even an authoritative white paper, as many open source initiatives do. Rather, it encompassed a set of design principles, engineering best practices, and research opportunities.

How does Cardano Work?

Cardano is a provably secure proof of stake cryptocurrency based on the Cardano Settlement Layer or CSL, as well as a collection of protocols known as the Cardano Computation Layer or CCL. 

To transfer ADA between accounts and record transactions, the two sets of protocols work together as a team with CSL, Cardano Settlement Layer. The Cardano network’s native token is ADA.

The Cardano Computation Layer (CCL) provides smart contract logic that developers can utilize to move money around the network programmatically.

So, all blockchains have some kind of consensus mechanism, and Cardano’s consensus mechanism is a proof-of-stake protocol called the Ouroboros, which was built by a group of cryptographers from academia. 

All machines on the network use the Ouroboros proof of stake process to provide network security, validate transactions, and earn newly minted ADA tokens.

The core innovation that Cardano delivers, aside from being proven and secure, is the use of a rigorous cryptographic architecture that is modular and flexible in design, allowing the combination of numerous protocols to expand its usefulness, according to the company.

The Cardano protocol’s purpose is to enable modularity so that the network may develop and scale over time to meet future demand. 

In this sense, the Cardano blockchain has a goal that is similar to that of many other blockchains: to boost scalability, which is to say, they want the entire world to be able to use the Blockchain.

The Haskell Programming Language is also used in Cardano’s code. As a result, banks in the defense industry frequently utilize this programming language.

Haskell Programming Language
Image Source: SmartPlayer

Users can join the Cardano network as one of three types of nodes under the proof-of-stake model:

  • Mcore Nodes
  • Relay Nodes
  • Edge Nodes

They could be in Mcore Nodes, which stake, ADA tokens, ADA tokens, and participate in blockchain governance. They could be Relay Nodes that send data between Mcore Nodes and the public internet, and then they have Edge Nodes that create cryptocurrency transactions. 

ADA Tokens, and the Token Economics

Cardano’s native token is called ADA, and it was named after the 19th-century mathematician, Ada Lovelace. Ownership of the ADA token allows you to be a slot leader and add new blocks to the blockchain, along with earning a share of fees, paying for transactions and blocks.

Just to be clear, all blockchains are in the business of creating blocks. And thus, if you hear references to creating new blocks from the blockchain, the consensus mechanism, or any of the other concepts that I’ve discussed here, keep that in mind. 

Every blockchain is in the business of creating new blocks and then validating or selling them in some way.

Let’s return to the ADA. ADA tokens can also be used to vote on software rules, such as monetary policy (in this case, the token inflation rate), giving participants an incentive to keep their ADA tokens in order to assure their future worth. 

With the Shelley platform upgrade in the summer of 2020, the blockchain officially began the process of decentralization, bringing with it delegated staking, which is enabled by the ADA token and means that holders of ADA can now delegate or assign their votes to other users on the Cardano Network, earning ADA rewards in the process.

Another thing to keep in mind is that the total supply of ADA Tokens is limited to 45 billion. This is in contrast to other blockchains that have different supply and token economics.

Roadmap of Cardano

To summarise, Cardano began its protocol development with a commitment to thorough peer review and research, and it attempted to merge the best features of Bitcoin, Ethereum, and other protocols into its own modularity and governance.

So, where does Cardano stand now? Let’s have a look at the roadmap to see why people are thrilled about the progress right now and anticipating what’s to come.

The Cardano Roadmap is organized into five sections, which they call ERAS, with the goal of building out the network fully. You have Byron, Shelley, Goguen, Basho, and Voltaire.

Cardano Roadmap
Image Source:  Cardians

Each Era is defined by a set of features that are available across the whole blockchain and network.

1. Byron Era

The Byron Era, which is the fundamental era, came first. The initial edition of the Cardano blockchain was released in 2017, and the Cardano main net added a few major features, including the ability to purchase and sell ADA coins, as well as an emphasis on growing the global Cardano community and token distribution on worldwide exchanges.

Byron brought the dataless wallet, ADA’s official desktop wallet, as well as Yoroi, a light wallet built for rapid transactions and everyday use. Finally, as previously mentioned, the Ouroboros consensus protocol was introduced around the same time as the Byron Era.

2. Shelley Era

The Shelley Era follows, with its focus on decentralization. The Shelley upgrade to their Cardano protocol went live in 2020, bringing with it a dedicated and delegated staking mechanism, as well as staking pools for Cardano and a new decoupled wallet, as I previously announced.

Shelley noted that the Cardano network is evolving away from a more federated structure, which is a centralized control method, and toward community operation of network nodes. 

By the conclusion of the Shelley era, which we’re still in, Cardano had achieved his stated purpose. Cardano’s incentive mechanisms are meant to establish equilibrium for the network around 1000 Staking Pools, making it 50 to 100 times more decentralized than previous big blockchain networks.

3. Goguen Smart Contract Era

Goguen may create Decentralized Applications (dApps) on Cardano’s stable foundation of peer-reviewed research and high-quality development. 

The Goguen project started during the Shelley era and will allow both technical and non-technical people to construct and execute effective smart contracts on the Cardano Network once it is finished.

A core goal for the Goguen era has been the creation of Plutus, a purpose-built smart contract development language and execution platform using the functional programming language Haskell, which I mentioned previously.

Plutus is now in the test phase and combines the benefits of functional programming with smart contract development, allowing a single code base to accommodate both on-chain and off-chain components, which should improve the software development experience for all developers.

So the next step in the Goguen period is to use Marlowe to make Cardano more accessible to a wider audience. Now, Marlowe is a Plutus-based high-level domain-specific language for financial contracts, allowing financial and business people with no prior technical skills to develop smart contracts. 

Marlowe includes the Marlowe Playground, an easy-to-use application development environment that even non-programmers may use to create financial smart contracts.

Marlowe and Marlowe Playground, when used together, make the process of designing smart contracts for financial applications much easier, allowing subject matter experts to contribute directly without requiring extensive programming skills.

The multi-currency ledger is then added to allow the generation of fungible and non-fungible tokens, which you may be familiar with if you’ve read any of my NFT articles.

4. Basho the Scaling Era

The era of Basho is known as the scaling era. Although the Basho period has not yet begun, it will focus on increasing the Cardano network’s fundamental performance in order to better enable growth and acceptance of applications with large transaction value.

As a result, Basho will see the development of side chains, or new blockchains, that can communicate with the Cardano main chain. And the possibility here is to significantly expand the network’s growth and scale. 

So, while side chains can be used in similar ways to concepts like sharding, which you’ll read about in the Ethereum area, the Polkadot Network takes a slightly different approach to the problem with its usage of the canary network and parachains.

So next, Bahso will extend the UTXL model of the main Cardano chain, and allow side chains the ability to support and switch between UTXOs, and account-based models using side chains.

5. Voltaire Era

So, to wrap things off, we have the Voltaire era, which is the era of governance. This age hasn’t begun yet, but it will bring a voting and treasury system, allowing network participants to influence the network’s future development by using their stake and voting rights.

The ultimate goal of the Voltaire period will be to give network participants the chance to offer Cardano improvement recommendations that have been voted on by stakeholders, utilizing the existing stake in the delegation process. 

Following that, Voltaire will introduce a treasury system, in which a portion of all transaction costs will be pooled to give funding for development activities conducted after the voting process.

So let me know in the comments what you think about Cardano’s peer-reviewed approach and roadmap for future decentralization. Are you buying Cardano NFTs? What projects are you really interested in looking at?

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