What is Cardano?

 Right now there are countless of cryptocurrencies that you can buy, but recently we've seen something called Cardano getting a lot of traction. But why is Cardano so popular all of a sudden? What makes it so special compared to other cryptos? Well, let's find out.

 Cardano is a new cryptocurrency platform that was launched in September 2017 after more than two years of development. It's rather different than other cryptocurrency projects because it is built around peer reviewed papers. So instead of writing white paper and implementing its three to code. The Cardano team actually makes sure that experts from around the world read their papers and prove them and agree with the outcome. This is a very different way of working. Cardano claims to be the third generation of cryptocurrencies. The first generation was Bitcoin and is essentially digital gold. It's used to transfer and store virtual money, but it's plagued with scalability issues. The second generation started with Ethereum and brought a smart contracts.

 It improved scalability somewhat, but not enough to become a global currency. The third generation, however, wants to take the previous two generations and improve upon them. Right now, Cardano and Iota are both considered to be third generation blockchains.

 Cardano wants to solve 3 big pain points of the current generation scalability, interoperability and sustainability. Let's go over each one. We'll start with scalability, which itself consists out of three problems that have to be solved. Transactions per second, network bandwidth and storage. 

Transactions per second is the most obvious one. In order for cryptocurrency to become a global payment system, you need to be able to handle a lot of transactions per second Cardano. Cardano ore Bora system solves this by adopting proof of stake instead of proof of work. You probably know that Bitcoin uses the proof of work algorithm and lets everyone mine new blocks. This process is slow and not only wastes a lot of computing power, it also wastes huge amounts of electricity.

 Cardano is much more efficient. It doesn't let everyone mine new blocks. Instead, the network elects a few nodes to mine the next blocks. These are called the slot leaders. So to make this all work, Cardano divides the time into epochs. An epochs is split into slots a short period of time in which exactly 1 block can be created. The network then elects a slot leader for each slot, and this is the only person that can mine a block for that particular slot. Slot leaders listen for new transactions, verify them, and then put them inside a block. If the slot leader doesn't complete his task in time or doesn't show up, he loses the right to produce a block and has to wait until he is reelected by the network. This technique makes Cardano highly scalable because they can increase the amount of slots per epoch and they can run multiple epochs in parallel. 

The next scalability problem is network bandwidth. Blockchains are stored in a peer-to-peer network. Each node in this network receives a copy of all new transactions. But imagine what happens if there are thousands of transactions per second. The nodes would need a lot of bandwidth to continuously download them all, and that is not very scalable. Instead, Cardano wants to split up the network into subnetworks by using a technique called Rina.

 Each node will be part of a specific subnetwork and can communicate with other networks if needed, much like the TCP/ IP protocol for the Internet.

 And the final aspect of scalability is data storage. Blockchain store all transactions that have ever happened. But how do we handle this ever growing set of data? The Cardano team is thinking about implementing techniques like pruning, compression and partitioning. However, they don't consider this a top priority at the moment because storage space right now is still fairly cheap. They'll tackle this problem later in 2018 or beginning 2019.

 Big problem #2 is interoperability. This again consists out of two problems. First of all, there are many cryptocurrencies out there, but they don't really work together. And secondly, banks and governments shy away from cryptocurrencies. So the Cardano team assumes that in the future, we won't have one coin to rule them all. Instead, multiple different currencies will exist side-by-side, each with its own protocol and rules. Right now, these don't talk to each other. You can't, for example, transform your Bitcoin into ether without an intermediate. The Cardano project aims to be the Internet of blockchains, or in other words, a blockchain that can understand what happens in other blockchains. This would mean seamlessly moving assets across multiple chains. Then there is also the problem with governments and banks. They shy away from cryptocurrencies because they don't adhere to regular banking laws. It's hard for them to trust the transaction in the crypto world because they don't have any metadata about that transaction. You see, they like to know who made the transaction and for what reason. However, this is also very sensitive information. So the Cardano project wants to allow people to attach metadata to a transaction if they want to. This would make the crypto world play nicer with the traditional banking world. But again, it would be up to the user to decide if he wants that or not.

 The final problem that the team intends to solve is sustainability. Right now there are a lot of people who want to build a company around cryptocurrencies. To raise money for their company, they launch an ICO or initial coin offering. After an ICO, the team ends up with a lot of capital that they can use to fully start their company. But what happens if, after a couple of years, this money runs out? How will they make sure that the development of their technology continues? Should they create a new coin and hold another ICO just to get some cash? This is still an unanswered question, but it's clear that raising money just once isn't very sustainable and doesn't promote continuous improvement. Cardano intends to solve this problem by creating a treasury. The idea is that the Treasury will receive a small percentage of every transaction that happens on the network. The Treasury itself is a special wallet that isn't controlled by anyone. Instead, it's a sort of smart contract that can release a part of the funds to developers who wish to improve the Cardano protocol. To do this, developers have to submit a proposal to the Community saying what they want to change and how much money they need for it. The community can then vote on the ideas that they think is the most important. After a certain amount of time, the Treasury takes the most popular proposals and gives them enough money so they can develop their improvements.