A Simple Introduction to Cardano

What is Cardano?

  • Cardano is a blockchain platform that aims to be a decentralized application (DApp) development platform with a multi-asset ledger and verifiable smart contracts.
  • Cardano runs on the proof-of-stake protocol rather than the proof-of-work protocol with the most notable example Bitcoin. Learn more about Proof of Stake vs. Proof of Work here.
  • The primary cryptocurrency of Cardano is called “Ada.”
  • The proof-of-stake is called the “Ouroboros consensus protocol”
  • Cardano is very similar to Ethereum in purpose and technology. If you want to learn more about Ethereum: A Simple Introduction to Ethereum

Ouroboros

  • It divides physical time into epochs that are made up of slots, which are fixed periods of time
  • Slots are similar to working shifts at a factory
  • Currently, an epoch lasts five days, and a slot lasts one second, but these numbers are configurable and can be changed after an update proposal
  • Each slot has a slot leader chosen by a “lottery” system. In this system, the higher the stake, the better the chances of winning the lottery.
  • Slot leaders are responsible for: Validating transactions, creating transaction blocks, adding newly-created blocks to the blockchain

Cardano vs. Ethereum

  • Supply Cap: Cardano has a supply cap of 45 billion vs. ETH does not place a limit of ETH that can be minted. For ETH, the introduction of EIP-1559 changed the fee structure from an auction structure to a hybrid of a base fee and a tip. The base fee is burned and has the potential to make ETH a deflationary currency.
  • Transaction Fees: ETH is suffering from high gas fees or in order words transaction costs. A notable example is where a crypto exchange accidentally paid a $24 million fee for a $100,000 Ethereum transaction. Cardano is much cheaper today but this should equalize as ETH moves to ETH 2.0 and as Cardano gain popularity and in turn increase network usage.
  • Smart Contracts: Both Ethereum and Cardano has the functionality to build smart contracts which enables DApps ranging from DeFi to NFTs.

My Thoughts

  • Ethereum has the first movers’ advantage and will most likely maintain market dominance for the foreseeable future
  • As long as ETH 2.0 is successful and ETH can stabilize and reduce it’s gas fees, it will remain the market leader
  • Does not mean that Cardano and other smart contract platforms will not exist.
  • My belief is that as the technology of smart contracts advances, the market will be split to a few major players with also specialized players that have designed smart contracts for specific objectives or industries in mind

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Ricky Young

My belief is that financial freedom cannot be obtained by just a 9-to-5, but a combination of smart investing and passive income. This is my journey to achieve financial freedom.

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