What is Cardano (ADA) Crypto Beginner’s Guide
While the developed world has seen the benefits of cryptocurrency and blockchain technology, the developing world is still lagging behind. There are many projects out in the world to help alleviate these differences in hopes of one day making the world a better place for all. Cryptocurrency, despite all the negative publicity, has managed to open doors for many underdeveloped nations.
Many cryptocurrency backed projects keep their focus on the food, energy, and water, but what about fixing theses poor nations’ economies? While food, water, and clean energy are very important, they aren’t sustainable without a sound economy and a well regulated financial system.
Many underdeveloped and developing nations often suffer from both high levels of corruption and poor financial systems. So what can these countries do? Many western banks often refuse to conduct business in these countries either due to bad regulations, corruption, lack of infrastructure, and/or high expenses to run a branch in that particular country.
Having a reliable system to conduct financial transactions will become a necessity for these nations to succeed in their goals for progress and future development projects. This is why engineers and scientists have come together to bring a new type of cryptocurrency to the world. But how can they ensure that this cryptocurrency will be able to handle all future growth?
Is there a way to build enough flexibility into a cryptocurrency to ensure it meets the demands of the future? Is there a way to find the middle ground between regulation and open access to all fair financial services? Where there is a will there is a way, when it comes to cryptocurrency there definitely is a way.
Cardano: Bringing Blockchain Technology, Altcoins, and Banking to the Developing World
Cardano was created to do more than just shake up the financial and banking industries. The engineers behind this project wanted to go where few financial-themed cryptocurrencies dared. The developers wanted to bring fair banking systems to developing nations. The main purpose is to give a banking system that is both effective, efficient, and easy to implement.
Currently, many developing nations suffer from poor regulations, bad banking systems, poor government, lack of reliable national banks, inflated currency and more. With Cardano, they hope to alleviate all of these issues with a platform that is built to simplify business, financial transactions and more.
While it is impossible to predict all future outcomes, Cardano has made sure to maintain flexibility and keep other potential changes in mind.
Using the Haskell programming language, Cardano has made it possible to have a secure financial platform that has a high degree of fault tolerance. This will also allow for future upgrades as the system fine tunes itself for each developing country’s needs. These upgrades can be made in the form of soft forks.
So how does Cardano plan to do provide adequate financial services to developing nations? How does the platform work? How does Cardano plan to use blockchain technology to further their project’s goals? Will it be able to handle errors and other risks?
How Does Cardano Work?
To understand how Cardano works, you will need to understand the inner-workings of Cardano. The platform is more than just a cryptocurrency, it is a layered system. Cardano functions currently with two main layers, the settlement layer, and the computation layer.
The main objective of these two layers is to separate the ledger of account values from the reasons why values are moved from one account to another. By separating these two concepts, Cardano makes it easier for smart contracts to be used.
Smart contracts are the soft fork that makes the Cardano platform flexible. This flexibility will allow businesses, governments, non-profits, and people to tailor privacy, design, and execution of a contract to their specific needs. This, in turn, would cut down on the issues of corruption, invasion of privacy, and other issues that plague the banking and financial industries in developing nations.
So how does each component work specifically?
The first layer: Cardano settlement layer (CSL)
This is the balance ledger layer and uses a proof of stake consensus algorithm. It was created as an improvement to current cryptocurrencies such as Bitcoin and Ethereum. The algorithm is basically meant to generate new blocks and confirm all transactions on the blockchain.
The Cardano settlement layer follows a set of steps:
1.) Uses two sets of scripting languages. One set of scripting languages is used to move values, the other set is used to enhance the overlay protection and support.
2.) Creates sidechains to link to other ledgers on the blockchain.
3.) This layer uses multiple signature types such as quantum resistant signatures and other cryptographic methods.
4.) Follows multiple user-issued assets and records that are currently in the various sidechains and main blockchain.
5.) The scalability of the Cardano platform’s ability to process transactions increases as more users join the platform.
The second layer: Cardano computation layer (CCL)
This is the layer that contains all of the information regarding the transactions and why these transactions are occurring. This layer is detached from the first layer. Because the CCL is detached from the CSL it allows users to create a different set of rules regarding the evaluation of transactions.
This means users can create smart contracts that can have certain bits of data omitted, included or used for specific data parameters. This layer uses both Plutus and Solidarity. For those who are familiar with Ethereum, Solidarity is the programming language behind their smart contracts.
Plutus will mainly be used to help the development of dApps on the Cardano platform. On top of developing a reference library for the Plutus coding language, the engineers of Cardano are also planning to implement tools that help verify and improve code assurance.
Cardano’s Daedalos Wallet
This is the open-source wallet that is currently linked with Cardano. The developers of Cardano hope to make the wallet a multi-cryptocurrency wallet and expand on the functionality of the wallet in relation to the rest of the platform. The wallet allows free exchange with Bitcoin, Ethereum Classic and other supported cryptocurrencies.
Another function of the Daedalos wallet will be the built-in app store. Cardano has a web-based wallet and will soon be available to users with either iOS and/or Android.
KMZ sidechain protocol
KMZ (Kiayias, Miller, and Zindros) sidechains are a new type of protocol created specifically for Cardano. These are the sidechains that allow funds to move between the two layers of the Cardano platform as well as any other blockchain that uses the same protocol. It is what keep the transactions secure, private, and fast.
The KMZ sidechains allow ledgers with certain regulatory rules to interact with the Cardano settlement layer while maintaining complete privacy. This means these ledgers won’t have to share data that is intended to be private.
What is the Ouroboros Proof of Stake?
Unlike other cryptocurrencies that rely on a proof of work consensus algorithm, Cardano uses a type of proof of stake. The protocol is so slot leaders generate new blocks and verify the transactions on the blockchains.
This proof of stake method also makes anyone who holds at least one Cardano ADA cryptocurrency a slot leader. Users will then be randomly selected by the Follow the Satoshi algorithm. Once selected the user will then be able to generate new blocks to the network automatically without the need for manual verification.
To prevent an inflation of the cryptocurrency, Cardano has set a maximum cap of 45 billion ADA coins.
How Does Cardano Calculate Transfer Fees?
Cardano does have transfer fees, however, these fees are very easy to calculate and are fairly minimal. To understand how the fees are calculated, users can follow a simple equation.
The equation: A + B x size = transfer fee.
A: a constant that equals a small fraction of the ADA being transferred
B: a constant that equals a small fraction of the ADA and byte size
Size: this is the size of the transaction in measured bytes
All transfer fees are collected into a pool and then handed out to all participating slot leaders.
What are the Benefits of Using Cardano?
Cardano is developed by academics and engineers who are dedicated to finding the best coding and scalability practices.
It is a cryptocurrency platform that is focused on security and wallet development
It is easy to purchase on major cryptocurrency exchanges such as Bittrex, Binance, and more.
Has a dedicated community to help all users who wish to use the platform or those who have questions regarding Cardano
Maintains complete transparency with its user-base
Uses academically backed coding algorithms, protocols, and technical reports to help prevent security failings and other issues
Final Thoughts on Cardano (ADA)
Cardano is definitely unique in its mission, but it definitely has its competition in certain areas such as smart contracts. Currently, Cardanos biggest competition comes from Ethereum, Lisk, NEO, NEM, and EOS.
There are a few drawbacks of this cryptocurrency. The first drawback is it may be confusing for novice cryptocurrency users. This is due to the fact that in order to purchase ADA users have to use alternative means such as Gemini and GDAX. Users will have to make their purchases first with either Bitcoin or Ethereum and then exchange them for ADA.
The second drawback is the digital wallet for this cryptocurrency only works on Windows OS and Apple OS, there isn’t a Linux version available.
The final drawback is the grand nature of the project as a whole. It intends to cover many areas which can leave many opening for potential failure if not handled with care.