Cardano might be the missing piece in your investment portfolio. But it is not just another cryptocurrency like Ethereum or Bitcoin. Instead, it is a new kind of decentralized blockchain-based platform launched in 2015. It is relatively young, so before investing, you must understand how it works.
What is Cardano
Cardano is a decentralized public blockchain-based platform and also one of the first open-source networks in existence. It focuses on delivering advanced features based on a quality scientific and research-based process, as the founder, Charles Hoskinson, assigns notable specialists from various educational institutions to review Cardano’s protocol when necessary.
The protocol also aims to create a third-generation platform that can improve smart contract deployment and resolve scaling issues of Bitcoin, which is a first-generation coin. Many industry experts also believe that Cardano can replace Ethereum, a second-generation coin if it fulfills its promises.
Cardano uses two layers; the Cardano Settlement Layer (CSL) and the Control Layer – one settle transactions, and the other is responsible for smart contracts. The powerhouse of Cardano is its proof-of-stake algorithm called Ouroboros. And unlike proof-of-work protocols, Cardano’s protocol is more affordable and less energy-consuming.
How Cardano works
As stated above, it is a two-layered framework; one is used to settle transactions with minimal transaction fees, and the other one is used to process smart contracts and decentralized apps. However, the Ouroboros protocol differs from other proof-of-stake algorithms – the blockchain is divided into epochs made of fixed periods called slots.
There are numerous slot leaders responsible for adding blocks. They are expected to create 50% transaction blocks within a single epoch, with blocks being approved by input endorsers whose election depends on their stakes. But to ensure fair validation processes and participation, Cardano has added a multi-party computational system, which acts as a digital coin toss. Then economic rewards are split between the input endorsers, slot leaders, and multi-party computation stakeholders.
ADA is Cardano’s native coin, which has a limited supply of 45 billion coins. There are currently 32,112,485,646 coins in circulation. ADA is also amongst the most attractive assets across different industries due to its transparency and efficiency. And it can be used as a payment method or voting tool within the ecosystem.
Moreover, the company behind Cardano, Input Output Hong Kong (IOHK), is a multipurpose company that offers different services, such as:
- Atala SCAN – protects users from counterfeit goods and unauthorized pharmaceutical products.
- Atala PRISM – provides a tamper-proof structure for academic certifications and credential issuance.
- Atala trace/EMURGO – responsible for product certification in the agricultural industry.
Pros of investing in Cardano
- Great development team
- Multiple layers: This is one of the many advantages of Cardano. By having two layers, it ensures unlimited scalability and faster transactions. It also permits updates without obstructing payments and transactions.
- Open-source platform: Cardano is a fully open-source platform with code written in the Haskell programming language.
- Functions as a third-generation blockchain: Cardano claims to be more reliable than other cryptocurrencies, as ADA continues to overcome challenges that other platforms have encountered.
- It can also provide digital identity: Cardano is decentralized like other cryptocurrencies. But it can also provide digital identity to unbanked citizens across the globe, especially in developing countries. According to data, the world’s population with no access to financial services is over 1.7 billion. And Cardano has started to cooperate with over 54 countries.
Cons of investing in Cardano
While this cryptocurrency has some worthy advantages over other currencies, traders and investors should also be aware of its disadvantages.
- Cardano is still young: Although Cardano has undergone essential reviews and testing, the truth is that Cardano is still developing. And because it is trying to keep up with competitors and tech advancements, it is developing slowly. Currently, the cryptocurrency is losing to Ethereum and EOS, as it still has incomplete token standards. Hence, it is difficult for people to start their Initial Coin Offerings on the platform.
- The Cardano project functions on a proof-of-stake protocol, which means that the miner of the next block is chosen randomly. This is contrary to the proof-of-work model where a miners computing power determines who gets the next block of currency.
- Security vulnerabilities.
- New Programming language with no proven use-cases: The languages used for developing on the Cardano platform are Haskell and Plutus. Haskell is an old functional programming language, and Plutus is a new one created by Cardano based on Haskell. While it is great to see innovations in the fintech space, the fact remains that the new language has not proven its uniqueness yet. And the lack of track record can pose a problem in the future.
According to CoinMarketCap, Cardano is among the top ten cryptocurrencies – ranking number seven. Since the total number of tokens is limited, the risk of inflation is also limited as the demand for the coin continues to grow. And Cardano’s success in the market largely depends on the number of smart contracts and dApps it would be able to host.
Although its entry-level makes it attractive for beginners and long-term investors, we can only say that ADA has a good chance to make a name for itself in the crypto investment space. Many also believe that the recent bullish trend in the crypto sector and the coronavirus crisis will increase the use-cases of digital currencies and blockchain technology. This, in turn, could also lead to an increase in ADA’s value. Crypto expert, Adam Web, suggests that Cardano could exceed $10 per coin in the next five years.
In all, Cardano is new to the world of blockchain technology, and we sincerely hope that in the long run, the pros will heavily outweigh the cons.
This article is not a piece of investment advice. Hence, LightBlocks Media will not be held accountable for any loss due to wrong investment choices or market volatility. We employ you to have a personal opinion via further researches before investing in Cardano or any other cryptocurrency.