Blockchain and DLT

What makes Cardano blockchain unique?

Cardano is a promising smart contracts development platform that is built on a Proof-of-Stake blockchain protocol. The platform was launched in 2017 by its founder, Charles Hoskinson, who is also the co-founder of Ethereum. 

ADA is the native digital currency of the Cardano blockchain used to pay smart contracts developers and other participants on the blockchain network. As such, its value is tied to the participants’ activities on the platform. As more developers build solutions on the platform, the demand and value of the ADA coin increases. Besides acting as an asset, ADA is also used as a medium of transferring and receiving funds instantly at an affordable fee. Since the platform was launched, Cardano’s ADA crypto has seen an increase in the value of up to 1,520%, with a current market cap of over $3 billion. 


What’s Unique about Cardano blockchain 

There are two main attributes of Cardano’s blockchain that sets it apart from the rest of the blockchain networks. First is its academic and mathematical framework, which is committed to maintaining a provably secure blockchain that is less prone to security attacks. 

Building on its academic approach, Cardano blockchain also aims to solve the scalability and interoperability problems facing the blockchain ecosystem. Additionally, the platform seeks to offer financial services without thwarting global regulators, which isn’t the case with other competing blockchain networks. 

Given its ambitious objectives, Cardano describes itself as the third generation blockchain. 

Essentially, this means that the platform is improving on the shortcomings of the previous blockchain generations. Let’s look at each of the two generations for a better understanding: 

i. First blockchain generation

The first blockchain generation started with the conception of Bitcoin. At this time, Proof-of-Work was the only known algorithm that facilitated the mining of new cryptos – in this case, Bitcoin. However, with time the protocol’s underlying issue, scalability, became apparent as Bitcoin transactions increased. This gave birth to the second Bitcoin generation.

ii. Second blockchain generation

The scalability problem resulted in slow Bitcoin transaction speed, which the second blockchain generation managed to solve through the introduction of the Ethereum blockchain that is expected to run on the Proof-of-Stake algorithm. Usually, Bitcoin’s block time takes almost 12 minutes while that of Ethereum takes less than 14 seconds. Moreover, Ethereum managed to prove that blockchain technology can be used for more than just cryptocurrency transactions, as evident from the introduction of smart contracts. 

Despite the success, transactions on Ethereum blockchain are relatively slow compared to those of traditional systems such as Visa. Also, the governance systems of the two blockchains proved to be unstable after both Bitcoin and Ethereum cryptos hard forked. It is at this point where Cardano blockchain comes in. 

iii. Third blockchain generation

As a third blockchain generation, Cardano is built as a comprehensive set of tools that allow for greater scalability and interoperability of existing cryptocurrencies and blockchain concepts. Also, unlike other blockchain networks, Cardano doesn’t attempt to replace global regulators. Instead, the platform has placed much emphasis on accommodating financial regulators to increase the widespread adoption of cryptocurrencies. Further, the non-profit foundation that maintains Cardano has partnered with researchers to ensure all development concepts on the platform are of the highest quality. 

Cardano’s Architecture 

Cardano’s blockchain architecture is multifaceted to achieve its three main objectives: increased scalability, interoperability, and sustainability. To start with, the blockchain itself is designed as an open-source project written in a security-focused programming language, Haskell. Unlike other coding languages, Haskell is compiled ‘ahead-of-time,’ making it ideal for high-throughput data processing. 

Besides the secure coding language, Cardano’s blockchain runs on a unique Proof-of-Stake protocol known as Ouroboros. This protocol defines the way nodes reach a consensus on the state of the ledger. Additionally, the Ouroboros protocol facilitates the secure transfer of the native ADA coin while also maintaining the safety of smart contracts on the blockchain. 

How the Ouroboros supports mining of new blocks

Similar to a typical Proof-of-Stake algorithm, the Ouroboros rewards token holders who stake their ADA on the network. From this pool of token holders, block miners are randomly selected using a mathematical model that guarantees all holders have a fair chance of mining a block and receiving the associated reward. 

Once a token holder is selected, they are assigned the role of a ‘slot leader.’ With this role, the leader has the power to publish a new block, which is then validated by the rest of the network participants. After validation, the slot leader receives an ADA token as a reward for mining a new block.

Cardano Layered design

As part of its architecture, Cardano’s blockchain network consists of two main layers – the Cardano settlement layer (CSL) and Cardano computational layer (CCL). The (CSL) is the primary layer that manages the staking of ADA cryptocurrency under the Proof-of-Stake algorithm. It also facilitates the transfer of ADA from one wallet to another and enables participants to create their assets. Just the same way, Ethereum blockchain actors can create ERC-20 tokens. 

The CCL, on the other hand, allows users to create rules for evaluating transactions before they pass to the CSL. This gives Cardano the ability to compute and evaluate transaction settlements on different layers, unlike in Ethereum blockchain, where it all happens on the same network. 

Solving inherent Blockchain problems

Having understood Cardano’s architecture, here’s how the integrated design works to solve the three main blockchain challenges; 

1. Scalability

As mentioned earlier, Cardano runs on the Proof-of-Stake algorithm, Ouroboros, which, unlike Proof-of-Work, doesn’t require all nodes to keep a copy of the entire blockchain. This approach enables faster transaction processing while reducing the energy cost needed to publish a new block. Moreover, the Cardano blockchain can split into slots, which are basically sub-blockchains. These slots are known as epochs from which the mining node is given the aforementioned ‘slot leader’ role.  

A single epoch can be partitioned infinitely, meaning that Cardano blockchain is, in theory, infinitely scalable. As such, it is possible to run as many transactions as needed without hitting a snag. 

2. Interoperability

Interoperability, in the blockchain’s context, refers to the ability of different blockchain networks to exchange data. With this in mind, Cardano aims to establish interoperability between blockchains and legacy systems of the financial industry. Think of transferring money from Ethereum ICOs, for instance, to a bank account via SWIFT. 

To achieve an ecosystem of connected networks, Cardano is exploring the concept of side chains. The concept works by linking both off-chain and on-chain networks via a two-way peg. Cardano is also exploring ways for individuals and financial institutions to selectively broadcast transactions metadata in compliance with Know Your Customer (KYC) and anti-money laundering (AML) policies. 

3. Sustainability

Cardano’s sustainability seeks to promote the future development of the blockchain network by ensuring the project is under sound management and has access to sufficient funds. 

While ICOs and patronage are the most common models for raising funds and managing a blockchain project, they pose a risk of centralization. This risk arises when a well-endowed company invests a huge amount of grant to a project and thus has authoritarian control over the development of a project. For this reason, Cardano has adopted a long-term financing model similar to the one created by Dash cryptocurrency. 

In this model, there is an entity known as the Treasury that holds grants. Every time a new block is added to the chain, part of that block’s reward goes to this entity – the Treasury. 

So, when developers want to contribute to the Cardano blockchain’s growth, they’re required to submit their proposal to the Treasury to ask them for grants. The Cardano ecosystem stakeholders will then vote on the viability of the proposal and decide whether to give the developer grants. If approved, the developer will be awarded the grant for development. 

Using this financing model, the control and development of the entire Cardano blockchain is left at the hands of the participants, thereby eliminating bureaucracy. This also goes a long way in preventing forking since changes/development of the network are implemented if only a majority of the voters approve it. 


Cardano can be described as a futuristic project committed to driving mass adoption of blockchain and cryptocurrencies. Its academic and research-driven approach to blockchain advancement is indeed a noble and worthy cause to solve the problems hindering blockchain adoption. However, the project’s feasibility remains theoretical; therefore, its success depends largely on the execution of the development plans. 


By Edith M.

Edith is an investment writer, trader, and personal finance coach specializing in investments advice around the fintech niche. Her fields of expertise include stocks, commodities, forex, indices, bonds, and cryptocurrency investments.

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