Last time we talked about the spirit of Cardano. Why it has such a unique and marvellous governance
scheme. This time we’re gonna take it up a notch! Remember when I said that Cardano is considered
a 3rd generation cryptocurrency? Well in this video you’re gonna find out
why. But before that, be sure to watch the other
Cardano video after this. It has some great insights you don’t wanna
miss. Now, Cardano has three pillar solutions: Scalability,
Interoperability, and Sustainability, which we shall talk about momentarily. To recap from the previous video, the objective
here is to build High Assurance Code: code that cannot fail under any normal circumstances;
which is important since we’re dealing with assets. So let’s start with scalability. People tend to throw this word around without
fully grasping what it really means for a cryptocurrency to scale. The usual benchmark used for scalability is
the TPS or transactions per second. This is also called the throughput. But please note that this is only a third
of the three facets that comprise scalability. Currently Bitcoin can do 7 TPS while Ethereum
can do around 15. Obviously, this isn’t enough to handle worldwide
adoption. Visa normally processes 1,700 TPS. That’s a huge gap. So Cardano’s response is Ouroboros, their
very own peer-reviewed consensus mechanism, utilizing a variant of the proof of stake
algorithm. According to their research, Ouroboros is
the first proof of stake protocol to be mathematically proven to be secure. So Cardano believes this will address the
TPS problem without a substantial risk of failing. The second facet of scalability is Network
Bandwidth. Bandwidth is essentially the speed of data
traveling through a path across the internet. Like I when I send an email, the data gets
routed into different paths, but it reaches its destination fairly quick since email data
is light. However, if I upload a 2 gigabyte video, it
would take longer for the data to completely reach its destination. Now this relates to crypto because in a distributed
ledger like blockchain, data is travelling all the time. It needs to, because we are constantly updating
as new transactions go through. Also, the nodes have to agree on the data,
in order to maintain consensus and prevent any tampering from fraudsters, trying to rig
the system. Going back to my email and 2 gigs video example,
the point is that data needs to be able to move fast and seamless. This is one of the reasons why Bitcoin imposed
a block limit. Some people saw that as an internal sabotage
but what really happened was they curbed the tps scaling a little bit in order to maintain
the capability of network scaling. Coz we need the nodes to be able to pass around
and receive blockchain data in due time. Only then can we ensure that network is still
being honestly validated. So the idea that we need the network to be
homogeneous, that is to say, alike in every node, is important for decentralization. Like how else do I know that I’m getting
the complete data that the network agrees to be true…. If I don’t receive the data in time? So it’s important that data can travel fast
throughout the blockchain or network. You see why network bandwidth needs to scale
too? So Cardano’s answer to this is a technology
they called RINA, Recursive Inter-Network Architecture; basically it’s a new type
of network structure with the goal of creating a homogenous network. What’s interesting is that RINA is actually
a proposed alternative to the current mainstream backbone of the internet, which is TCP/IP. Now you don’t need to know much about this
if it’s too technical for you. What you need to realize is that RINA is a
technology that could become the new backbone of the internet and Cardano is taking advantage
of it. Now the third facet of scalability is Data
Scaling This is a great issue that is being talked
about a lot in the Bitcoin community, especially against the other forks like Bitcoin SV. Coz Bitcoin SV just keeps increasing the blocksize
to seemingly no end. But doing so has immense consequences in terms
of scaling the data. You see, a blockchain is a database of transaction
records, now these records are stored forever. So with that in mind, you get the idea that
as the number of users grow, so will the volume of daily transactions. And consequently, the whole blockchain size. Now since the blockchain just keeps getting
bigger forever, you’d expect that at some point in the future, only big data servers
can afford to run a node. You and me won’t. Then decentralization dies. So what is Cardano’s plan? They are looking into four solutions: pruning,
subscriptions, compression, and partitioning. Pruning is basically running a smaller version
of a full blockchain, by deleting older data that it no longer requires, while downloading
the latest blockchain data that is necessary. Compressing is making the blockchain smaller. An example for this is the Mimblewimble protocol. Partitioning is like slicing the blockchain
into different parts, so that they can be managed separately but still achieve consensus. So the idea here is to combine these different
techniques intelligently and come up with a solution that allows the data stored by
in each node to be less demanding in terms of hard drive space. According to Charles, there won’t be one
cryptocurrency to rule them all. So it’s more logical to work on the assumption
that there will be many different coins that will coexist; therefore, the second pillar
of Cardano is interoperability. Today, we have different cryptocurrencies
like Bitcoin and Ethereum and Stellar. On the other hand, legacy financial systems
like banks are still around, and they use technologies like SWIFT to move money around
similar to how we use blockchain. None of these are interoperable…okay maybe
Stellar and banks.. but Stellar isn’t interoperable with Bitcoin, or Litecoin, or other tokens
for the most part. Neither are Bitcoin and Ethereum compatible
to each other. Same with Litecoin and Dash. You see the problem here? I don’t know… it’s like everyone is
working with the premise that only one coin could win. There are a few exceptions, but the greater
part of the crypto market seems to act like this; creating silos and preventing unity—which
by the way is a really good strategy to win, and a thousand times easier to do than trying
to become the next bitcoin. So it is a breath of fresh air that Cardano
is prioritizing interoperability. Imagine an internet of blockchains where Bitcoin
can flow freely into Cardano to Litecoin, or to any other blockchain, without needing
any exchanges or intermediaries at all. That would be phenomenal for the industry. And there are two technologies to make this
happen. One is atomic swap, which the bitcoin people
are heavily developing, and sidechains, which Cardano is looking into and planning to implement. The third pillar of Cardano is sustainability. Now, Charles admits that this is the toughest
problem to solve. It’s very difficult to create a system that
would fund the future development of a decentralized entity. The usual method is through an ICO which they
did, but it’s not gonna be enough for long term development. Especially the way ICO works where founders
suddenly receive a huge sum on day 1. It’s just not good way of funding and not
really sustainable on its own. Another way is through patronage, that is,
receiving funds from entities like governments, foundations, or companies. But that too, is prone to centralization,
because whoever gave the donation might influence the development of Cardano. So Cardano instead plans to use the treasury
model which was inspired from DASH. But how does it work? Well, everytime a block is added to the Cardano
blockchain, part of the block reward goes to the treasury. A mining reward in a sense, but not directly
paid to developers, but instead, when someone wants to develop something, they simply submit
their proposal to the treasury to ask for funding. Like most decentralized communities, stakeholders
vote on which proposals are gonna be granted funding. So basically those are three pillars of Cardano. See on the flipside guys.