Cardano: an overview of a project with potentially unlimited scalability

Over the past few years, Cardano (ADA) became one of the fastest-growing blockchain platforms in the entire cryptocurrency industry. ADA is one of the top-ten cryptocurrencies by market capitalization and has already exceeded investors’ expectations numerous times since its launch in 2015. The project’s ecosystem is rapidly evolving on the path toward a fully operational blockchain platform. Just recently, its developers announced the release of an update that includes smart contracts and tools which will integrate ADA into decentralized finance (DeFi) space.

Cardano’s major advancements lie in the unique mathematical principles at the base of its consensus mechanism and multi-level blockchain architecture which sets it apart from other competing blockchains. Another reason for the cryptocurrency’s popularity is that it was created by former Ethereum developers who already have significant experience developing blockchain networks. Today we will look at the key features of the platform, its ecosystem, and the project’s future updates.

What is Cardano?

ADA is positioned as the first, third-generation cryptocurrency and aims to solve the scalability and infrastructure problems inherent to Bitcoin, a first-generation cryptocurrency. The first problem has to do with congested networks and high fees caused by increasing transaction volumes. Ouroboros — the algorithm at the heart of Cardano — was proposed as a potential solution to the aforementioned problem.

Ouroboros uses a Proof-of-Stake (PoS) approach to save energy costs and speed up transaction processing. Instead of having copies of the entire blockchain on each node on the network (as Bitcoin protocol does), Cardano’s blockchain optimizes nodes on the network by assigning “leaders” responsible for verifying and validating transactions from a set of nodes. Subsequently, the leader node sends transactions to the rest of the network to confirm the transactions are indeed valid.

Cardano aims to allow for crosschain transactions through sidechains that conduct transfers between the parties outside of the Cardano blockchain. The project is also developing ways to allow institutions and individuals to selectively disclose metadata associated with transactions and identities to allow cryptocurrencies to be used for trading and daily transactions.

Cardano has ambitious plans and intends to move from the settlement level to the management level, which will serve as a robust computing structure for complex applications such as gambling and gaming systems. Other applications are identity management, credit systems and Daedalus, a universal cryptocurrency wallet with automated cryptocurrency trading and crypto-to-fiat conversion capabilities. As mentioned earlier, the non-profit foundation that runs Cardano has an extensive list of partner organizations to improve its algorithms and develop new governance structures. According to Hoskinson, the partnership is mutually beneficial because Cardano’s research projects align academic incentives with the expectations of the cryptocurrency industry.

Project history

Cardano raised additional funds via an initial coin offering (ICO) which lasted from 2015 to 2016, and the company managed to raise more than $62 million in the process. The project was launched in 2017, and amid the bull cycle, ADA’s capitalization surpassed the $500 million mark in just a few weeks. By early December 2017, the coin’s capitalization had grown to $3.4 billion, with ADA ranked 9th on Coinmarketcap.

The development of the project rests on the shoulders of three organizations:

  • Cardano Foundation — an oversight and educational body responsible for standardizing and protecting the protocol, public and government relations, and strategic partnerships
  • Input-Output Hong Kong (IOHK) — a research and development company responsible for improving and maintaining the Cardano ecosystem
  • Emurgo — a for-profit organization that funds innovative Cardano-based applications

In addition to Hoskinson and Wood, there are several other notable figures involved in the project: Professor Agelos Kiyayas of the University of Edinburgh, Philip Wadler, one of the authors of the Haskell, Java and XQuery programming languages, and computer algorithm design and analysis expert Elias Koutsoupias.

Cardano’s blockchain architecture

The CCL is responsible for the computational needs of the blockchain, enabling the execution of smart contracts. It operates separately from the settlement layer to provide flexibility in the event of ecosystem changes or key system upgrades. It’s a standalone protocol that provides greater storage flexibility and an access model that allows users to create customized rules when verifying transactions.

Cardano’s consensus algorithm called Ouroboros is an improved version of Proof-of-Stake. While in PoS the right to produce blocks and validate transactions belongs to validators who lock a certain number of their coins on the blockchain, Ouroboros arranges these processes in a slightly different manner:

  1. First, the network selects a few random nodes, able to mine new blocks. These nodes are called slot leaders.
  2. The blockchain is then divided into slots, each of which is called an epoch.
  3. Slot leaders have the ability to mine their specific epoch or its subsection. Any member of the network who helps mine an epoch is rewarded for their contribution.
  4. An epoch can be divided into its component parts indefinitely. This means that the Cardano blockchain is theoretically infinitely scalable, allowing as many transactions as necessary to run without any bandwidth limitations.

Transaction blocks generated by slot leaders are additionally verified by input endorsers, who represent another group of network participants. They are also selected based on the number of ADA tokens they’ve locked. The Ouroboros mining process eliminates the need for the energy-intensive Proof-of-Work algorithm, which has recently become the target of many Bitcoin and Ethereum critics.

Cardano & DeFi

A recent IOHK blog post noted that Plutus would provide support for its own Cardano-based smart contracts language. To understand the main features of the platform, three key concepts need to be revealed: advanced UTXOs, Plutus Core (the onchain component of Plutus) and the Plutus Application Framework (PAF). PAF is the standalone component of the platform that enables interaction with smart contracts.

EUTXO extends the UTXO (Unspent Transaction Outputs, first implemented in Bitcoin) model by allowing output addresses to contain complex logic to decide which transactions can unlock funds. In addition, all outputs contain user data. This allows for the validity of the transaction to be verified offline before the transaction is sent to the blockchain.

Cardano Ecosystem


Metaps Plus


The developers of the app launched the first public REVU token sale on May 18, and the startup has already received investments from IOHK, Beyondo, Manigo, Crobitcoin, and NodeFactory. According to their development roadmap for the project, the public token sale will be the first step toward full deployment in Q3 and Q4 2021.



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