What is Cardano
Cardano is a decentralised public blockchain and cryptocurrency project and is fully open source. Cardano is developing a smart contract platform which seeks to deliver more advanced features than any protocol previously developed. It is the first blockchain platform to evolve out of a scientific philosophy and a research-first driven approach. The development team consists of a large global collective of expert engineers and researchers
It was created by blockchain development firm Input Output Hong Kong (IOHK) and led by Charles Hoskinson, former co-founder of BitShares and Ethereum, and aims to run smart contracts, decentralized applications, side chains, multi-party computation, and metadata. Cardano develops their currency around a Recursive InterNetwork Architecture (RINA). It uses the Ouroboros proof of stake algorithm to achieve decentralized consensus in its network. In this protocol, slot leaders generate new blocks in the blockchain and verify the transactions. Anyone holding a Cardano ADA coin can become a slot leader. Cardano uses Haskell, a programming language with a high degree of fault tolerance.
What makes Cardano SL special?
While there are similarities between Bitcoin and Cardano SL, there are also many differences between these two cryptocurrencies. The most significant difference is that Bitcoin is a proof of work type cryptocurrency, while Cardano SL makes use of a proof of stake approach to reach consensus. This encourages honesty and long term participation.
PURPOSE OF A CONSENSUS ALGORITHM
Consensus algorithms are used to produce new transaction blocks, resulting in an updated state of the ledger. Whenever someone publishes a block of transactions, they — or rather, their node that runs the cryptocurrency protocol — have to attach a proof that they have merited it. Below two types of such proofs are discussed.
PROOF OF WORK AND MINING
Proof of work is the most common consensus algorithm type for cryptocurrencies. It originated in Bitcoin, and this is how this cryptocurrency works. To generate proof of work, a computer has to solve a challenge. The challenge is a computationally heavy problem which is hard to solve, but the solution is easy to verify. When a computer on a proof of work based network finds a solution, it publishes it along with the transactions that the computer has been observing while cracking the problem. The owner of this computer collects the transaction fees and a reward for generating a block. The entire process is called mining. Mining is very energy consuming, and the amount of energy needed is constantly increasing, which can lead to unsound competition.
PROOF OF STAKE AND MINTING
Proof of stake is a novel approach to block generation. IOHK scientists led by Prof. Aggelos Kiayias have designed the first provably secure proof of stake algorithm called Ouroboros. Ouroboros lies at the heart of Cardano SL. Research team has published a white paper that is a worthy read for anyone with a background in cryptocurrency theory. The core idea of proof of stake is that instead of wasting electricity on cracking computationally heavy problems, a node is selected to mint a new block, with a probability proportional to the amount of coins this node has. If a node has positive (> 0) stake, it is called a stakeholder. If a node eventually becomes chosen to mint a block, it is called a slot leader. You can read more about this process in Proof of Stake in Cardano SL.
BEYOND SETTLEMENT LAYER
Cardano SL is called “Layer” for a reason. It is the first component of the Cardano Platform. Eventually, it will be expanded with a Control Layer, serving as a trusted computation framework to evaluate a special kind of proofs to ensure that a certain computation was carried out correctly. In gaming and gambling, such systems are used for verifying honesty of random number generation and game outcomes. Accompanied with side chains, it will make possible to accomplish such tasks as provably fair distribution of winnings in games. But the application of Control Layer lies well beyond gaming and gambling. Identity management, credit system and more will be a part of Cardano Platform. We are also aiming to evolve Daedalus, the Cardano SL wallet application, into a universal cryptocurrency wallet featuring automated cryptocurrency trading and cryptocurrency-to-fiat transactions.
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