Blockchain technology has been evolving ever since its creation. There was the initial idea as proposed by the infamous Satoshi Nakamoto when he wrote the white paper that led to the development of the cryptocurrency known as Bitcoin. In the years since this moment, there has been much progress and an increasingly wide variety of applications found for blockchain technology to be used in.
When people discuss the evolution of blockchains, they often differentiate between the different ‘generations’. The most recent blockchain currencies have been popularly grouped together and designated as third generation.
Previous blockchains protocols like BitCoin and Ethereum have issues:
- Scalability has been a problem for cryptocurrencies since their inception. Indeed, Bitcoin still has issues with transaction processing times. The architecture of the new generation blockchains allows virtually infinite scalability.
- Sustainability has also been a concern for previous generations. It takes enormous computing power and huge amounts of energy in order to run the blockchains. Therefore, trying to lower the energy usage of the new blockchains has been a key factor in their development.
- Development on top of the blockchain: BitCoin especially suffers from any lack of computational layer. Ethereum allows Smart Contracts written in Solidity, an arbitrary language specific to the protocol.
Third generation blockchains to the rescue
Third generation blockchains solve most of the current problems. Namely Cardano is the most advanced and promising blockchain protocol as of now. It has been around since the end of 2017 and one of its original developers was the former founder of Ethereum, Charles Hoskinson. The currency on the Cardano platform is called ADA. Cardano is focused on solving 4 critical problems experienced by first and second generation blockchains. These being, scalability (as discussed above), interoperability, sustainability, and governance.
Cardano uses Proof of Stake instead of Proof of Work. The proof-of-stake model is powerful because it encourages decentralisation (it is estimated that half of Bitcoin’s total mining power is controlled by just 4 mining pools that have access to cheap computing power) by preventing groups of people working together to control the network. The model is also beneficial because it does not require all miners to solve a complex problem which requires great computing power and high energy usage. For Proof-of-stake there is no advantage of running a network node on a beefy server as compared to a Raspberry Pi. Finally, and very importantly, proof-of-stake also dissuades any actor from attempting a 51% attack. It simply does not make financial sense as they would need to stake 51% of the currency in circulation in order to do so, and would therefore lose more than they would gain through the attack.
By addressing some of the critical problems that were experienced by first and second generation blockchains, the third generation blockchains have given themselves an opportunity to potentially be the first that are used as legal or official currency in the future.
These third generation cryptos such as Cardano still have a ways to go to improve their name recognition however, as Bitcoin and Ethereum among others are still far more popular and widely used despite their flaws. But as the cryptocurrency market continues to grow and blockchain technology is more widely adopted by mainstream industries, there is certainly a lot of expectation that Cardano and its third-generation cohort will gain in prominence.
With Cardano evolving fast and its Plutus Smart Contract Platform around the corner, we at Lossless are on the verge of opening a new Cardano specific consulting division that actively drives commercial projects using Cardano. We will start in January 2021 by publishing our current catalog of adaptable Open Source solutions in that realm on https://cardano.tech