The smart contract wars are in full swing! Investors are scrambling wondering if they should buy Cardano, buy Avalanche or buy Luna. There are so many good projects to choose from but today we will take a closer look at Cardano which promises to be one of the most secure and decentralized smart contract platforms out there.
In today’s crypto guide we take you through the important aspects of Cardano trading and highlight what makes this project special. Let’s see what Cardano is all about!
The Cardano Approach
Most projects in the cryptocurrency space take a build-fast, break-things and fix-later approach. Being first to market is the primary objective rather than correctness. In the fast moving world of cryptocurrency custody solutions this approach does make sense, however is this smart in the long run? We constantly see exploits ranging in the tens of millions of dollars in stolen crypto, there must be a better way. Should I buy Cardano? If you value a project that is methodical and that applies academic rigor and a peer review processes to its development then this may be the project for you.
Founder Charles Hoskinson is a somewhat polarizing figure in the digital currency community for his initial association with Ethereum but his slow and steady approach may lead Cardano to victory in the end. He has assembled a small army of researchers and developers who created a whole new programming language called Plutus to improve correctness of smart contracts. Hoskinson understands that smart contract protocols are used to transact millions to billions of dollars worth of transactions and to this end security should be paramount. Cardano was designed to be correct the first time and thus its development has been slow compared to some other notable projects such as Solana, people who are unphased by exploits are happy to buy Solana because it has faster transactions and the project is backed by serious venture capital. If you buy Cardano you are buying into the idea that quality takes time and careful planning, decentralization should not be compromised for the sake of higher throughput, this is Cardano’s philosophy and approach.
Please note that Cardano’s native token is called ‘Ada’ but for the sake of simplicity we use the name of the network ‘Cardano’ to represent the name of the network and the native asset or token.
Solving the blockchain trilemma
First generation
The first generation of cryptocurrencies were tokens that could be traded on a secure, borderless and immutable network. This solved a major problem previous forms of internet money could not, which was the double spend problem. People still invest with their blockchain smart-card in these first generation cryptocurrencies such as Bitcoin and people buy Ripple, despite their relatively limited capabilities. Some believe their simplicity makes them less vulnerable to exploits but there have been major advancements in blockchain technology since the development of Bitcoin.
Second generation
Ethereum introduced the second generation of cryptocurrencies which was understood to be programmable money. You could now create smart contracts which were basically instructions that could be added to money that would automatically execute once certain conditions were met. This enabled the invention of decentralized finance applications such as yield farming decentralized exchanges, NFTs and metaverse projects.
The problem with second generation digital currency however is that it could not solve the blockchain trilemma. The blockchain trilemma is the problem of simultaneously achieving security, scalability and decentralization with a blockchain. Ethereum was secure and decentralized but could not scale to meet the demand, consequently users now have to pay somewhere between $50 to $1000 on gas fees to execute basic transactions depending on how congested the network is. Using this technology is too expensive for the average Joe. Third generation blockchains are distinguished from second generation blockchains by solving the trilemma.
Third generation
What is Cardano? Cardano is a third generation proof-of-stake blockchain technology, which is a programmable digital asset that is secure, decentralized and can theoretically scale to millions and ultimately billions of users. In its current form Cardano is decentralized and secure but has yet to reach the throughput that would secure its status as third generation blockchain. Cardano is now in the scalability era of its roadmap which means its throughput should increase greatly in the coming months which would finally see Cardano on par with its competitors such as Avalanche and Solana in terms of speed. Let’s look at how does Cardano work to solve the blockchain trilemma
Security
People who buy Cardano often speak of its great security, but how does it achieve this? Cardano smart contracts are built using a smart contract language called Plutus which has Haskell as its foundation. This is a functional programming language, which was designed to help developers minimize mistakes that can result in exploits. This is not a panacea, Cardano too will experience exploits as it is an open platform and bad programmers will inevitably make mistakes as happens on all platforms. Seed phrase security could help in avoiding these exploits. Cardano is building a dApp store which is comparable to the iPhone App store but for Cardano decentralized applications which have gone through an auditing process in an attempt to protect users. Cardano’s decentralized nature and proof-of-stake consensus mechanism further contribute to its security, but deserves its own section. If you are interested in a blockchain that prioritizes security it is probably not a bad idea to buy Cardano especially if it’s coupled with a cryptocurrency custody solution.
Decentralization
How decentralized is Cardano? Its consensus mechanism is proof-of-stake, this differs from proof-of-work used by Bitcoin and Ethereum. The issue with proof-of-work is that it is very energy intensive and requires a large amount of computing power to mine, therefore a small group of mining companies basically control the majority of mining which is not ideal for decentralization. Cardano and its proof-of-stake protocol works very differently and uses over a hundred times less energy than Ethereum to secure the network. Cardano currently has over 3000 stake pools most of which are single pool operators, meaning there are many individuals that are securing the network making it very decentralized to prevent loss of private key holders.
Scalability
Cardano’s base protocol will never be as fast as Solana or Algorand because it prioritizes security. Ways in which to increase throughput such as increasing block size or alternative forms data storage techniques jeopardize security. People buy Cardano because they believe it is secure and decentralized and thus these solutions are insufficient. Cardano trading speed for security on the base layer is a good thing, because scalability can be achieved on a layer 2 solution. Cardano’s base layer will already be an order of magnitude faster and cheaper than Ethereum but with layer 2 scaling and what are called isomorphic state channels or HYDRA, Cardano can theoretically reach hundreds of thousands of transactions per second for certain functions which puts even the fastest chain Solana to shame. The coming months will reveal of this is all talk and if Cardano can actually walk the walk. The question one should be asking is should I buy Cardano now before it has reached its final form or should I buy Cardano once it has achieved all that it has promised?
How can I buy Cardano?
If you wish to invest in Cardano, you can achieve this by creating an account at a centralized cryptocurrency exchange. There are multiple platforms that support Cardano trading and if cryptocurrencies are legal in your region then you should have little to no trouble finding an exchange that allows you to buy Cardano. In this section we will help you to find the best place for Cardano trading and take you through the process of setting up an account.
In order to set up an account and start Cardano trading first you must find an exchange on which you can actually buy Cardano as well as a hot wallet crypto option. The easiest way to do this is by going to Coinmarketcap or Coingecko, these are popular websites that host all kinds of data and information on cryptocurrencies, most importantly for our purposes they show where to go for Cardano trading. On the home page you simply click on Cardano, it is usually among the top 10 cryptocurrencies by market capitalization, so you should be able to easily identify it. This will take you to a page with Cardano’s price chart. On this page look for a tab that is called ‘Markets’, if you click on this tab it will show you all the exchanges where you can buy Cardano.
Centralized exchanges such as Binance, Coinbase, Kraken and KuCoin are the most popular places to go for Cardano trading and generally require personal information such as a picture of your passport or ID and your email address for KYC (know your customer) and AML (anti-money-laundering) purposes. Once you have provided this information you can connect your bank account and deposit your local currency and use it to buy a stablecoin like USDC or USDT. Stablecoins cryptocurrencies that are pegged to the dollar and have trading pairs to nearly all cryptocurrencies, you will then trade your stablecoins (or dollars) for Cardano. Remember Cardano’s native token is called Ada, so you want to trade your stablecoins for Ada. That’s all there is to it! Now you know how to invest in Cardano!
Cardano’s Game Plan
Another thing that sets Cardano apart from its competitors is that it has a very clear strategy to get mainstream adoption and this plan has already been set in motion. Cardano’s plan has three basic components. Let’s look at each in turn.
Identity System
Cardano has a native application built into the protocol called Atala Prism. This application is an identity solution. Hoskinson realized that in order for the legacy financial system and the new blockchain paradigm to interoperate, an identity solution is essential. Financial institutions must establish a root of trust and for that some proof identity is necessary, Atala Prism was designed for this express purpose. If you want to create a bank account, take out a loan, establish a credit score, etc. you need to be able to prove that you are who you say you are. Cardano has created a native identity solution that will enable you to embed this information into your crypto wallet.
Cardano is in the process of rolling out Atala Prism to 5 million Ethiopian students who will use this identity solution to prove their academic record; false diplomas are a common issue for employers in Ethiopia. The hope is to ultimately extend this program to all students throughout Africa. This identity solution is powerful because it preemptively solves potential regulatory concerns regarding KYC and AML in developed countries and simultaneously provides an identity solution to millions in Africa that may not have previously had access to such services. This connects those in developed and developing countries through one powerful financial infrastructure and links to the next important part of Cardano’s plan -banking the unbanked.
Banking the Unbanked
As mentioned above, the Atala Prism identity solution is onboarding millions of African students to the Cardano ecosystem and providing them with digital identity documentation. In the developed world, people have access to financial services and thus there exists an inertia that prevents people from adopting new, superior technologies. In developing regions such as Africa, there are tens to hundreds of millions of people that do not have access to financial services and would gladly adopt the disruptive power of decentralized finance if given the opportunity. Cardano is solving three of the primary challenges that are preventing people in developing nations from accessing financial services.
The first is identity documentation through Atala Prism, which is needed to establish accountability, transparency and trust in financial engagements such as loans. The second connectivity through World Mobile, a project building on Cardano that provides community owned broadband access to poor African regions. The third is a financial pipeline to capital. One of the visions of founder Charles Hoskinson is to create a program on Cardano for micro financing where people from developing countries can provide loans to farmers and entrepreneurs that should be paid back with interest over an agreed period of time. This cuts out banks as the intermediary and allows for instant, near feeless, borderless capital flows. If you buy Cardano you are investing in the protocol that is working towards this powerful vision.
Absorb the Competition
There is no doubt that Ethereum’s head start in the smart contract race has seen them amassing network effects that will not easily be outdone. Cardano realizes that most smart contract developers use the Solidity smart contract programming language and most are not familiar with Cardano’s native Plutus. In order to attract the best developer talent, Milkomeda has created an Ethereum virtual machine (EVM) that can port tokens from the Ethereum ecosystem to a Cardano hot wallet crypto service. This means any tokens that currently exist on the Ethereum blockchain can benefit from Cardano’s cheaper fees, superior security and scalability without having to wait for Ethereum’s scaling solution which may only arrive in 2023. In this manner Cardano can absorb much of the value that is locked in the Ethereum blockchain.
Some fair criticism
Cardano does a lot right, but you cannot answer the question should I buy Cardano without recognizing its shortcomings. its commitment to its long term vision is commendable, but its slow methodical process has seen other projects race ahead of it. In 2019 Cardano was virtually the top dog in the Eth-killer conversation but today Cardano must contend with the likes of Avalanche, Algorand, Solana and Luna, all of which have compelling sales pitches.
Cardano is currently in its scaling phase; it must prove itself in this regard while maintaining decentralization if it wishes to become a dominant blockchain. While throughput is at its current pace, alternative blockchains are looking like the superior infrastructure for general purpose. The developer tooling also seems to be lacking, making it hard for developers to quickly innovate on the Cardano blockchain. This issue will undoubtedly be resolved in time, but will it be too late by that point?
Conclusion
In this article we highlighted all the reasons investors are so excited about Cardano. We believe it is one of the most promising smart contract platforms out there although it still has to prove that it can scale to meet the demand of tens of millions of users. Their platform coupled with our blockchain smart-card will help anyone prevent loss of private keys.
If you enjoyed our article, feel free to check out our other content on crypto trading and the latest news in the blockchain space. Remember to do your own research before investing in cryptocurrency. Trade wisely, friends!
Cardano Trading FAQs
How can I buy Cardano?
The easiest way to buy Cardano is to find a centralized exchange that enables Cardano trading. You can find this information on Coinmarketcap or Coingecko by clicking on Cardano and the the markets tab. You will have to setup an account which we describe in greater detail in our Vaultavo crypto trading guide.
How to keep my Cardano safe?
Vaultavo is a company dedicated to providing the best in digital asset security. Our first recommendation is to remove your crypto assets from centralized exchanges which are vulnerable to exploits. We suggest keeping your crypto in cold storage and ideally our industry leading Vaultavo Biometric Smart Card to optimize security and convenience.
What is the difference between Cardano and Ada?
This is a very important distinction to make! When you want to buy Cardano, you will find while crypto trading that the ticker for Cardano is actually called ADA. Cardano is the name of the blockchain or network whereas ADA is the name of the native currency that resides on the Cardano blockchain. You technically cannot invest in Cardano, only in ADA.