What Is cardano ?
Cardano is a smart contract platform founded in 2015 by one of the co-creators of Ethereum, Charles Hoskinson.
Cardano's goal is to become a platform capable of running financial applications at scale used by everyday individuals, especially the developing world.
Cardano aims to separate itself from competing blockchains in several ways.
First, it is built in layers - a settlement layer for payments, and then a computing layer for applications. This is in comparison to something like Ethereum, which is only built on a single layer, creating backlogs and making upgrades difficult.
Second, its focused on interoperability. Cardano doesn't necessarily look at competing blockchains as competing blockchains. Rather, it believes many blockchains will be in operation and interoperability is a necessary development.
Thirdly, Cardano is meticulous about research and peer review. It is the only blockchain project that is built on strictly peer reviewed, academically researched code, rather than whitepaper proposals that, according to Cardano's founder, "kind of, sort of work".
Cardano is an extremely ambitious project with many branches, so read on to get a full idea of what they're about.
First let me say Cardano is, quite simply, the nerdiest project I've come across yet.
If you're like me and want the smartest, geekiest guys in the room working on your project, Cardano could be what you're looking for.
Cardano is currently being developed by an engineering company called IOHK (Input Output Hong Kong).
IOHK is founded by Cardano founder Charles Hoskinson. IOHK is contracted to develop Cardano until 2020.
This is one of the interesting things about Cardano - it's development appears to be highly centralised. On the one hand, that's a good thing because centralised teams are always more efficient and more synchronised. On the other hand, centralisation is a risk factor in any blockchain platform. Should the IOHK team suddenly disappear tomorrow, or get sued, or go bankrupt, or some of the lead devs get hit by a bus, there's a big problem. Contrast this to if a lead developer of Bitcoin somehow disappears; there are already hundreds of developers working in his place that the ecosystem wouldn't even notice.
Anyway, let's look at who's actually behind the team.
Charles Hoskinson is the founder of Cardano (via his company IOHK), and the former CEO and co-founder of Ethereum.
Along with Cardano, IOHK is also developing Ethereum Classic, which Hoskinson stayed with after the Ethereum fork.
He is the founding chairman of the Bitcoin Foundation's education committee.
He is also the co-founder of a company called Invictus Innovations along with EOS-founder Dan Larimer. Invictus Innovations launched Bitshares in 2014.
If anything, Charles brings a huge amount of value just from his network. He's known to be friends with Charlie Lee, creator of Litecoin, and as mentioned above, Dan Larimer, creator of EOS. His time at Ethereum also means he has networked and worked with some of the biggest names in crypto.
Needless to say, he's also considered one of the foremost experts in the industry on blockchain technology and cryptography, and posts concept tutorials regularly on Youtube.
Jeremy Wood is the former operations manager of Ethereum. He lives in Japan and founded IOHK with Hoskinson in 2015. Little else can be found about him.
Right now on the IOHK Cardano team page, there are 42 developers listed (that's a big team). Here are some of the big dogs:
Duncan Coutts / Head of Engineering - PhD in computer science, developing in Haskell for over 20 years. Founder of Well-Typed, a Haskell consultancy.
Lars Brünjes / Director of Education - PhD in pure mathematics, Cambridge University alumni, Haskell expert.
Philipp Kant / Director of Formal Methods - PhD in physics, Haskell developer for distributed computing, data management, econometrics.
Neil Davies / Systems Performance Scientist - PhD, mathematician and computer scientists specialising in scaling and networks.
It's a confidence booster to see four PhD's in various systems based subjects. The rest of the team is listed mostly as Haskell developers. Check out the full roster here.
Also as a reference point, Haskell is the language that Cardano is built in and is a comparatively new language (compared to things like C++ and Java. While Haskell is considered the most suitable language for a platform like Cardano, it also means it can be harder to find talent.
The second player in Cardano's development is Emurgo.
Emurgo is an incubator founded in 2017 specifically for startups being built on Cardano.
Emurgo seems to work similar to the NEO Council, in that it's goal is nurture the Cardano ecosystem. This can be via consulting, ICO assistance, or direct investments.
While IOHK builds the actual platform, Emurgo helps real world businesses integrate it and thrive.
As of now I am unable to find information on how Emurgo is funded, and how much ADA they received at ICO.
The Cardano Foundation is a non-profit based in Switzerland that was set up to support Cardano development.
The main goals of the foundation were to help support Cardano in legal and regulatory matters, educate the community on Cardano, and serve as an objective party in Cardano's ecosystem. It was also tasked with creating a set of standards for those using the Cardano system.
In October 2018, both Emurgo and IOHK issued an open letter to the community stating that the Cardano Foundation was not executing its mandate and they would no longer be associating with them. Because the Cardano Foundation is a stand-alone, non-profit entity, nothing could be done about the foundation itself, but it was said that IOHK and Emurgo would distance themselves from the foundation and move ahead with the mandate themselves. You can read the full letter here.
Because the Cardano Foundation is a non-profit, any funds or tokens it has cannot be used for personal use under Swiss law, but it's unclear what will ultimately happen to the funds (if they'll be locked, distributed etc).
Cardano is being built in a significantly different approach to most blockchain platforms today:
Cardano wasn't conceptualised as a specific whitepaper, but rather a specific set of 15 core principles. The idea was that a whitepaper is too rigid for this space, rather, it's better to have a clear idea of concepts you want to build your platform around and learn as you go.
- Separation of accounting and computation into different layers
- Implementation of core components in highly modular functional code
- Small groups of academics and developers competing with peer reviewed research
- Heavy use of interdisciplinary teams including early use of InfoSec experts
- Fast iteration between white papers, implementation and new research required to correct issues discovered during review
- Building in the ability to upgrade post-deployed systems without destroying the network
- Development of a decentralized funding mechanism for future work
- A long-term view on improving the design of cryptocurrencies so they can work on mobile devices with a reasonable and secure user experience
- Bringing stakeholders closer to the operations and maintenance of their cryptocurrency
- Acknowledging the need to account for multiple assets in the same ledger
- Abstracting transactions to include optional metadata in order to better conform to the needs of legacy systems
- Learning from the nearly 1,000 altcoins by embracing features that make sense
- Adopt a standards-driven process inspired by the Internet Engineering Task Force using a dedicated foundation to lock down the final protocol design
- Explore the social elements of commerce
- Find a healthy middle ground for regulators to interact with commerce without compromising some core principles inherited from Bitcoin
Cardano terms itself a "third generation blockchain".
If Bitcoin is a first generation blockchain, and Ethereum a second generation, then Cardano believes third generation blockchains should do everything Bitcoin and Ethereum can do (transfer of value, smart contracts) while also being infinitely scalable, be interoperable with all other cryptocurrencies rather than just one, and be self-sustainable (rather than constantly relying on funding for development).
Here's how it aims to address each of these areas:
Cardano believes it can attain scalability by developing a dual layer blockchain and a purpose-built proof of stake algorithm.
Cardano is built on a dual layer system.
The first layer is the settlement layer, known as the CSL, which handles transactions.
The second layer is the computation layer, known as the CCL. This is where the blockchain processes smart contracts and dApp activity.
The idea behind the dual layer system is to make the platform more adaptable. If tweaks need to be made to the transaction algorithm, it can be done without upsetting the computation layer and vice versa. Not only does it make each layer easier to update, it makes them faster and more efficient too.
Proof of stake: Ouroboros
Cardano's proof of stake algorithm, named Ouroboros, is developed in-house and, according to Cardano, is the only proof of stake protocol scientifically proven to be secure.
Proof of stake is a method of validating a blockchain.
It serves as an alternative to proof-of-work, which involves using computing power to solve complex algorithmic equations. The main criticism of proof-of-work is that it is inefficient, and requires expensive amounts of hardware and electricity to operate.
Proof of stake is much less resource heavy, and simply involves storing your coins in an active node/wallet. The algorithm selects at random someone to reward for a new block, the probability of you being chosen depending on how large your stake is.
Ouroboros is a proof-of-stake protocol unique to Cardano. Time is broken up into small periods known as slots, and blocks are rewarded based on a lottery system using randomly selected slot leaders. For the tech-inclined, you can read a full technical explanation of it here.
Cardano aims to develop side chain functionality on Cardano, allowing any token to integrate with the Cardano platform.
Founder Charles Hoskinson believes this will add to the longevity of the project, as it is inevitable that many coins will be used in the future rather than just one or two. Ability for the chain to communicate with all coins is essential for mass adoption.
Cardano has been researching side chains and has confirmed it will use a protocol known as KMZ sidechains. However no integration has been reported as of yet.
Hoskinson believes that all blockchain platforms need to be sustainable in the long term. This not only applies to funding, but also to governance and the community. If changes need to be made, how is consensus reached? Who gets to vote? How is it implemented?
First, Cardano aims to establish a treasury. The treasury will be sent an automatic allocation of all minting and transaction fees (amount to be determined). This treasury will be governed by ADA holders using a voting mechanism to fund upgrades and development.
Secondly, Cardano plans to decentralise the development of the protocol itself. Once the core team has deployed the final product, governance will then be passed onto the community. Cardano aims to establish a system for proposing and enacting Cardano Improvement Proposals through the blockchain itself, most likely by ADA holders.
High Assurance Code
Cardano prides itself on having the highest commitment to quality in the industry. Their claim is that Cardano code is heavily tested based on scientific research and testing, and all code is formally verified and peer reviewed. Let's see what this actually means:
Cardano is coded in the Haskell language. While Haskell is more obscure than most coding languages, it is considered one of the better choices for enabling formal verification of code.
Formal verification is a process that confirms with mathematical certainty that the code is capable of performing its intended task.
From Cardano's whitepaper:
"Due to the complex nature of the domains of cryptography and distributed computing, proofs tend to be very subtle, long, complicated and sometimes quite technical. This implies that human driven checking can be tedious and error-prone. Therefore, we believe that every significant proof presented in a white paper written to cover core infrastructure needs to be machine checked."
This is one component to IOHK's commitment to high assurance code.
Peer review is a standard practice in many industries when it comes to new research, for example in science, medicine, mathematics.
However, Cardano aims to make this standard practice for its code development too, and hopes to set a standard for the crypto industry as a whole.
"Many cryptocurrencies are either entirely specified on a white paper only relevant to a CV or just by hastily written code. None of the current top ten cryptocurrencies by market capitalization are based upon a peer reviewed protocol. None of the current ten top cryptocurrencies were implemented from a formal specification.
Yet billions of dollars of value are at stake. Once deployed, a cryptocurrency is exceedingly difficult to change. How does a user know they are using a secure system? How does a user know that the marketing claims are legitimate? What if the proposed protocol can never achieve the claims?"
Therefore Cardano further commits to high assurance code by ensuring all code committed to the Cardano platform is reviewed by peers in the industry. The actual specifics of their peer review process isn't published.
Cardano is an extremely complex and ambitious project with a lot of moving parts. It is recommended for a full picture to check out roadmap.
Token (metrics and utility)
ADA completed their ICO in January 2017, raising approximately 108,000 Bitcoin or $63 million. Metrics as follows:
- 25,927,070,538 (around 26 billion) ADA were sold to ICO investors.
- 5,185,414,108 (around 5 billion) ADA were distributed to IOHK, Emurgo and the Cardano Foundation. The percentage split was not disclosed.
- Cardano has a hard cap of 45 billion tokens.
- The tokens that are not yet generated will be produced via minting. The minting process has not yet been decided.
The ADA token serves as the native token on the Cardano network.
To use the Cardano network, fees need to be paid in ADA, similar to how they are paid on Ethereum.
Cardano fees are based on the following equation:
a + b * size
a is a special constant, at the moment it is 0.155381 ADA;
b is a special constant, at the moment it is 0.000043946 ADA/byte;
size is the size of the transaction in bytes.
When proof of stake is implemented, fees will be paid to stakers. As of now they are burnt.
The obvious problem here is that ~0.15 ADA could end up being a sizeable fee if the price of ADA rises. However, the team has said this can be adjusted in future.
The second utility is staking. The token can be staked to earn passive income via block rewards and minting. Staking is not yet active.
Lastly, if all of Cardano's sustainability protocols are implemented, the token should also offer considerable voting rights in development of the platform in the future.
Cardano's reddit is large and the community does seem proactive in answering questions. They are not quite as fanatical as Bitcoiners or Ripplers but they are definitely supportive. Charles Hoskinson himself is often seen on there too, as well as Twitter, answering more complex questions from the community.
Hoskinson also does regular AMA's on Youtube to explain Cardano's developments and answer questions. Someone who fronts up to the community regularly is very valuable in crypto, particularly when it can be hard to decide which projects are actually genuinely following their roadmaps and using investor funds responsibly.
The IOHK blog is regularly updated and gives good insights into developer progress.
Cardano also needs to be commended on its large amount of public documentation on its coding, architecture, roadmap and core principles. There is a very comprehensive user library at cardanodocs.com.
Having the Cardano Foundation and Emurgo as separate entities to IOHK is also a smart move and helps nurture the ecosystem.
B Money Verdict:
I have a few concerns about Cardano.
First, development is highly centralised. While I can understand this is a necessary evil in early stages of development, it is still a risk factor. IOHK is almost a single point of failure - if anything happens to them (legal trouble, funding trouble, loss of personnel, bad management etc) Cardano likely will flounder and disappear.
The second risk factor is competition. There are a lot of smart contract blockchain platforms being built today, and many of them are already completely operational (EOS, Ethereum, NEO, Stellar etc). I can appreciate Cardano's rigorous quality controls mean development is slowed, but there is a lot to be said for early mover advantage in this space.
The third risk factor is funding. Hoskinson claims that IOHK is funded until 2020. That's not very far away. What happens when/if funding runs out and the platform isn't finished? A second ICO?
The fourth risk factor is progress. If you invest in Cardano today, you are really still investing in an idea. The Cardano platform is only operational at a settlement level - all the other big ideas they have are just ideas. Progress is also slower than most projects due to their rigorous process (a good thing). Because there is little product to show as of now, Cardano is definitely high risk - high reward.
Lastly, I have some doubts about the founder Charles Hoskinson. While certainly an extremely intelligent individual, his history rings alarm bells for me. First he started at Bitshares, then he left Bitshares to found Ethereum, then he left Ethereum for Ethereum Classic and now he's working on Cardano. Is it outrageous to think in a year he leaves Cardano and starts something else? Should that happen, Cardano likely will die a slow death. When's the last time you heard anyone talking about Bitshares?
There is also the case of infighting with the Cardano Foundation, although I'm not too concerned about that.
Now, the flipside is that Cardano is extremely ambitious and if the project pulls this off, it is almost certainly going to be a Top 3 cryptocurrency and could very possibly leapfrog Ethereum.
In almost any industry, quality equals longevity and Cardano's commitment to producing excellent software is unrivalled in cryptocurrency. The team working on Cardano is large and expert, stacked with heavy hitters and PhDs, and it appears to be a team that could bring this project to life.
Cardano is very far from a sure bet, but if everything goes to plan an investment in Cardano could do very well indeed.
The Good Stuff
- Very ambitious.
- High commitment to quality.
- Only peer reviewed platform.
- Expert team.
- Third generation blockchain.
- Unique proof of stake protocol.
The Bad Stuff
- Slow development times.
- Hoskinson staying power a concern.
- Infighting with Cardano Foundation a distraction.
- Still only a concept - final working product still years away.
- Funding only secured until 2020. Burning $1m per month.
- Centralised development.
Expert team. Hoskinson very well connected. Large development team at IOHK. Emurgo adds incubation.
Still just a concept. Settlement layer operational, but currently ADA is nothing more than a currency. Concept is excellent, but cannot score a concept. Finished product still far away. Score will increase as platform is developed.
As of now, token is just a currency. No staking yet. No computational layer. Score will increase as platform is developed. Metrics are good.
IOHK and Hoskinson are very active and address community actively. ADA supporters have large active community. Blog and Twitter active. Website is excellent source of information.
How To Buy CARDANO In New Zealand
To buy Cardano instantly with New Zealand dollars, I recommend using EasyCrypto. Rates are some of the fairest in NZ and transactions are fast. You can sign up for a free EasyCrypto account here.
For advanced investors, you can also try international exchange Binance.
BUY WITH NZD: EasyCrypto
- How much funding does Cardano have: https://www.reddit.com/r/cardano/comments/9i1ovy/how_much_current_funding_does_cardano_have/
- ADA distribution: https://www.cardano.org/en/ada-distribution-audit/
- ADA ICO details: https://cardanodocs.com/cardano/monetary-policy/
- ADA rich list: https://adatracker.com/richest
- Cardano fees: https://cardanodocs.com/cardano/transaction-fees/
- Vitalik and Charles discussing Ouroboros vs Casper: https://www.reddit.com/r/cardano/comments/92r3si/vitalik_allegations_against_ouroboros/
- Cardano guide by Chainrock: https://medium.com/chainrock/cardano-peer-reviewed-blockchain-for-the-thrid-generation-analysis-review-8c697a619bce
- Cardano by Unhashed: https://unhashed.com/cryptocurrency-coin-guides/what-is-cardano/