Cardano – a Third Generation Blockchain


Cardano (ADA) is known as a third-generation blockchain. Despite still being in the development stage, it is highly regarded and has seen considerable growth. It has a unique approach in the way it is designed and implemented, making it the perfect case study for a third-generation blockchain.

What is a third-generation blockchain?

Bitcoin is an example of a first-generation blockchain. It is designed solely as a means to transfer its token, BTC, on the Bitcoin blockchain. Ethereum is an example of a second generation blockchain. In the Ethereum ecosystem, developers can create dApps and execute smart code contracts, with potentially limitless use cases.

Cardano, Tron, and Eos are third-generation blockchains and are much more recent releases. Third-generation blockchains aim to do everything that first- and second-generation blockchains can do, and more, without any of the scalability or governance issues.

However, a third-generation blockchain is supposed to have near infinite scalability, zero fees, no energy consumption, near instant transactions, and be purely decentralized. At present, there is no such thing as a third-level blockchain in terms of functionality, though teams are working on it.

How is Cardano different?

Cardano has a number of features that set it apart from other blockchains. It is the first blockchain that is designed purely from academic standards by engineers and researchers. Even the code itself is actually peer reviewed, a model that is used in the scientific literature industry.

Cardano uses a proof of stake (POS) protocol, which is generally regarded as more energy efficient. But Cardano uses an Ouroboros POS protocol, which is allegedly the only POS protocol with mathematically proven security. This is important given the increasing number of attacks on cryptocurrency networks.

ADA token holders can vote for upgrades and modifications to the network. This on-chain governance system reduces the risk of forks which are so prevalent in other cryptocurrency networks. Other networks have off-chain governance systems, such as the dedication of computing power to determine where the network is going to go. New Cardano implementations are funded by the treasury system, which receives 25% of the block rewards.

Cardano is divided into two layers. The Cardano Settlement Layer (CSL) is responsible for the transfer of value and balance accounting in the ADA cryptocurrency. The Cardano Control Layer (CCL) is responsible for smart contracts and regulatory control. This is key, as the network is designed with regulation in mind. The separation between the two is held to enhance privacy. The CCL is often likened to the ‘terms and conditions’ of the CSL transaction. Other blockchains with only one layer need to add third-party solutions and other layers to achieve the same level of functionality.

Cardano competitors

Cardano has two main third-generation blockchain competitors – Tron and Eos. However, Tron is known for questionable hype and marketing tactics, as well as blatantly copying code from Ethereum. There are also many concerns about its inherent security. Eos has had severe governance issues, despite being ranked very highly by all Chinese government rankings and Weiss cryptocurrency ratings. Cardano has not had these PR issues and is more ‘prestigious’ in many respects.

Cardano is a complete ecosystem that has been designed specifically to deal with the issues that first and second generation blockchains are encountering, such as the addition of third-party solutions and layers such as the Lightning and Raiden Networks to resolve scalability issues. Additionally, the way modifications and upgrades are voted on is far superior to other blockchains.

There is little doubt among most experienced blockchain developers that Cardano is one of the most robust and technically advanced DLT networks available. It is definitely the most well thought and structured blockchain.

On the other hand, it is still in the development stage and there is much to be achieved. Meanwhile, the world is moving on with Bitcoin, Ethereum, and Litecoin integration, and there is a lot to be said for establishing a market presence early.

Digital Nomad with an interest in Zen and Blockchain technology.

Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.

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