Cardano

A case for ADA

Overview

  1. Cardano (ADA) was developed as a smart-contract platform and an alternative to Ethereum. Charles Hoskinson is the founder of ADA and was also an early founding member of ETH’s team. With ADA he is working to create a new platform as an attempt to fix ETH’s issues differently.
  2. The entire team(s) on ADA is staffed by world-class developers and academics. ADA has arguably the single most distinguished team currently operating in cryptocurrency, which truly is an astounding accomplishment.
  3. ADA has developed most of its protocol through the rigorous discipline of High-Assurance Code. This means that features begin not as code but as academic papers which are then submitted for formal academic peer review. Once there each paper is reviewed and mathematically proven for correctness as applicable. Upon passing through that, it is translated into a high-level code representation. It is then extensively tested that the code matches the paper identically. Then, various security threats are simulated and further testing is performed. Finally, the code is then translated into production-ready code and tested that it exactly matches the other two representations. Only after that point is it released for use. This ensures the most reliable software that engineering and academia can produce. By the time any feature is released, it is already one of the most tested pieces of code ever produced.
  4. The teams at ADA have mastered this discipline of producing High-Assurance Code at a level that is unlikely to be replicable by any other team not just in blockchain, but also across almost any other discipline. They have been through this process again and again and are becoming ever better and faster at it.
  5. Because of the peer-review process, the algorithms presented in ADA are also typically the highest-performing that academia and engineering have yet discovered.
  6. ADA made another bold technical choice to leverage functional programming languages including Haskell and their own Plutus. Plutus was created (by the author of Haskell and team) to ensure maximally reliable smart contracts. In practice, this means that developers will greatly decrease the number of bugs deployed in their code, which is essential in financial applications. It also means that it will be much easier to mathematically prove the correctness of projects built on it. These effects cannot be easily replicated in non-functional languages used on other platforms. More traditional languages are also supported for applications that don’t need as high of assurance for quality.
  7. ADA is including robust interoperability across blockchains as a first-class priority within the protocol itself. Much of the research for how to handle interoperability was created and funded through ADA’s work.
  8. ADA is fully open-source (the code is public) much more decentralized than some of its competitors. Additional features are on the roadmap to fulfill this ethos such as built-in governance by the community. This gives ADA the ability to upgrade without disruptive contentions common on other protocols.
  9. ADA implements a public treasury through Project Catalyst. This provides funds to support improvements throughout the entire lifetime of the protocol, which is important because producing High-Assurance Code is quite an expensive process. The community votes on how to deploy the funds. The engagement of the community voting on how to deploy the funds has the most participation of its kind ever.
  10. ADA has active and productive partnerships with many 3rd world countries around the world. Unlike many currently in crypto, these partnerships are not just press gimmicks but case studies on solving real problems for these countries using ADA. Examples include permanently solving voter fraud, providing digital identity for unbanked individuals, facilitating accountability of international financing to underdeveloped countries. The ultimate goal of Hoskinson is to allow ADA to facilitate credit issuance in 3rd world countries, thereby allowing world wide access to credit markets across all economies. If successful the entire world would be able to fund entrepreneurial efforts where they are most needed and reliably profit from the proceeds.
  11. Where ETH is working on ETH 2.0 to become more scalable, ADA can handle almost limitless scale. As the ADA network gains more users, it becomes even faster.
  12. ADA is implemented using Delegated Proof of Stake (DPoS), specifically Ouroboros. Its central security model has already been extensively mathematically and practically proven to be secure given the assumption of an honest majority through the same peer-reviewed High-Assurance Code discipline. The honest majority assumption is the defining assumption behind the whole of cryptocurrency.
  13. The game theory to incentive an honest majority has been defined and created using parameters that can be easily changed over time as real-life reveals which exact settings are optimal.
  14. ADA has claimed and maintained a spot in the top 10 cryptocurrencies for several years and now is in the top 5.

Major Bullish Arguments

  1. ADA writes the standards by which the rest of cryptocurrency is measured.
  2. ADA is unmatched in the technical prowess of their platform. It is a direct implementation of the best-known research in the field, most of which was funded by the project itself. Where other projects try to implement one or two breakthrough ideas from papers, ADA has developed most of its protocol via peer-reviewed paper first, producing the absolute best technical results yet known to science, engineering, and academia.
  3. There is no minimum staking requirement. Most of the supply, currently over 70%, of the ADA token is staked. This leads to less supply is available as demand is increasing. In addition, large staking pools are penalized. These innovations should lead to greater diversification of stakers and first-class participants of ADA in the long run compared with other protocols.
  4. ADA has a robust and active partnership program that is providing resources to assist in real-world usage by solving existing problems in 3rd world countries. Users that come from such partnerships will be unlikely to leave for another platform, especially one with superior features to its competition (except for mass adoption). If millions in Africa, far-Europe, and South America can suddenly have access to financing via affordable Decentralized Finance on ADA, they will quickly adopt the platform.
  5. ADA is leading the world on research to use blockchain to ensure fair, open, and provably honest and correct voting systems. It is pioneering this effort in solving this problem in 3rd world countries. If successful, it could become the standard way to conduct elections worldwide across democratic nations.

Major Counterarguments

  1. The High-Assurance Code process is too expensive and time-consuming to produce usable results in the real world fast enough.
    • It is true that ADA has had several delays of releases throughout its history, as has most protocols. However, with time the team in ADA has managed to deliver working functionality again and again and establish a regular release cadence. They now have over 100 peer-reviewed papers which are implemented across their entire system. They release month after month and quarter after quarter code that has passed their massive arsenal of automated tests. And, they are getting faster at the whole process each time.
  2. Now that ETH exists, no other platform will be able to overtake it in adoption.
    • Companies will choose to build on the protocol that best enables them to fulfill their own goals. Today ETH has a huge problem with fees. It is working to gradually alleviate that problem. However, it is much more difficult to successfully rebuild the plane while still flying. Projects that don’t need to support legacy systems yet can innovate faster than their predecessors. ETH is in a race against the clock to deliver solutions before alternative platforms become fully ready to compete to run projects.
  3. Frequently, the project with the undisputable best technology does not become the market leader.
    • This is often true. However, a technology advantage can be sufficient when greater by at least an order of magnitude compared to competitors. ADA is attempting to build such a system. ADA is also not ignoring facilitating real usage. The partnerships with 3rd world countries are leading to real usage that will be very slow to leave for any other platform. The innovation on top of ADA funded through the treasury is only getting bigger and more diverse. ADA has a solid chance to acquire real users. Unlike other platforms, when those users build on ADA they do not quickly run into the limit of what the technology can handle but instead largely have a good experience for the long term.
  4. Other projects can copy the ideas of ADA into their platforms and take market value.
    • ADA is an open-source project, like all of its major competitors. While the ideas can be copied, the true value is in the network of users. This cannot be copied or replicated without those users choosing to go elsewhere. ADA has proven themselves as one of the most trusted projects in the ecosystem by showing steadfast commitment to their values.

Price Potential

  1. ADA addresses the same market as ETH, namely, it is a smart contract platform.
  2. ADA is leading the pack in research and pioneering sustainable blockchain governance systems. It is likely closer to permanently solving these problems than any other organization worldwide. Once these problems are fully solved, the way is clear for the widespread growth of the Decentralized Autonomous Organization (DAO). These are organizations like companies or governments that have a treasury and can contract and pay “employees” directly to fulfill a common mission. However, these systems are opt-in by nature and participants can choose to leave at any time if desired. The entire system is fully transparent to all stakeholders and fully auditable in realtime. This is unlike the limited visibility a shareholder has into a regular company today. The theoretical limit to this use case is the market cap of all companies and countries treasures, in addition to new companies that are unable to operate in the current system. The true potential of solving governance is the total of all systems that require governance, though it is unknown what portion of that market will choose to leverage blockchain solutions.

Major Risks

  1. Projects on ETH do not want to leave ETH unless they are left with no other choice. However, high fees might force some projects to go elsewhere if ETH does not address congestion quickly enough. However, even the full proposed implementation of ETH 2.0 is not as scalable and efficient a system as ADA has designed from first-principles through peer-reviewed research.
  2. The High-Assurance Code process does take longer than other methods. To continue to grow, ADA needs to prove that it can continue to deliver results through such a rigorous process without falling too far behind to competitors who run while making no such guarantees of correctness.
  3. Charles Hoskinson is perhaps the most trusted founder in cryptocurrency by his community. If for any reason he was unable to continue his work the protocol would undoubtedly suffer. However, Charles has taken many pains, including organizing ADA’s work across three teams with perpetual funding arrangements, to ensure that the protocol lasts beyond his leadership. With the lead that ADA has on blockchain governance, ADA is probably the most likely to outlast any unexpected loss of its founder compared to its competition.

Additional Resources

© 2022 Technically Employed, LLC under Terms