While crypto prices have captured the attention of the global media, the true value of the industry arguably lies in blockchain technology. There are many blockchain platforms building decentralized applications to help streamline the way we do business, store and maintain information records, and more. One of the most prominent projects working on decentralized applications (DApps) is Cardano.
What is Cardano?
Cardano is a blockchain platform that aims to provide a more sustainable ecosystem for cryptocurrencies. It was founded by Charles Hoskinson, who was an early contributor on the Ethereum blockchain. Cardano describes itself as the only coin with a “scientific philosophy and research-driven approach.” Its open-source blockchain is subject to a thorough peer-review procedure by scientists and programmers in academia.
Cardano has partnered with several academic experts and institutions to explore and review all aspects of its blockchain. One of such notable collaborations was with researchers at Lancaster University who are creating a “reference treasury model” to find an effective way to fund future improvements for Cardano’s blockchain network.
What Algorithm Does Cardano Use?
Every blockchain platform runs on a specific algorithm that enables it to create blocks and validate transactions. Cardano uses Ouroboros, an algorithm that makes use of proof-of-stake (PoS) protocol to validate transactions. This blockchain protocol is designed to reduce the level of energy produced during block creation to its barest minimum by removing the need for hash power or large computing resources.
Cardano uses a unique proof-of-stake model. While a regular proof-of-stake algorithm allows nodes with the highest number of stakes (or coins) to create transaction blocks, the Ouroboros algorithm works in a slightly different way.
The Ouroboros algorithm divides physical time into epochs which consists of fixed periods. These epochs operate in such a way that helps to reduce network congestion and save on fees.
Cardano Use Case: Verifying Credentials and Identity
Cardano’s organization has created three products for its ecosystem; Atala Prism, Atala Scan, and Atala Trace. Atala Prism is an identity management tool used to provide access to specific services. For instance, the product is used in verifying the credentials used to open a bank account or checking a user’s eligibility for government aid. The other two products are being used to trace a product’s journey through a supply chain.
Cardano has signed a Memorandum of Understanding with the Free University of Tbilisi in Georgia to help verify credentials in a more efficient, cost-effective, and trustless manner than the current system. Ethiopia also plans to use Cardano to track the educational records of the country’s 5 million students.
Cardano Use Case: Supply Chain Tracking and Anti-Fraud Measures
Cardano has also developed a smart contract platform that will serve as a reliable platform for deploying enterprise-level decentralized apps. Its smart contract capabilities will make it easier to create DApps compared to Ethereum, its main competitor.
New Balance, a $4.5 billion footwear company, has contracted Cardano to use these applications to track the authenticity of their footwear throughout its supply chain, helping to deter the sale of counterfeit products.
Information stored on a blockchain network cannot easily be edited after it has been entered, making blockchain networks highly effective at providing tamper-proof records for this type of use case. Because Cardano is a public blockchain, the records are also publicly accessible, meaning anyone can verify the information.
Cardano Use Case: Project Management
Cardano’s development team also recently launched a democratic on-chain governance system called Project Catalyst to manage the development and execution of projects. Project catalyst will also transform their treasury management system to fund future expenses.
Cardano’s developers seek to restore confidence in global economic systems by introducing a more secure, transparent, and sustainable way to conduct business internationally through its integrations.
Cardano has made a firm effort to partner with businesses and develop its network over time, and was slower to launch working smart contracts and other key functionality than competitors like Ethereum. However, recent years have silenced many critics skeptical of Cardano after it launched smart contracts and forged ties with major companies, educational institutions, and world governments.
Cardano Use Case: Banking the Unbanked
In addition, Cardano’s platform seeks to provide financial inclusion to the world’s unbanked population. Cardano currently has projects addressing this in Africa and other developing economies to improve financial inclusion worldwide.
The Meld DeFi banking protocol recently launched a crypto lending protocol on Cardano, allowing people without bank accounts to access peer-to-peer lending and borrowing services. This also has a major use case in industries like remittance payments, where fees are very high for many people in third-world countries attempting to send money home to their families.
Two-thirds of the world’s population is currently without a bank account, and it’s possible that crypto projects like Cardano will make it easier for them to access financial services at a lower cost and with fewer barriers to entry.
While the cryptocurrency industry is relatively new and decentralized finance is still under development, the US Federal Reserve Bank in St. Louis praised the concept, stating that it could prove to be disruptive of the world banking monopoly.
What Does the Future Hold for Cardano?
The future development and potential for the Cardano blockchain protocol is quite unpredictable. However, most crypto experts are bullish on its future. As the world becomes increasingly environmentally conscious, most crypto enthusiasts appreciate a blockchain that reduces the emission of carbon into the atmosphere.
Another thing to consider is that, while Ethereum has an unlimited supply of coins, with a yearly inflation rate of 4%, Cardano has a limited supply of $45 billion. Due to its limited supply, ADA price could inflate accordingly.
High fees have been a limiting factor for the DeFi space, particularly on products built on the Ethereum blockchain. Cardano is solving this and more with its Mary upgrade. It’s largely believed that the Mary upgrade has the potential to position Cardano as a serious competition to Ethereum, which has had problems with high fees and slow speeds for financial transactions.
Cardano developers are now able to create custom tokens or import projects from other blockchains into the Cardano network. This presents a great benefit for new and interesting projects in the Decentralized Finance and NFT space.
In conclusion, for investors who seek a blockchain project that has a sustainable utility in the real world, Cardano is a valuable cryptocurrency worth considering for investment.
Even if it’s not always the best Blockchain technology that wins in the crypto space, the future holds great potential for the success of the Cardano blockchain.