What you need to know about Cardano
Cardano was designed to be an all-in-one cryptocurrency. Its goals are incredibly ambitious, but there are a lot of issues Cardano will need to overcome to achieve these goals.
- Learn more about Cardano, how it works and where to buy ADA
What to consider before buying Cardano (ADA)
Let’s consider what makes Cardano different to other cryptocurrencies.
You can think of bitcoin as the first generation. It uses the blockchain to let people send and receive tokens to each other, but not much else.
You can think of Ethereum as the second generation. This unlocked the real potential of blockchain technology in the form of “smart contracts.” These are programs designed to do things automatically on the blockchain. The code for these programs is publicly available and unchangeable, which means they are 100% trustworthy. This opened up a new world of possibilities.
Cardano might be the third generation, and it was specifically designed with the aim to offer all the functionality while overcoming the problems other currencies have encountered.
Can be updated without hard forks
All software needs to be updated over time and cryptocurrency is no exception. But because cryptocurrency is usually decentralized, it often needs to be updated through “forks.” This is like a fork in the road where one path is the updated software and the other path is the current version.
Significant updates will often require a “hard fork,” which means the new version and old versions are no longer compatible with each other. These kinds of updates mean convincing enough people to follow the new path and leaving behind anyone who doesn’t. Hard forks are a slow, difficult and unreliable way of implementing updates. Actually implementing them is dependent on convincing people to follow the new path. When they’re dependent on difficult hard forks, cryptocurrencies might stagnate, become outdated and eventually lose value.
Cardano’s ADA avoids this since it can be upgraded with “soft forks” instead. These are backwards-compatible updates, and users can decide for themselves whether they want to implement them.
Unlike other cryptocurrencies, Cardano is also mostly operated centrally with its own group of developers, rather than being fully decentralized like bitcoin or Ethereum. This top-down structure may be able to improve efficiency, but some might see it as a flaw.
ADA’s goal is to be able to evolve and be updated relatively quickly and easily compared to other cryptocurrencies.
Efficient transactions and functions
Slow and expensive transactions are proving to be a problem for bitcoin and Ethereum.
Ethereum can get particularly expensive when executing more complicated smart contracts, while bitcoin’s dependence on hard-fork updates means it’s having trouble updating to meet demand.
By contrast, Cardano aims to offer negligible transaction fees, even for especially complicated smart contracts.
Easy to use
Cardano’s goal is to be easy for users and developers alike.
Ethereum smart contracts have a reputation for being difficult and time-consuming to program, but Cardano’s aim is to make it much easier. Similarly, Cardano also comes with its own specially designed wallet called Daedalus, which offers a much more user-friendly experience than most cryptocurrency wallets. For example, Daedalus offers wallet addresses that are readable by humans rather than the long string of numbers and letters that’s become the standard in cryptocurrencies.
Cardano is also planning to roll out ADA ATM machines in Japan, and then the rest of the world, from 2018 onward.
Currently both bitcoin and Ethereum use a “proof of work” mining system. This means the blockchain is operated by having computers solve difficult equations. This is a relatively simple and reliable way of securely managing a blockchain. The downside is that it’s also relatively inefficient, consumes a lot of energy and will frequently cause problems with slow and expensive transactions, especially for more valuable tokens.
By contrast, “proof of stake” mining essentially lets users mine new coins and operate the blockchain by holding currency. This can be relatively efficient, but is a lot more difficult to program securely and reliably.
Cardano’s developers claim to have developed the world’s first proof-of-stake mining algorithm that has been mathematically proven to be secure. In addition, the system also offers an incentive for users to hold larger amounts of ADA.
What issues does Cardano (ADA) face?
You should also consider the following issues to decide whether they will negatively affect Cardano’s growth.
It’s still early days
The initial launch of Cardano does not offer smart contracts or many of the other features on its roadmap. Until they’re available, there are no guarantees that Cardano can achieve its stated goals.
In the coming months and years, new and existing competition could change the picture.
Ethereum is planning to introduce a more efficient proof-of-stake mining system, while bitcoin is set to become compatible with smart contract add-ons in the future. You will need to decide whether the growing functionality of dominant existing coins, as well as brand new ones, might draw people away from Cardano.
There’s also the more philosophical question of whether the world really needs or wants Cardano.
Does the world need Cardano?
Cardano is designed with the aim to be an all-in-one cryptocurrency, usable for almost anything. This is in sharp contrast to most newly emerging cryptocurrencies, which tend to be built for highly specific applications. You will need to consider whether Cardano’s functions might simply be too broad to see rapid uptake.