Cardano: Ethereum and NEO Killer or Overpriced?

As the first blockchain with peer reviewed tech, Cardano is an ambitious platform. Can it stack up to NEO and Ethereum?
TOKEN: ADA

Cardano has been on the tip of everyone’s tongue since it’s enormous run up earlier this month. Even in the volatile world of cryptocurrency, Cardano’s 2000% increase over three weeks was extraordinary, and the community took notice. It now sits as the 6th largest cryptocurrency market cap at over $10 billion. Yet, before Cardano and its then $700 million market cap suddenly appeared on coinmarketcap.com, most had never heard of the project before. Its sudden appearance and enormous subsequent increase have left the blockchain community scratching their heads and scouring for information.

So like with any new kid on the block, we want to understand what Cardano is, what separates it from other blockchain platforms, and whether it can play centerfield for our neighborhood team…

This article examines Cardano both as a standalone platform, as well as in comparison to Ethereum and NEO. For an analysis of NEO versus Ethereum, you should read this. I understand that EOS and other third generation platforms are also relevant; I will research and write about those later on. Since I have already extensively covered NEO, I will dedicate this article primarily to providing an in-depth analysis of Cardano. I will also compare each unique component to those of NEO and Ethereum. I will quote directly from my past article on some aspects. Let’s begin…

What is Cardano?
Cardano is the, no-crust on his sandwich, kid at school who uses words like “peer-reviewed” and reads “academic journals.” He occasionally gets shoved into his locker and has never been good at sports; but 10 years later he’s driving around a Ferrari and you realized you never should have judged him in the first place.

Cardano, put simply, is a blockchain platform that provides a programmable blockchain and smart contracts for dApp development. But the industry is ripe with strong competition: Ethereum has first mover advantage and a large user base, NEO focuses on a smart economy, ARK has smart bridges and blockchain interoperability; so what makes Cardano special and why can it be a competitive player in the field?

Cardano’s One Liner: Cardano is the industry’s first platform that utilizes academically peer-reviewed open source code.

Definitely don’t want bugs in the code for this airplane’s protocol…
Translation? It means that the Cardano project boasts a network of global researchers and scientists that have contributed to and developed an advanced blockchain protocol. All of Cardano’s protocol technology goes through an extensive peer review process, similar to the process that airplane code might go through. Their conclusion is that code that supports a global economy should have the same rigorous scrutiny as code on which lives depend.

Cardano is known as a 3rd generation blockchain. Bitcoin was the 1st generation. Ethereum was the 2nd. Ethereum led the pack, but because its technology was fundamentally new, the technology was rudimentary. Now, Ethereum must rely on its governance system to upgrade and scale. 3rd generation blockchains, like Cardano, have the advantage of hindsight. They can identify the drawbacks and constraints of previous projects and develop accordingly. This is precisely the path that Cardano took. The project emerged in 2014, not with a whitepaper, but rather with collective research and collaboration, focused on identifying the limitations of present blockchains. They then proceeded to code from the ground up, attempting to address each of those limitations. Each building block was submitted to conferences and experts for review before being added to the larger building.

This peer reviewed process is incredibly important, especially considering that poor coding and development can lead to catastrophic results (think Parity and DAO hacks). How many developers are there in the world who can effectively code a blockchain project? How many developers can code quality projects in an entirely new industry, on entirely new technology? I think that number is certainly less than the 1380 cryptocurrencies posted on coinmarketcap.com. So much focus has been directed towards scam projects; I think a more important focus should be placed on legitimate projects that are just done poorly. Far more people will lose money in this industry to teams and developers who just weren’t very good than to criminal money grabs. So the question must be asked: how do we know a project is good? How do we know the code is kosher? One way, as Ethereum has done and NEO is doing, is through the bumpy, trial and error road of adoption. Cardano’s method of peer review is another.

With this philosophy of methodical and peer reviewed development, Cardano is working towards addressing the problems of 2nd generation blockchains.

More Than Just Cardano
Before we get into what limitations Cardano addresses and what makes the project unique, we should understand who is behind Cardano.

The project is supported by three entities, all serving different purposes within the ecosystem.

The Cardano Foundation
Cardano is supported by a nonprofit company, known as the Cardano Foundation. The foundation serves several purposes, both to Cardano and to the blockchain community as a whole. They work towards promoting Cardano to the greater community, educating about cryptocurrency, and working with governments around regulation. An organization like this is important for the adoption of a blockchain platform; the foundation provides a standard body that can facilitate cooperation and adoption with enterprises and businesses. The Enterprise Ethereum Alliance serves a similar purpose for Ethereum. OnChain, a partner of NEO, while not a nonprofit, also serves to connect public blockchains with governments and businesses. Since blockchain platforms such as NEO, Ethereum, and Cardano are decentralized, these organizations provide a centralized body for businesses to work with. Like the publishing agency for the platform.

To note too, the Cardano Foundation hosts a variety of digestible resources about Cardano. From overviews of the project and the technology to blog updates detailing exactly how the team operates, their exact working schedule, and their release timeline. I have honestly never seen such transparency.

Input Output Hong Kong (IOHK)
IOHK is an engineering company that develops blockchain solutions for academic institutions, corporations, and governments. The company is led by Charles Hoskinson and Jeremy Wood, former CEO and Executive Assistant of Ethereum respectively. IOHK supports Cardano and boasts an extensive research team — 17 accredited individuals. This team has been responsible for the development of Cardano’s technology and digital wallet. IOHK also supports several other blockchain projects, including Ethereum Classic. For the tech minded, the website features all of their peer-reviewed papers.

Also, I recommend you go to the website just to play around with the colorful interface.

Emurgo
Emurgo, a Japanese based company, both assists established businesses with integrating blockchain technology, as well as invests in startup ventures. Emurgo’s connects businesses to the Cardano blockchain.

This delegation of tasks between IOHK, the Cardano Foundation, and Emurgo is interesting. I am supportive of the concept. I can understand how dividing the development and engineering from the marketing and networking might allow for a more efficient system. Each organization serves a different purpose within the ecosystem.

TLDR: Cardano is supported by three organizations. The Cardano Foundation supports the platform by promoting Cardano to the greater community, educating about cryptocurrency, and working with regulation. IOHK is the engineering and development organization behind the Cardano technology. Emurgo works towards integrating the platform with businesses.

What Makes Cardano Special?
As Calvin Harris says, “this is what you came for.”

A platform can have the flashiest website, the most robust development team, and the largest collection of “peer reviewed” papers, but if it’s not accomplishing something new — something revolutionary — then it will die. For in this space, competition is stiff, and everyone is competing against Ethereum, the king of dApps.

Cardano is ambitious, but largely undeveloped. I will explore future features that Cardano will implement, but for now, it’s most important to focus on the foundation. The features and protocols that form the basis for Cardano’s future.

Listed in the order I explore them, I believe the unique aspects of Cardano are: layered technology, proof of stake protocol, coding language, wallet, governance model, and treasury.

Cardano technology is layered like this delicious cake
Layered Technology
With value transfers, there are two sets of information. There is the simple, from, to whom, when, and how much — this is the only information Bitcoin can support. However, as we are aware, in our real world, value transfers are never this simple. Associated with each transaction we can also ask: what are the terms and conditions of the transfer, why was the money transferred, and what were the involved entities? This is known as metadata.

Ethereum, the 2nd generation blockchain, enabled the integration of all of this information. They call the connection between the actual value transfer and the associated metadata smart contracts. Programmable contracts. However, with Ethereum, because there is no separation between accounting and computing, this information is stored together, with no consideration given as to whether the metadata always needs to be included. This is problematic. The more data that is included with each transaction, the more gas it costs, the more difficult it is for the blockchain to store that information, and the more cumbersome it is for nodes to store the history of the blockchain.

Thus, Cardano separates the transfer and the why. They accomplish this by separating the platform into two distinct layers:

The Cardano Settlement Layer (CSL): This layer is responsible for the token economics and the balances of all user accounts. Cardano’s native currency, ADA, is transacted over this layer. In layman terms, this just means that all code relating to accounts and the ADA token exist on this layer.

The Cardano Control Layer (CCL): All the smart contract functions exist on this layer. In addition, regulatory elements like digital identity can be supported by this layer.

The CCL is the control tower of Cardano
The CSL only maintains the actual transaction information — for example: 3 ADA from Wallet A to Wallet B. By including only the simplified transaction information, the CSL can be like a standardized transacting protocol. Most, if not all possible transactions, are preprogrammed. Flexibility and customizability, while useful, can create security holes. However, with simple transactions, Cardano can anticipate and fix those holes from the beginning.