Cardano is a blockchain project whose main goal is to make it easy and safe to run financial apps. It is an open-source network that lets people send and receive digital money safely, quickly, and easily. Cardano is used by companies, governments, and consumers worldwide. The Cardano blockchain’s cash token is called ADA. It was first made as a project to help fix problems with the Proof-of-work model used by Ethereum. Ironically, Charles Hoskinson, who helped start Ethereum, has officially started Cardano.
Besides having the same co-founder as Ethereum, Cardano has many uses and is an upgrade for multiple processing layers for computations, making it easy to upgrade in the future and reach an agreement based on proof of stake. At the moment, peer-to-peer purchases are settled with Cardano. But developers are always working on getting smart contracts up and running on Cardano.
How Does Cardano Work?
Firstly, Cardano has a different kind of agreement than most other blockchains. It has a payment layer and a computation layer on top of the blockchain. The first layer is already working, so ADA coins can be moved from one wallet to another. It is a proof-of-stake blockchain that aims to solve the scaling problems that layer-one blockchains like Ethereum have. Its second layer is still being built, but it will allow initiating and signing of smart contracts. Since Ethereum and Cardano share the founder, the methodology adopted is also very similar. However, Cardano has some advantages over Ethereum.
Cardano follows a process called “slashing” to maintain the highest level of security. Slashing is a way to punish someone by taking away some of their staked tokens for good. This is done with the best interests of the users in mind, since it puts validators who do mean things at risk of losing their staked tokens. Validators are people who are part of the network. To have a “stake” in the network, they must also own a certain amount of ADA. So, it gives validators a reason to try to get their interests in line with the financial network.
With soft forks, the project team can make changes to the second layer, which is the processing layer of Cardano. These changes won’t affect the first layer, which is the ADA. This layer is more flexible and can be changed to meet the needs of the person.
Cardano vs Ethereum
Both Cardano and Ethereum are built on a Proof-of-stake mechanism and are the leading Layer-one blockchains networks globally. PoS mechanism is more energy-efficient and aims to aid the development of decentralised applications and smart contracts. Despite the same aim, Ethereum and Cardano work differently. Layer-1 blockchains are the bedrock of a digital building. They are the underlying infrastructure for a blockchain system that houses various protocols and projects.
Ethereum focuses on the three S’s, sustainability, scalability, and security. In contrast, Cardano prioritises interoperation and governance along with the above three S’s.
Ethereum uses a ‘shard’ structure to increase transaction capacity. On the contrary, Cardano uses a ‘layer framework. Shard infrastructure implies dividing a bigger job into small parts and allocating the smaller jobs to make everyone work simultaneously. Thus, processing the transactions faster rather than focusing on making the network run faster. A layered framework is like an office building, where all different floors have different tasks. This enables Cardano to make the network faster by processing transactions simultaneously.
However, Ethereum has a more developed ecosystem than Cardano. Cardano’s smart contracts still need work, so its blockchain has no decentralised exchanges, NFTs, or lending platforms.
Strengths of Cardano
Mentioned below are a few strengths of Cardano:
- More Adaptable: Cardano blockchain is more adaptable in comparison to other blockchains. For example, if a single, smart contract has to be modified as per different users, it can ensure compliance with the protocol whilst catering to all end-users.
- Improved Financial Freedom: Cardano has been conceived with the aim of improving financial scalability and convenience. It is a one-stop solution for millions who do not have access to traditional financial services.
- Layered Blockchain: We know that Cardano is a two-layer blockchain. Hence, updating the first layer does not cause any disruptions to the second layer of the blockchain. It is the layering of transactions that results in even lower transaction fees.
- Decentralised: Like all other cryptocurrencies, Cardono’s network is also decentralised. A decentralised network means beyond the control of a single entity or a central authority.
Is Cardano Safe?
Cardano is amongst the top fundamentally strong cryptocurrencies in the market. A team of experts has engineered it. The double-layer feature of ADA tokens and smart contracts acts as an excellent security cushion. All blockchains have been encrypted with cryptography, ensuring there is no compromise on the integrity and user data of the project.
Cardano is a considerably safe investment. However, neither one of the cryptocurrencies can avoid volatility and the high risk associated with them.
Is Cardano Considered a Good Investment?
Cardano is one of the most hopeful blockchain projects because it has solid foundations, clear goals, and a lot of momentum behind it. People often call it an “Ethereum killer.” However, it is not true. Since they were both made by the same person, it’s clear that it’s an updated or better version of Ethereum. Both cryptos are used for different things, though.
Cardano is selling for USD 0.38 or INR 31.44 right now, which is about 60% less than its all-time high. The price drop is due to the market crash of 2022 when most cryptocurrencies lost between 60 and 70% of their value. But the crypto market is likely to come back strong in 2023. Research and analysis show that the financial markets will move in a good direction this year, which is good news for crypto investors both old and new.
Please don’t take this as advice about how to spend. Keep in mind that investing in crypto is very volatile and dangerous. One must perform due research before investing. Cardano might be a good choice if you are new to crypto and blockchain and want to invest in the crypto market. You can also read about altcoins like Ethereum and BNB here.