Right now there are countless of cryptocurrencies
that you can buy.
But recently, we’ve seen something called
Cardano getting a lot traction.
But why is Cardano so popular all of a sudden?
What makes it so special compared to other
Well let’s find out..
Cardano is a new cryptocurrency platform that
was launched in September 2017 after more
than 2 years of development.
It’s rather different then other cryptocurrency
projects because it is built around peer reviewed
So instead of writing a whitepaper and implementing
it straight to code, the Cardano team actually
makes sure that experts from around the world
read their papers, improve them and agree
with the outcome.
This is a very different way of working!
Cardano claims to be the third generation
The first generation was Bitcoin and is essentially
It’s used to transfer and store virtual
money but is plagued with scalability issue’s.
The second generation was started with Ethereum
and brought us 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
Right now Cardano and IOTA are both considered
to be third generation blockchains.
Cardano wants to solve three big pain points
of the current generation: scalability, interoperability
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 a cryptocurrency to become
a global payment system, you need to be able
to handle a lot of transactions per second.
Cardano’s Ouroboros 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.
To make this all work, Cardano divides the
time into epochs.
An epoch 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 puts them inside a block.
If a 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 increase the amount of slots
per epoch and they could run multiple epochs
The next scalability problem is network bandwidth.
Blockchains are stored in a P2P 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 node would need a lot of bandwidth to
continuously download them all, not very scalable!
Instead, Cardano wants to split up the network
into subnetworks by using a technique called
RINA (Recursive InterNetwork Architecture).
Each node will be a part of a specific subnetwork
and can communicate with other networks if
Much like the TCP/IP protocol for the internet.
The final aspect of scalability is data storage.
Blockchains store all transactions that have
But how do we handle this ever growing set
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 number two is interoperability.
This again consists out of two problems.
First of all: there are many cryptocurrencies
out there, but they don’t work together.
And secondly: banks and governments shy away
So the Cardano team assumes that in the future
we won’t have 1 coin to rule them all.
Instead, multiple different cryptocurrencies
will exists side by side, each with it’s
own protocol and rules.
Right now they don’t talk to each other.
You can’t for example transform you 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
This would mean seamlessly moving assets across
Then there is also a problem with governments
They shy away from cryptocurrencies because
they don’t adhere to regular banking laws.
It’s hard for them to trust a transaction
in the crypto world because they don’t have
any metadata about that transaction.
They like to know who made the transaction
and for what reason.
However this is also very sensitive information.
So the Cardano projects wants to allow people
to attach metadata to a transaction if they
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 then use to fully start
But what happens if – after a couple of years
– this money runs out?
How will they make sure that 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
Cardano intends to solve this problem by creating
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 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 what they
want to change and how much money they need
The community can then vote on the idea’s
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
Over time, the treasury model will keep Cardano
sustainable by providing a continuous stream
of money that can be used to continue to do
research and to improve the system.
So far we talked about all the things that
the Cardano project wants to achieve.
And as you can see it’s quite ambitious
and maybe a bit risky.
They’re trying to tackle many challenging
Take the treasury model for instance: it depends
on a fair voting system to prevent people
from seizing control.
The Cardano project is very young and has
a long way to go.
But their way of working is very different
from other cryptocurrencies.
So Cardano might be the project that finally
solves some long standing and fundamental
Time will tell!
So that concludes this video.
I hope you learned a lot and if you did, make
sure to subscribe to my channel and like this
Thank you very much for watching and I’ll
see you in the next one!