How do I invest in Cardano Blockchain

Blockchain Cardano: what's behind the Ethereum rival?

More and more people are interested in the topic of blockchain and cryptocurrencies. In the meantime, more than 800 billion US dollars have been invested in more than 1,300 different crypto currencies - and the trend is rising.

The relatively new Cardano blockchain project recently attracted a lot of attention. The value of the associated cryptocurrency (token) ADA shot up by more than 1,000% in the last 2 months. With a market capitalization of over US $ 20 billion, Cardano is now one of the top 5 cryptocurrencies.

What is Cardano?

Cardano is considered a third generation blockchain. Cardano sees itself as a programmable blockchain platform with smart contracts that are designed for the development of so-called decentralized applications (Daaps). The associated cryptocurrency is called ADA.

Ex-Ethereum boss Charles Hoskinson and ex-Ethereum employee Jeremy Wood are behind the project. Cardano is taking a scientific approach to bringing the functions of Bitcoin and Ethereum to billions of people.

To achieve this goal, Cardano is supported by three organizations: IOHK, the Cardano Foundation and Emurgo. IOHK in Hong Kong, headed by Hoskinson, is driving the development of the Cardano blockchain. The Cardano Foundation, which is based in Switzerland, takes care of the community and ensures that Cardano is known worldwide. The Japan-based blockchain studio Emurgo helps companies integrate the Cardano blockchain.

What is special about Cardano?

Cardano attaches great importance to security and has therefore decided on the Haskell programming language. This is a language that is suitable for processing complex functions relatively easily.

One of the most important differences between Cardano and other blockchain projects is the way Cardano handles transactions and the overall structure of the blockchain.

Cardano relies on a modular structure so that certain segments or functions of the blockchain can be updated without affecting other areas. Among other things, this is intended to help solve the scaling problems that many other blockchain projects are facing today.

Specifically, this is achieved with Cardano by splitting the platform into two levels (layer): The Cardano Settlement Layer (CSL) is responsible for information about the transaction (user A transfers amount X to user B). The Cardano Control Layer (CCL), on the other hand, is responsible for the smart contract functions. Information about the smart contract is stored here. The digital identity can also be managed via this level.

By splitting it into two separate layers, Cardano not only achieves more flexibility and greater scalability, but also more privacy, as no metadata of the first level is required.

Otherwise Cardano relies on a special Delegated Proof of Stake (PoS) protocol called Ouroboros. According to Cardano, it is currently the only PoS protocol with mathematical security. Proof of Stake (POS) means that transactions are not confirmed by mining, but by other wallets with the crypto currency ADA.

This means: The number of tokens in the wallet are decisive for the probability of finding a block. In practice, the network uses a random principle to select a token holder with coins in the wallet, which then acts as a node (network computer) and confirms the transaction or the block (slot leader).

A new slot leader is then elected. All rewards (distributions) are collected in a pool and distributed to the different slot leaders every 20 minutes. The more ADA tokens the investor holds in his wallet (staking), the greater the chance that the network will use this wallet as a slot leader and thus to confirm a block.

However, investors should note that the Cardano blockchain is still in the early phase of development. Staking is not currently possible, this should only be possible with the Shelley update in the second quarter of 2018.

Conclusion: Cardano is an interesting concept that investors should keep watching

Cardano sees itself as a third generation blockchain that attaches great importance to security. In doing so, Cardano is trying to win the trust of companies, node operators and investors alike.

However, investors should note that Cardano is still in the very early stages of development. It is not yet possible to assess whether Cardano will be able to hold its own against other smart contract platforms such as Ethereum, NEO or EOS.

In general, investments in cryptocurrencies are always associated with a high level of risk - high price fluctuations of 10 to 20 percent are the order of the day. Total losses are also possible if the blockchain project is discontinued and the associated cryptocurrency is no longer traded on the stock exchange (delisting).

The hype surrounding cryptocurrencies is blooming - 5 curious cryptocurrencies you probably better not invest in. > read more

© Verlag für die Deutsche Wirtschaft AG, all rights reserved