Cardano Design Principles
From the beginning, Cardano opted for a different approach for all the solutions and efforts they pursue. He adopts a scientific approach in the fundamentals that guide his objectives. Everything Cardano does is based on these three design principles:
Cardano tries to solve the problem of scalability from the beginning. To achieve this, it evaluates the problem of scalability not only from the point of view of the increase in transactions per second (TPS) that the network can process, but also from the point of view of the increase in network availability and data scaling. Each of these aspects requires a lot of work, there are white papers and solutions in progress that we will not comment on in this article, but it is worth mentioning.
Interoperability refers to the ability of a blockchain to interact with other blockchains. As Cardano’s founder, Charles Hoskinson, said, “There will not be one currency that governs all. It is very likely that in the future, we will have many tokens and blockchains for different use cases. Cardano’s intention is to position itself as the “Internet of Blockchains”, which means that it can provide seamless interoperability between different blockchains, so that all projects can be interconnected with each other. To achieve this, the intention is to develop “sidechain” solutions that can implement “crosschain” transactions.
According to Charles Hoskinson, this could be the most difficult problem to solve. He refers to how Cardano will pay for future development and growth. The most prominent idea around this is to implement a Treasury system within the Cardano blockchain, very similar to how Dash’s treasury system works. In short, this system will work using some of the block rewards as a deposit in the Treasury. Each time a new change or a new feature is proposed to be introduced in the network, the developers will have to present a proposal, and the interested Cardano people will be able to vote and decide if the proposal should be accepted or not. If the proposal is approved, the submitter gets the development grant.
One of the main approaches Cardano applied is designed to withstand the passage of time and meet future challenges is its two-layer structure. The blockchain is clearly divided into two independent layers:
- Cardano’s Transactional Layer.
- Cardano’s Computational Layer.
Transactional Cardboard Layer
This is the layer where the ledger lives with its balances. As its name indicates, it is the layer where transactions are settled, and the consensus algorithm Ouroboros is executed.
Cardano’s Computer Layer
This is the layer where all the computation is executed, that is, where all the execution of the Smart Contracts takes place. This layer is clearly separated from the transactional layer, in order to have more flexibility in case of future changes. A good example of how this approach differs from the Ethereum approach is that in Ethereum both layers are merged, so any change in the Ethereum core could end up in a fork that could divide the network (as happened with Ethereum Classic). By separating the two layers, Cardano aims to avoid future bifurcations and problems, while maintaining flexibility.
Cardano has a particular focus on programming languages for its intelligent contracts. Unlike other competitors such as Ethereum or EOS that use an Object Oriented Programming paradigm (Solidity or Vyper in Ethereum, and C++ in EOS), Cardano opted for the Functional Programming paradigm.
Ouroboros consensus algorithm
The consensus algorithm used in Cardano is called Ouroboros 1, and is a version of Cardano’s own Participation Test. It is said to be safe by providing mathematically verifiable security against attacks. The protocol is guaranteed to be safe, as long as 51% of the participation — in the case of Cardano, ADA — is in the hands of honest participants, which, in addition to other novel concepts, is achieved through the random selection of leaders. The protocol continues to evolve through new iterations and rigorous safety analysis.
The Ouroboros protocol features an incentive mechanism that rewards network participants for their participation, either by managing a stake pool or by delegating ADA to a stake pool. Rewards (in the form of ADA) can be obtained by completing either of these activities.
ADA is Cardano’s native cryptomone. It is named after Ada Lovelace: a 19th century mathematician known as the first computer programmer, and is the daughter of the poet Lord Byron.
Each ADA holder has a stake in the Cardano network. ADA coins stored in a wallet can be delegated to a stake pool to earn rewards — and thus participate in the successful operation of the network — or committed to a stake pool to increase the likelihood that the pool will receive rewards. Over time, ADAs can also be used for a variety of applications and services within the Cardano platform.
Cardano has a limited supply of coins and only 45,000,000,000 ADA coins will be in circulation. Let’s call it maximum supply. It will never change, therefore it makes ADA coins a precious resource. Currently ~ 31,600,000,000 coins are in circulation (circulating supply) and ~ 13,400,000,000 coins will be gradually released by the protocol in the following years.