Atypically, Cardano does not have a white paper. Instead, it uses design principles intended to overcome issues faced by other cryptocurrencies such as scalability, interoperability, and regulatory compliance. Cardano claims that it overcomes problems in the crypto market: mainly that Bitcoin is too slow and inflexible, and that Ethereum is not safe or scalable.
Cardano uses a proof-of-stake protocol named Ouroboros; this is in contrast to Bitcoin and Ethereum, which use proof-of-work protocols. Proof-of-stake blockchains use significantly less energy than proof-of-work chains. In February 2021, Hoskinson estimated the Cardano network used 6 GWh annually, less than 0.01% of the 110.53 TWh used by the Bitcoin network as estimated by the University of Cambridge.
Within the Cardano platform, Ada exists on the settlement layer. This layer is similar to Bitcoin and keeps track of transactions. The second layer is the computation layer. This layer is designed to be similar to Ethereum, enabling smart contracts and applications to run on the platform.
Like Bitcoin, Cardano uses a UTXO ledger model, though it is an extended version (EUTXO) to facilitate smart contracts and scripting languages.
Cardano implemented decentralized finance (DeFi) services on September 12 2021, including an upgrade to enable smart contracts and the ability to build decentralized applications (DApps). Also included is Plutus, a Turing-complete smart contract language written in Haskell, and a specialised smart contract language, Marlowe, designed for non-programmers in the financial sector. Cardano’s smart contract languages allow developers to run end-to-end tests on their program without leaving the integrated development environment or deploying their code.
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