Cryptocurrency – some love it, some think it’s the bane of financial instruments (if they will even call it that). Either way, crypto isn’t going anywhere but mostly up. Governments, financial institutions, art collectors..you name it, and you will see the beginnings of serious crypto adoption.
When most people hear about cryptocurrency, they nearly always think of the big dog in the room: bitcoin. Bitcoin was a great start, but from a technical perspective it is highly ineffective and overvalued. Bitcoin’s little brother, Ethereum, suffers from similar problems. High gas fees, scalability issues, and requiring lots of power to operate plague Ethereum still today.
If bitcoin is a 1st generation crypto and ethereum 2nd gen, Cardano is our 3rd+ generation crypto currency. The designers of Cardano learned from the mistakes and issues of bitcoin and ethereum and put in place a system that is eco-friendly, scalable, truly decentralized, and cost effective.
So let’s dive in a bit more and see how Cardano, with its ADA coin, solves the Bitcoin and Ethereum early-generation problems.
Proof of Stake
By market cap, Cardano is the largest blockchain implementing Proof of Stake. Earlier gen crypocurrencies / blockchains like Bitcoin use Proof of Work systems. PoW is incredibly inefficient in several ways, not least of which is the fact it takes insane amounts of power (think: trees and dino fuel) to operate.
From a security standpoint, PoS offsets any initiative a miner might have to attack the network since their compensation is tied to their actual stake in the network. We’ll talk about compensation for staking a little later.
One of the reasons Proof of Stake works is because it relies on validators to have ‘stake’ in the system. Depending on a number of variables, but one of which is how much stake a validator has in the system, those validators are chosen to assist in validating the blockchain and transactions. Contrast this to the Proof of Work system wherein priority goes to those who have invested the most in processing power and you begin to see just how centralized previous generation blockchains actually are. If you’re China in a PoW system, you have a leg up on the network. If you own a power plant, and there are those who do in the Bitcoin network, you’ve a major leg up. This should not happen in cryptocurrencies and blockchains, but it does with earlier generations.
This is ironic given that one of the supposed benefits of blockchain technology is decentralization, yet we are only really beginning to see this with newer generations such as Cardano.
It feels like we hear almost daily on news networks and from politicians and many other outlets that we should ‘follow the science’ or ‘believe in science’. Well here’s a place you really _should_ follow the science given that the blockchain itself is based on math and science. To that end, Ouroboros, the consensus protocol used by the Cardano network, was the first PoS protocol that was not only proven to be secure but the first to be entirely informed by scholarly academic research.
Each development phase of Cardano has been and continues to be peer reviewed and uses evidence based methods to achieve each of its milestone. ADA isn’t a meme coin and Cardano isn’t a fluke blockchain, it has a science based pedigree right from the start.
Since one of the biggest advantages of Cardano is the Proof of Stake approach, what is the incentive to stake your ADA with a stake pool? Think of a stake pool as a bank, and just like putting your money in a savings account you get a reward in interest payments, staking with a stake pool rewards you for delegating your coins. Many stake pools will get you a return of 3% or more, which is a lot better than your savings account is going to get you. The coins are there for you to spend at any time and no one can access your wallet, but by staking or delegating you’re contributing to both the stake pool and the network while your coins are delegated.
Everyone gets something out of the deal, and you’re helping the planet to boot!
Looking for a Stake Pool? BBHMM has you Covered!
There are many stake pools to choose from, but I’m partial to one called BBHMM (Blockchain Better Have My Money). Part of the reason I, along with many of our delegators, love BBHMM is because the stake pool operators (those guys that keep the servers running 24×7 for the pool) are top notch, highly experienced, reliable guys. Also I’m one of the operators, so I know what’s what 🙂
If you’re interested in getting started with Cardano, or already have some ADA in your wallet and you’re looking for a new stake pool, please check us out!