Docs
Overview
Why use Cardano?

Why use Cardano?

Cardano (opens in a new tab) is an open source proof-of-stake (opens in a new tab) blockchain project that began in 2015 to address existing blockchain challenges in the design and development of cryptocurrencies. It aims to provide a more balanced and sustainable ecosystem that better accounts for the needs of its users as well as other systems seeking integration.

The first generation of blockchains (like Bitcoin) offered decentralized ledgers for secure cryptocurrency transfer. However, such blockchains did not provide a functional environment for complex deal settlement and decentralized application (DApp) development. As blockchain technology matured, the second generation (like Ethereum) provided more enhanced solutions for writing and executing smart contracts, application development, and the creation of different token types. On the other hand, the second generation of blockchains often faces issues in terms of scalability.

Cardano is conceived as the third-generation blockchain as it combines the properties of the prior generations and evolves to meet all the arising needs of users. When comparing blockchain properties, many aspects should be considered. Thus, the best solution must ensure the highest security, scalability (transaction throughput, data scale, network bandwidth), and functionality (besides transaction processing, the blockchain should provide all means for business deal settlement). Moreover, it is important to ensure that blockchain technology is constantly developing in terms of sustainability and is interoperable with other blockchains and financial institutions.

To address these needs, Cardano focuses on such core concepts as:

  • Scalability — ensures that the Cardano network is capable of processing an increasing number of transactions as user demand grows. Scalability also provides higher bandwidth capabilities to allow transactions to carry a significant amount of supportive data that can be easily managed within the network. For these needs, Cardano is implementing various techniques (like data compression for instance) and is working to introduce Hydra (opens in a new tab), which will enable multiple side chains functionality.
  • Interoperability — ensures the most multi-functional environment for financial, business, or commercial operations by enabling users to interact not only with one type of currency, but with multiple currencies across various blockchains. Moreover, interoperability with centralized banking entities is as important to grant legitimacy and convenience of use. Cardano is being developed to support cross-chain transfers, multiple token types, and commonly used smart contracts languages.
  • Sustainability — designing a proof-of-stake blockchain means it is vital to ensure that the system is self-sustainable. To drive growth and maturity in a truly decentralized manner, Cardano is built to allow the community to maintain its continuous development by participating, proposing, and implementing system improvements. To ensure sustainability, the treasury system is controlled by the community and is refilled constantly from potential sources such as newly-minted coins being held back as funding, a percentage of stake pool rewards, and transaction fees.

Cardano advantages

  • Academic research — formal methods, such as mathematical specifications, property-based tests, and proofs, are the best way to deliver high assurance software systems and give confidence to users for the management of digital funds. Cardano has been built using formal methods to achieve strong guarantees on the functional correctness of core components of the system. All of the research and technical specifications that underpin Cardano are publicly available, and all Cardano development activity is published online.
  • System design — Cardano is written in Haskell, a secure functional programming language that encourages building a system using pure functions, which leads to a design where components are conveniently testable in isolation. Furthermore, advanced features of Haskell enable us to employ a whole range of powerful methods for ensuring correctness of the code, such as basing the implementation on formal and executable specifications, extensive property-based testing, and running tests in simulation.
  • Security — Ouroboros (opens in a new tab) (the Cardano proof-of-stake protocol) establishes rigorous security guarantees; it was delivered with several peer-reviewed papers presented in top-tier conferences and publications in the area of cybersecurity and cryptography.
  • Power consumption — Cardano is a proof-of-stake blockchain. In contrast to proof-of-work blockchains, Cardano requires much less energy (opens in a new tab) and computational power. The Bitcoin network grows through computers doing ever-more-energy-intensive computations – proof of work – which is unsustainable in the long term. Cambridge University has an online tool that shows the computers powering Bitcoin (opens in a new tab) already consume twice as much energy as Switzerland every year.
  • Seamless upgrades — traditionally, blockchains upgrade using hard forks. When conducting a hard fork, the current protocol would stop operating, new rules and changes would be implemented, and the chain would restart – with its previous history being erased. Cardano handles hard forks differently. Instead of implementing radical changes, the Cardano hard-fork combinator technology (opens in a new tab) ensures a smooth transition to a new protocol while saving the history of the previous blocks and not causing any disruptions for end users.
  • Decentralization — Cardano is maintained by almost 3,000 distributed stake pools that are operated by the community. All blocks and transactions are validated by network participants without any reliance on a centralized authority.
  • Functional environment for business use cases — Cardano is establishing a foundation for global, decentralized finance to develop a range of DApps that can run using functional and domain-specific smart contracts, providing multi-asset tokens for any needs.

Cardano development themes

Cardano’s development journey (opens in a new tab) has been split into five main themes focusing on such core functionalities as:

  • Byron — foundation establishment
  • Shelley — decentralization
  • Goguen — smart contracts
  • Basho — scalability
  • Voltaire — governance

Each theme is centered around a set of functionalities that are being delivered across multiple code releases. While these development streams are delivered sequentially, the work for each happens in parallel – with research, prototyping, and development often in progress all at once across the different stages. Let’s take a closer look at these development themes.

Byron

Byron set the foundation for Cardano development allowing users to buy and sell ada on a proof-of-stake blockchain network. Initially, the Cardano ledger was established as a federated network, where block production and transaction validation were maintained by Input Output Global (the company that develops Cardano technology) and Emurgo (opens in a new tab) (the company that drives Cardano commercial adoption) stake pools. Byron saw the delivery of Daedalus (opens in a new tab) and Yoroi wallets, and also provided users with a Block Explorer ‒ a tool specifically designed for browsing the blockchain.

Shelley

The Shelley development theme introduced a decentralized ledger creating a completely new economic system, which drives the network’s growth and gradual optimization. Shelley evolved from Byron’s federated network maintenance, with more and more blocks being produced by the distributed stake pool operator community. This theme focuses on a number of critical steps that ensure enhanced user experience in terms of stake pool operation, delegation preferences, and incentives. As a proof-of-stake network, Cardano Shelley introduced the Incentivized Testnet (ITN) which proved that the blockchain can be sustainable in the long term by relying exclusively on community-managed pools.

Goguen

Goguen development focuses on the establishment of a global, financial and multi-functional system for decentralized application (DApp) building, smart contract support, and custom token issuance. Goguen is a key building block to establish a versatile platform to build solutions around such application domains as supply chain, track and trace, finance, medical records, identity voting, property registration, P2P payments, and many others.

Basho

Basho will focus on Cardano’s optimization in terms of improving the scalability and interoperability of the network. Whereas other development stages focus on decentralization and new functionality, Basho is about improving the underlying performance of the Cardano network to better support growth and adoption for applications with high transaction volume.

Voltaire

Decentralized governance and decision making lie at the heart of Voltaire granting the Cardano community an ability to vote on network development updates, technical improvements, and project funding. For the Cardano network to become truly decentralized, it requires not only the distributed infrastructure introduced during Shelley but also the capacity to be maintained and improved over time in a decentralized way.

Related Topics:

What is Smart Contract?How to Delegate and Earn Reward