familiar with crypto it's likely you know the name vitalik buterin in 2015 buterin and a team of co-founders launched a little tiny project called ethereum now known as the second largest cryptocurrency with incredible potential ethereum had a few other important founding members one of these members was charles hoskinson just a couple of short years later hoskinson found himself at the center of a brand new project launching cardano named after the italian mathematician derolamo cardano welcome to whiteboard crypto the number one youtube channel for crypto education and here we explain topics of the cryptocurrency world using
analogies stories and examples so that you can easily understand them in this video we're going to explain what cardano is specifically how it works and how ethereum fits into play so first off what is cardano well to make things simple let's give a very basic answer cardano is simply just a proof of state cryptocurrency now to really explain what it means and to summarize why it's not just some random altcoin let's hear what the founder has to say about it basically hoskinson saw that cryptocurrencies would suffer from three main problems these problems are scalability interoperability
and sustainability let's go through each of these issues to understand the intentions behind the project number one is scalability fans of bitcoin know this problem all too well because of bitcoin's block size the network can only confirm around five to seven transactions per second now this is not even comparable to the visa behemoth that can do tens of thousands of transactions per second the block size debate in bitcoin raged on for years but at least one question remains for basically any cryptocurrency how can this project scale now as hoskinson has said we actually want things
to speed up as more users use a system not slow down as many of them do if the network is being used it needs to speed up in order to be consistent for its users what he meant was that a blockchain's capability should scale linearly with its usage cardano solves this by using what are called epochs which basically divide up who validates certain blocks in the blockchain to be even more precise they use slots and any of the nodes which nodes are just computers from people or organizations that are running the blockchain they can be
nominated to be a slot leader these terms don't really need the mean much to you but they are what allows cardano's proof of steak to scale cardano calls this system oroboros but oraboros could warrant its own video due to its complexity the important thing here is that slots can be divided up further which lets the network scale speaking of scalability this channel is slowly starting to scale meaning each new video gets more and more views and the subscriber base is growing so if you're watching this video and aren't subscribed yet please consider subscribing because we
are working hard on continuing to create high quality educational cryptocurrency videos and by you subscribing and watching our future video that is the best way to reward our hard work moving on the second problem is interoperability so this is a very old technological problem let's think about this using an example of early wireless networking if you've ever wanted to set up a wireless network in your house you know you have to connect your devices with a router so that the signal can reach your device but what if your apple iphone only connected to apple routers
it wouldn't be very useful if everybody had to get all the same hardware for everything from the ground up and from the same brand and in fact that would probably be considered a monopoly by the united states government so how does cardano make sure that crypto doesn't suffer from the same problem well it allows for people to easily bridge cardano and other cryptocurrencies that use other blockchains by using something called the kmz sidechains protocol this is basically the crypto version of being able to easily exchange u.s dollars for canadian dollars or euros or some other
currency now unlike other cryptocurrencies cardano knows it won't be the only cryptocurrency and because of this it proactively works on an interoperability solution using bridges if you want to learn about the technicals of how a blockchain bridge works you can definitely check our specific video on it the third problem is sustainability now if cardano or any other cryptocurrency is going to host much of our financial lives obviously we would need a way to guarantee that the system stays functioning so when we say sustainable we don't necessarily mean environmentally sustainable although many say that cardano because
of its proof of stake instead of proof-of-work mechanism is environmentally sustainable there is a huge debate about environmentalism in the crypto world regardless what we are talking about is the network's ability to keep the lights on continuing to make improvements and have a healthy development community cardano solves this by establishing a treasury which collects fees and pays them to those who make contributions to the network in short cardano is a self-sustainable cryptocurrency that has intentions of improving itself in the future and it is developed with that in mind now you'll notice that cardano seems to
be designed with one thing in mind solving problems very rationally and logically this is a project created and run by a man who used to be a mathematician now this shows up in several ways namely the fact that it was named after an italian mathematician the token which actually carries value and is used on the network is called ada so cardano is the blockchain and ada is the coin now this is not americans with disability acts but it comes from the name of a woman who is now considered to be the first ever computer programmer
ada lovelace beyond naming conventions charles hoskinson clearly has shown an ambition for tackling big challenges through methodical reasoned and problem solving within the cardano project there is tons of research being done papers being written and even peer reviews to get third party feedback some may say charles even has a cult-like following but he does do often live stream update logs to update his audience despite cardano's unique style and branding you might just ask yourself how exactly is it different from ethereum well lucky for you we're gonna cover it now we're not gonna speculate about individual
conflicts or personalities but the story goes that hoskinson thought ethereum should be a for-profit entity whereas buterin wanted ethereum to stay as a non-profit both of their wishes ended up coming true in a way buterin stayed with ethereum and hoskinson took a sabbatical shortly followed by a proposition fellow co-founder of ethereum jeremy wood approached hoskinson about creating a for-profit entity that would create blockchain projects for companies governments and even other organizations this company became known as iohk or input output hong kong and it's an homage to the engineering term and to the place that it
was incorporated so what does this have to do with cardano you ask iohk's main project is what we now know as cardano although ethereum and cardano are both smart contract platforms they do differ in several ways the first is that cardano has been a proof-of-stake blockchain from the beginning this means that instead of bitcoin's method of doing really hard math problems to mine coins they validate transactions according to how many tokens the validators stake so for example if you own a lot of ada you can stake that ada and have more power in the network
than those who have little ada ethereum however started as a proof of work chain but is now migrating to become a proof of stake chain another thing that's important is that like bitcoin cardano is deflationary this basically means there is a fixed amount and in the case of ada 45 billion total ada coins will be minted as opposed to ethereum which mints more and more ethereum every year from an economic perspective that would generally mean that all other things being equal ada should increase in value or appreciate more than ethereum however that is as close
to price speculation as we will get to today with the future in mind though let's take a look at where cardano is being used in the real world and where it might be used in the future despite the ico craze of 2017 which was known for a lot of shady scams cardano actually started off with an ico where it differs though is from that point on cardano showed it should be taken seriously through its commitment to rigorously researching and testing its solutions iohk helped both the university of edinburgh and the university of wyoming support their
blockchain and initiatives and from there has launched into several real world partnerships we can see the breadth and depth of cardano's potential when we look to its partnership with the government of georgia the country not the state and they have decided to build an id verification system using both cardano and iohk's enterprise solution atala this is already getting more complicated and a little bit outside of the scope of this video but they followed this in 2021 with an agreement with the government of ethiopia to use cardano for id verification for students commercially though and likely
its most impressive partnership is with new balance i know what you're thinking that's right iohk has been hired by new balance to use its technology to verify the authenticity of its sneakers very similar to how vechain is used to authenticate supply chains using a blockchain as a methodical and precise organization iohk has released a road map for cardano's future which includes five eras foundation decentralization smart contracts scaling and then governance which you can actually read the roadmap if you'd like each of these eras takes on a new challenge and adds new products and features to
cardano's capabilities it's safe to say that regardless of any future utility cardano will always have a plan for what they do next this video is a little different than the rest of our videos because this was actually a coin but that's all we have for cardano today if you have any questions feel free to leave them in the comments below as cardano is a big project with a lot of hearty fans thank you guys so much for watching we really hope that you've learned something in this video and most importantly we hope to see you
in our next video you
