EMURGO - Blockchain Primer: How will a fully decentralized Cardano benefit ADA holders?

Shelley, the second stage of Cardano’s development, will bring a new era to Cardano. This era will be the first time in Cardano’s history where full decentralization will be achieved. This means that the Cardano blockchain will be fully maintained and updated through a global network, without any central governing party. The second stage in Cardano’s journey brings many new opportunities and benefits for ADA holders to enjoy. It’s important to understand what these benefits are for ADA holders. In this post, we’ll look at how Cardano’s decentralization will benefit the holders of ADA.

What is Decentralization Exactly?

Once Shelley is reached, Cardano will be a fully open, decentralized ledger. This ledger will need to be maintained and kept up-to-date, as an increasing number of people enter the Cardano ecosystem. Payments for goods and services or sending ADA from one address to another are all transactions that will need to be recorded and preserved on the Cardano blockchain. How, exactly, will the Cardano blockchain record these transactions, and why does this matter to an ADA holder?

Ouroboros lays at the heart of the decentralized Cardano blockchain. This is a brand-new, proof of stake algorithm that ensures Cardano’s blockchain remains secure and correct. Ouroboros allows stakeholders (people who own ADA) to help update the ledger with all the transactions that take place between people globally. All of this will be achieved without needing to consume the same amount of resources that Bitcoin does.

Benefit for ADA Holders: You Can Help Keep the Cardano Blockchain Up-to-Date

Currently, the Cardano blockchain is maintained and secured by the Ouroboros Classic algorithm. This was the consensus algorithm that has been used since the dawn of Cardano’s first phase, the Byron era. Byron began with the launch of Cardano’s mainnet. This phase has reached its final major milestone, marked by the release of Cardano 1.5. This release laid the foundations needed to transition from Ouroboros Classic (used currently) to Ouroboros Genesis. Once the transition to Ouroboros Genesis is achieved, Cardano will become a proof-of-stake protocol with the same level of security as the world’s most popular proof-of-work blockchain, Bitcoin.

This transition to Ouroboros Genesis will allow anyone who owns Cardano ADA coins to help keep the Cardano blockchain up-to-date.This is because Cardano will be a proof-of-stake system. “Proof” means having evidence that blocks of transactions between Alice and Bob, Bob and Carol and so forth are legitimate transactions. “Stake” means having coins in an address you own. Ouroboros Genesis gives any holder of ADA coins the potential to participate in validating transactions, and adding blocks to the blockchain. A key benefit for an ADA holder is knowing you are helping to keep the blockchain up-to-date.

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