On Oct. 1, 2017, an unusual event caused a collective gasp in the world of cryptocurrencies. A little known cryptocurrency called Cardano — or ADA, as its corresponding coin is called — showed up on crypto-tracking sites with a market cap of about $600 million.
At the time, it was unusual to see a new coin appear out of thin air with such a high market cap. But Cardano is different. It’s an incredibly ambitious product with a strong team and tons of buzz. By year’s end, the market cap of Cardano was more than $10 billion, despite the fact that the project was in a fairly early stage. In January, it briefly soared to more than $33 billion before receding back to roughly $10 billion as the overall cryptocurrency market shrunk. It is currently the sixth largest cryptocurrency by market cap, behind Bitcoin, Ethereum, Ripple, Bitcoin Cash, and Litecoin.
So what makes the cryptocurrency scene so bullish about Cardano?
Cardano claims it will solve most of the issues that plague well-established cryptocurrencies such as Bitcoin and Ethereum. Bitcoin isn’t flexible enough, and transactions on its network are currently slow and expensive due to protocol limitations and overwhelming demand. Ethereum is far more flexible, but — as prominent Ethereum developer Vlad Zamfir recently put it — it’s not safe or scalable yet.
But Cardano, at least so it claims, has very secure code, peer-reviewed by experts and scientists. It claims to be fast and scalable, thanks to its Ouroboros proof-of-stake technology. It’s written in Haskell, a programming language that’s typically used in critical systems in the banking and defense industries. It provides interoperability between existing cryptocurrencies. And finally, it offers long-term sustainability, by using a sort of cryptocoin treasury that can fund projects long-term.
Cardano has a very strong developer team. Its leader is Charles Hoskinson, who studied Analytic Number Theory at the Metropolitan State University of Denver and University of Colorado at Boulder before dropping out to co-found Ethereum, among other projects. He now travels around the world to speak and educate on crypto and promote Cardano; as he moved between time zones, it took me two weeks to align with him and do a phone interview.
“We didn’t actually do any marketing,” Hoskinson says of the cryptocurrency’s early days. “When Cardano started trading on Bittrex, it was the first time the rest of the world has actually seen it; the first time they kinda saw the vision, which was this idea of a third generation cryptocurrency, and all this things that we’ve set up, the research team that we set up, this enormous team we’ve put together. They saw the code, they saw all the progress, and they said holy moly, we missed this.”
A cryptocurrency built from scratch
Hoskinson refers to Bitcoin and Ethereum as the first- and second-generation cryptocurrencies. They were the first of their kind, and it was impossible for their development teams to prepare for all potential problems in advance. Cardano has the benefit of knowing their history.
“Every component of our system has been built from scratch,” Hoskinson says. And since all of it has been peer-reviewed by experts and scientists, he claims, it should be more reliable and secure than the code of most other cryptocurrencies. This is important. Parity, a popular wallet for Ethereum, suffered a hack in which unknown actors made away with $32 million, as well as a bug that froze more than $150 million in digital assets, due to errors in its code.
Hoskinson isn’t just making claims out of thin air. Cryptomiso, a site that ranks cryptocurrencies according to Github commits — changes in a project’s code — currently ranks Cardano as the second most active project. And this code has seen actual usage: Cardano’s Oroborous proof-of-stake algorithm is live, and its Daedalus wallet is live.
“You pay a higher upfront fee to do things properly, once you’ve done that, what happens is you get acceleration, and you don’t have to backtrack, because you’ve done it right the first time.”
But Cardano consists of two layers: A settlement layer, which is similar to Bitcoin, and essentially only takes care of who has sent how much ADA to whom. The other is the control layer, which is similar to Ethereum and enables applications to run on the platform. That part of the project is still undergoing testing.
“We’re starting very far behind everybody. (…) A lot of the work that we did in 2016 and all throughout 2017 and we’re still doing now is about building up to a point where we catch up completely with all of our competitors,” Hoskinson says. “The difference between us and a lot of our competitors, is that every time we get involved in something, we write a paper. And the people reviewing these things are cryptographers, experts from universities such as…
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