During last year’s crypto-currency fever, Bitcoin, ether and Ripple were in greatest demand from investors. This is not too surprising, because these currencies are the most expensive on the market – their capitalization exceeds $ 330 billion. But the January collapse showed that the situation could change very quickly.
Now the high volatility is due to the overheated market and the doubts of some investors in their investments. But in the future, the price dynamics will be determined by the appearance of more efficient technologies that replace the old, slower and less optimized ones. Today the market reigns blockchain Bitcoin and Ethereum , but they are rapidly catching up with Cardano – third generation blockchain seeking to become the ideal technology version. Will he be able to press his predecessors?
Meet Cardano
Cardano is a public, decentralized block and open-source crypto currency (like bitcoin, block and crypto currency, they are called the same). Its appearance was the result of the cooperation of three organizations: the Cardano nonprofit foundation, the engineering firm Input Output Hong Kong (IOHK) and the Japanese Emurgo, which works with companies interested in the implementation and integration of Cardano’s detachment.
The project is still at the beginning of the road, the software is actively updated. The main difference of Cardano is the peer reviewed block. It was created from the ground up to overcome the shortcomings of existing technologies related to the regulation, scalability and protection of personal data.
This can be looked at in another way: bitcoin was a first generation blockbuster. He introduced the public to crypto-currencies, but he had and has certain drawbacks. Second-generation blockers, such as Ethereum, learned from bitcoin errors. However, having overcome some problems of bitcoin, the ether has collided with others.
Cardano tries to make maximum use of the experience and achievements of its predecessors. The table shows the main characteristics of these projects.
There are also other differences between the blockboys of the first, second and third generations, but we will focus on two main ones: the consensus algorithm (protocol) and transaction data.
Consensus algorithm
The consensus algorithm is simply a bizarre term describing the process of determining who will sign the next block in the blockroom. You probably already heard about proof of work (PoW), often called “mining”. There is a reward for calculating the next block in proportion to the provided computing power.The method works, but it has some drawbacks: security problems, high power consumption, low transaction speeds and other issues. At present, Bitcoin and Ethereum are working on the PoW protocol.
When proving the share of ownership (proof-of-stake, PoS), the reward is proportional to the amount of crypto currency in the user’s wallet. In a sense, it can be seen as a dividend paid for owning a token. By analogy with mining this process is called “stacking” (from English staking).
Bitcoin developers do not plan to switch to PoS, while the Ethereum network is in the process of transition. There is one problem: there are still no formal proofs of the safety of PoS algorithms.
For everyone except one, called Ouroboros, which is the basis of the Cardano network. The PoS protocol provides high security, so valued by banks and government organizations. In addition, there is no need to extract tokens. Instead, all of their volume is created at the very beginning and they are immediately or piecemeal entering the market. The developers released 45 billion Cardano tokens, although currently in circulation is about 30 billion. Thus, you can buy ADA tokens only on the market.
Transaction data
Imagine the difference between buying a candy and a house. The first can be easily purchased in the store, with only basic information. Buying a property requires much more information, a detailed contract and complex transactions.
The key difference between cryptoprojects is the amount of data that is moved during transactions.Bitcoin is similar to conventional currencies and only processes basic information. That is why it is called “crypto-currency” (although not all tokens are crypto-currencies).
Ether can be used as a currency and store information about contracts, but all of it is collected in one layer. As a result, transactions are not always smooth. It’s like buying a house for paper dollars, and writing a contract on them. This approach significantly complicates the transaction and is not a very optimal way of storing information for future use.
Cardano uses a multi-layered data storage system. Tokens can be used as currency and for storing information about contracts, but this happens in separate layers of the program code. This approach allows to carry out more complex operations and increases the speed of work compared to previous-generation blockbusters, contributing to increased interest on the part of companies and a wider adoption of technology.
What in the end
Bitcoin brought to the masses the technology of blockade, but he himself is very far from ideal. The Ethereum platform made a number of improvements to bitcoin technology, but faced growth challenges.
Cardano develops as an ideal block, combining the experience and achievements of its predecessors.However, the project is still in the early stages, and tokens still perform the function of conventional crypto currency. The next major update is scheduled for the second quarter of 2018. A proof-of-stake algorithm, an on-chain management structure, and several key functions will be released.
Until the final implementation of the blockade of the third generation will take some time, a number of software updates will be required. Most likely, this year the popularity of the project will increase significantly – potential investors should bear this in mind.
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