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Have you already heard about Cardano, but you don’t quite get what’s so special about it? Then you’ve come to the right place, 'cause I’ll give you the 3 main reasons why Cardano is definitely here to stay.
Reason #1: The eUTXO Model
The very first thing that makes Cardano stand out is their choice of accounting model. Everyone at the time of Cardano’s early development was either copying Bitcoin and their UTXO model, or building with Ethereum’s accounts model.
Cardano created a new way, called extended-UTXO. It improved upon Bitcoin’s original model, by making it a lot easier to put extensive smart contract capabilities on it.
Now, these 3 accounting models deserve a post of their own. But to summarize, it means that Cardano merged the best of 2 worlds: doing transactions and smart contracts without needing to keep a global state of the network at all times, like Ethereum does. And since transaction validity can be determined locally, you avoid mid-script execution failures, have a more powerful parallelization and you always know how much a transaction is going to cost before-hand.
Reason #2: Cardano’s Consensus Algorithm
Innovations don’t stop there, Cardano created from the ground up their own Proof of Stake consensus algorithm, called Ouroboros. Now, Ouroboros is constantly evolving with new capabilities, but its principles are the same since the first version, Ouroboros Classic.
It divides time into epochs of 5 days. On every epoch, groups of Stake Pools are defined to manage the blockchain, and stake rewards are calculated and distributed.
It’s all done in such a way that users are not required to lock their tokens to stake; and it’s also not possible to lose tokens just by staking.
So Ouroboros manages to be a system that maximizes user liquidity, ease-of-use, security, decentralization.
Reason #3: Cardano’s Governance Approach
At last, and probably the best aspect of Cardano is their focus on long-term sustainability. Now, I’m not talking about being green (even though Cardano is one of the most efficient blockchain projects in terms of energy consumption).
I’m talking about development sustainability, funding sustainability and decision-making sustainability. How does Cardano achieve that? At first, by having 20% of all transaction fees go to a decentralized Treasury system, with a liquid democracy on top of it.
This way, they don’t depend on ICOs or venture capital to fund development, and the community can actually decide what’s a priority. Where should funds be allocated? Should Cardano help fund innovation, research a new quantum-resistant algorithm or simply invest in good ol’ marketing?
Now, Cardano’s governance is still a work in progress project. It already has a beta-version voting system called Catalyst, which has already funded a little over a thousand projects, amounting to about 38 million dollars as of the date of this post.
One thing that’s coming to Cardano in respect to governance is a Members Based Organization, which will be a sort of Congress composed of community members, developers, stake pool operators and dReps.
There, consensus will be achieved on certain topics through various themed committees: such as formalizing CIPs (Cardano improvement proposals), proposing parameter changes, defining formal specifications, and that sort of thing.
From there, the changes can then be finally voted on by ADA holders. So ultimately it’s going to be a bicameral model: with a bureaucratic body suggesting the direction Cardano should take, and the community having the final say on what will actually happen.
In short, Cardano started out as an idea for a research-based principles-first innovative blockchain project, with all development being dependent on a single company. But now, as core-development is being delivered, it’s slowly and consistently being decentralized in all aspects. And see ya next time!