Ethereum, Cardano & Polkadot: Part 02
The key to deciding which cryptocurrency to invest in the longterm is to understand the stability and the roadmap of the project. In this post, I explore Cardano’s (ADA) roadmap. Over the past week, ADA and Polkadot (DOT) have been swapping places with BNB in market cap, which should give an indication of their strength compared to the many Altcoins out there.
In the last article we looked at the evolution of the 3 stages of the blockchain ecosystem, and will now analyse ADAs Scalability, Interoperability and Sustainability as a third generation blockchain project.
Cardano identifies 3 areas in their Scalability road map; transactions, network and data. Transaction speeds play a key role in the acceptance of blockchain technology into the mainstream. At present, Bitcoin has 4.6 transactions per second (TPS) and Ethereum 30 TPS compared to Visa’s 1,700. Cardano addresses the TPS issues with “Ouroboros”, the first blockchain protocol based on proof of stake with rigorous security guarantees. They are confident of managing up to 1 million TPS dwarfing the capability of even the centralised financial systems. Ouroboros also addresses the quantum computing threat to blockchain tech (ability for a quantum computer to get a 51% consensus in the blockchain), an argument which taints most first generation Crypto currencies. This efficient proof of stake also significantly lowers the per hour management cost of ADA compared to Bitcoin, which stands at U$ 3,000,000 per hour (calculated at the present market value of BTC which is U$ 50,000). The second factor in scalability is, network. As the number of transactions keep growing, it is inefficient to have a homogenous network topology with every node relaying every message. Cardano achieves efficiencies by RINA (Recursive InterNetwork Architecture), a principle by John Day which will help to maintain network efficiencies when transactions increase exponentially in the future. The third factor is data storage, due to blockchain information lasting forever. This drives the data storage requirement exponentially with increased adoption, which isn’t sustainable for consumer devices which run the blockchain. The fourth phase, Basho will be addressing this with the introduction of side chains.
The next focus is Interoperability. As the players in the eco system increase such as Bitcoin, Ethereum, Ripple as well as the legacy banking systems, many projects are conceived to facilitate the communication between these systems. The key players handling this at present are centralised exchanges. These exchanges, as we know, come with their own issues of security, uptimes and regulatory limitations, which isn’t ideal for the promise of decentralisation. This is made further complex when the transactions reach the fiat world, where banks require data regarding transactions to ensure compliance with regulations. ADA aims to provide this service by acting as the glue facilitating transactions between all eco systems, becoming a game changer. This will open the blockchain eco system to operate seamlessly with the legacy banking systems, without the compromise of decentralisation.
The final aspect is that of Sustainability, which is beyond doubt, the most important factor to the success of a blockchain project. Project funding carried through investments bringing patriarchal management, and the recent criticism of the Binance Smart Chain are good examples of this. InItial Coin Offerings (ICO) is an alternative method for funds, though the funding raised isn’t infinite. ADA addresses this by creating a treasury, and banking a portion of staking rewards. Unlike Bitcoin, which rewards the miner 100%, this project will adopt a similar system to DASH, which banks 10% of the rewards to a treasury. Projects can then be funded by the treasury, based on voting by the network. This liquid democracy model prevents the need to launch ICOs with the sole intention of raising capital. With the growth of any project, forks are inevitable. Disagreements without governance can result in projects facing similar situations, such as Bitcoin cash and Ethereum classic. ADA’s constitution which governs soft forks and hard forks addresses this too. Its founder Charles Hoskinson, certainly seems to have learned from the inefficiencies of Bitcoin, and the disagreements in Ethereum, emerging with an impressive road map. At the present price of $1.16, ADA deems worthy of some attention.
Cardano blockchain successfully launched its Mary hard fork upgrade to its mainnet this week. The upgrade, which introduces user-defined native tokens to Cardano, allows it to perform the functions of a multi-asset (MA) blockchain. The hard fork, named after Frankenstein author Mary Shelley, continues Cardano’s rollout of its Goguen smart contract era, named after American computer scientist Joseph Goguen. If you’ve noticed, Charles Hoskinson is a literature buff too.
Part 03 will focus on the PolkaDot project
