Cardano – the third generation blockchain

Cardano is an open-source blockchain platform that is the pioneer of the third generation of blockchain technology. Cardano was developed by Charles Hoskinson in 2015. Charles is a former member of the ethereum project and left ethereum in 2014 and started Cardano. The stable release of cardano was released on May 13th, 2020. ADA is the crypto token that fuels the Cardano network. It is 7th in terms of market capitalization with a valuation of approximately $40 – $50 Billion. To get some perspective, bitcoin’s market cap is around $1 Trillion and ethereum’s market cap is between $300 – $400 Billion.

What is third-generation blockchain?

The third-generation blockchain or crypto 3.0 is an improvement to the second-generation blockchain. Bitcoin introduced blockchain and is the first generation cryptocurrency. It allows transferring value over the blockchain network. Bitcoin and other first-gen blockchains face scalability issues due to the mining process. For any major changes in the network, the network has to split and create a new cryptocurrency. For example, disagreement between developers led to the splitting of bitcoin into bitcoin and bitcoin cash. Another way of getting an update on the existing network is to install overlay protocol over the network which is a complex process.

Ethereum introduced programming language onto the blockchain and become the second generation blockchain. This allowed the creation of customizable transactions using smart contracts that would execute according to the code and executes automatically. Though ethereum is superior to bitcoin, it also lacks scalability. Ethereum promises to address this scalability issue in ethereum 2.0, but the update has not rolled out yet. Ethereum network cannot scale efficiently to cater to millions and billions of users. The gas price for verifying transactions also increase as the price of ether increase.

Cardano claims to be the third-gen blockchain that addresses scalability, interoperability, and sustainability. It can scale according to the increase in users. Cardano is the first blockchain network that is peer-reviewed by experts and is research-focused. Experts evaluate every aspect of this project and thereby ensuring a high assurance code.

Difference between Cardano, Ethereum, and Bitcoin


The main difference between cardano and other two networks is the mining process. Bitcoin and Ethereum still use Proof of Work (PoW). PoW is high resource-intensive and consumes high computational power. Miners have to compete against each other for block creation and because of this wastage of power increases. Miners get tokens for mining and the only successful miner gets the token.

Cardano implements proof of stake (PoS). To be specific, Cardano uses a consensus protocol, namely,“Ouroboros” which is a provable secure proof of stake protocol. This protocol is designed and secured in a rigorous cryptographic way.  In ouroboros PoS, the network is split into small epochs. Each epoch selects slot leader randomly. These slot leaders validate the transaction. Slot leaders are similar to miners in bitcoin and ethereum. Since slot leaders are chosen at random, there is no competition between the leaders, and is cheaper to run. Since slot leaders need not be as resource-intensive, they can do much more than the mining of blocks and will cover these in future articles as it is beyond the scope of this article.


Cardano addresses scalability issues in three verticals

  • Transactions per second
  • Bandwidth
  • Data scale

Transactions per second

Currently, the Cardano network can handle 7 transactions per second (TPS). Bitcoin handles 4 – 5 TPS and Ethereum handles 20 TPS. But in the Cardano network, by changing some network parameters, this can be increased to 50 TPS. Cardano claims that in the future they can handle a million transactions per second. TPS in the Cardano network is based on the number of transactions that are generated in the network. At present, 1 transaction is generated every 20 seconds and the 7 TPS is enough as of now. Changing the network parameter is simple but the rough calculation given in this article is a general idea.


As the network grows from 100 to 100,000 TPS, we need to move a large amount of data at a given point in time. Thus maintaining a homogenous network becomes challenging as every node cannot relay every single message due to the limitations of the node. To overcome this issue, the Cardano network uses a heterogenous network known as RINA (Recursive Internetwork Architecture). It allows the network to grow and configure according to the size of the network. It works seamlessly with the existing TCP IP model ensuring interoperability. RINA also tries to eliminate network overhead issues.

Data Scale

When a transaction takes place in a network between Alice and Bob, apart from verifying the transaction, other players in the network, say Charles, Tom, and Maria, need not require to store this information. It may be redundant for them. Therefore, storing the full copy of the blockchain creates a barrier to entry for new nodes as the network grows. The nodes require a large amount of data storage to participate. This would not pose a problem to commercial entities and businesses but can limit the participation of individuals and small-scale businesses to take part in the network. Using techniques like pruning, subscription, compression, and partitioning, Cardano reduces the amount of data one has to store and handle.

In order to get some perspective of the size of blockchains, size of bitcoin is 328Gb as of March 2021. The size of the ethereum blockchain is 280 Gb.


While most of the blockchain network competes against each other for dominance, the Cardano network aims to build an “internet of blockchain”. All cryptocurrencies are uses different languages and platforms. There exist no single standard for developing blockchain. So it is difficult for one blockchain network to understand the language of another network. It is also difficult for the legacy systems like banks to understand the language of the blockchain network. The goal of Cardano is to connect all the blockchain networks and coexist with traditional systems like banks. This would allow seamless transfer of values and tokens within and outside blockchain networks. This could potentially reduce the dependency on exchanges for buying cryptocurrencies.


Cardano promises a lot for the future and the future seems exciting nonetheless. Cardano is still under development. Integration of smart contracts onto the Cardano network may roll out in early June or July 2020. Smart contracts are currently in testing on the test net and this feature will roll out on the main network. Smart contracts in Cardano differ from smart contracts on ethereum network. They are building support for multiple languages to write smart contracts unlike dependency of solidity for ethereum. New Distributed Application (DApp) ecosystem is in making for the launch of smart contracts.

Cardano is building a network and community. Their work is promising and only time will tell if they can live up to the claims that they make. The scientific approach that it takes makes it more interesting and exciting. Although this means that, every new feature integration would take time as it undergoes rigorous testing.

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