What is Cardano?
In the past, when someone asked me “What is Cardano?” I just told them to watch the Cardano Whiteboard Video, because it got me into Cardano as well. But then, I realized, not everyone wants to watch a 50 minute video “just” to know what Cardano is. Therefore I'll keep it brief in this article, even if this means some information is missing.
Cardano is a cryptocurrency, to be precise it's a more than that, it's a platform and the currency of it is ADA. Cardano is based on a proof of stake technology, with a number of innovative ideas built on top. For example having this notion of side chains (layers) that allow to separate the system. So that, for example, if one part does the work no longer good enough, it can be changed without affecting other parts of the system.
Unlike most other currencies, Cardano is built from scratch. The project launched in 2015 and it took two years of research, to get to a point, where they were able to start with programming. This research-first driven approach was unique in the cryptocurrency space. For the first time they applied the same scientific rigour, known from mission critical systems, as in space travel, to the field of cryptocurrencies.
Okay, so who's “they”? When Cardano was founded they already took care to achieve a distribution of power. There are 3 independent entities:
IOHK, the research and development company. IOHK does the research, develops and maintains the protocol.
Emurgo, drives adoption, incubates and supports commercial ventures on Cardano.
Cardano Foundation, a non-profit foundation, based in Switzerland, acts as a supervisory and strengthens the community.
Cardano is often referred to as the 3rd generation of cryptocurrencies. It would make no sense to talk about a 3rd generation, if you don't know the previous ones, hence a quick recap:
The 1st generation started with Bitcoin. The problem that Bitcoin solved was: is it possible to create decentralized money, a token that you can send and receive, that is scarce and tradeable - without a 3rd party, such as a bank, involved?
The 2nd generation started with Ethereum. It brought a programming language to the blockchain and suddenly money was programmable. "Smart contracts" were born.
Both generations, however, were not made to be used by millions or billions of people. In addition, both generations do not offer good developer experience and have poor to no possibility for self-administration. These insights define the next generation and Cardano is exactly what a 3rd generation cryptocurrency should look like. There are three big dimensions:
Scalability: is often confused with transactions per seconds (TPS), but it's the idea to gain resources with every user that comes into the system, somewhat like BitTorrent does.
Interoperability: be interoperable with other cryptocurrencies, as well as with the legacy financial systems.
Sustainability: a system that governs itself and can also finance itself without being dependent on donations. There are two main aspects:
1. a project may die (or fade out) when funds are gone. Therefore, one important thing a system needs to address, is where does money come from for the long-term maintenance? Cardano has a prefilled, built-in treasury system, that gets a constant stream of funds from transactions fees and block reward taxes. This is explained in detail in treasuries with Bingsheng Zhang.
2. a project may split like Bitcoin, Bitcoin Cash and Bitcoin SV if there is no way to decide where to go with the protocol. So the next important thing a system needs to address, is how to vote for something and how to propose for projects that can use the treasury funds, also explained in treasuries with Bingsheng Zhang.
The roadmap to achieve all three dimensions is divided into 5 phases: Byron, Shelley, Goguen, Basho and Voltaire.