How Small Companies Are Experimenting with Cryptocurrency Applications – Cardano Example
One thing for sure, the cryptocurrency landscape is extremely complex and dynamic and no doubt full of frivolous excess and “wasted motion”. While there are tens of thousands of projects, or coins, select cryptocurrencies have succeeded in rising above the noise level, achieving meaningful adoption and some traction on specific applications. How pragmatic and useful these applications can prove over time and whether associated adoption can really scale are open questions.
Cardano
Cardano is a public blockchain platform. It is open-source and decentralized, with consensus achieved using proof of stake. It can facilitate peer-to-peer transactions with its internal cryptocurrency, “ADA”.
Cardano’s development began in 2015, led by Ethereum co-founder Charles Hoskinson. The project is overseen and supervised by the Cardano Foundation based in Zug, Switzerland. When launched in 2017, it was the largest cryptocurrency to use a proof-of-stake blockchain, which is seen as a greener alternative to proof-of-work protocols.
You can check an ADA price chart to see how popular the asset has been in recent years. Just what exactly does Cardano offer when compared to other cryptocurrencies? Read on to find out.
The Cardano Consensus Mechanism
Blockchain platforms are decentralised, which means they do not require oversight or management by a financial or governmental body to process and verify transactions. Instead, these transactions are verified through a peer-to-peer network, using a process known as a consensus mechanism.
Bitcoin, the first blockchain platform, has always used a consensus mechanism called proof-of-work (PoW). In a PoW consensus mechanism, new transactions are added as blocks, which form a chain as they are verified. However, users on the network must verify these blocks themselves, and they do so by solving complex puzzles to generate a hash code that is equal to or less than the code of the block. Once a block has been verified, it is added to the chain and the user, or miner, who generated the correct code is rewarded with new Bitcoin.
Until relatively recently, all other cryptocurrencies used the same PoW consensus mechanism. However, Cardano was designed to change that and was the first cryptocurrency to use something called a proof-of-stake (PoS). In a PoS consensus mechanism, a select group of users are chosen to verify new blocks. These users must have staked a certain amount of ADA into the blockchain, and verifying blocks requires far less energy.
PoW systems are notoriously energy-intensive, which many people believe has a detrimental impact on the environment. By using a PoS consensus mechanism, Cardano is arguably a more environmentally friendly option, a vital attribute in today’s world.
A Developer-Focused Platform
Early blockchain platforms were designed merely as a vehicle through which currency transactions could be processed. While they offer significant benefits over traditional financial systems, developers soon realized the potential of blockchain and how much more these advanced platforms were capable of.
While Cardano serves as a processing network for the ADA cryptocurrency, it also has a number of other uses, and it was designed with flexibility and adaptability in mind to ensure it was capable of more. Cardano can be used for things like record keeping, project management, and identify verification processes.
Cardano also allows for users to build and host their own apps on the platform. Known as dApps, these are highly scalable applications that can cover a wide range of different functions and features.
Smart Contracts
In 2021, Cardano rolled out support for smart contracts on the network. Smart contracts are code-based, self-executing contracts that exist on the blockchain. What self-executing means is that all parties involved in an agreement are guaranteed to abide by their contractual obligations, making the process far more secure for everyone.
They allow for decentralised agreements and transactions to be made between parties, who can stay anonymous if they wish, without the need for a third party or mediator of any kind. Rather than an authority figure being used to ensure the contract is upheld, smart contracts use code to automate the process.
Applications for Small Companies with High Potential Use-Cases
Small companies could find several potential uses for the Cardano cryptocurrency:
- Payment Processing: Cardano’s blockchain can facilitate secure and efficient cross-border payments, reducing transaction fees and processing times for small businesses that deal with international clients or suppliers.
- Micropayments and Content Monetization: Cardano’s low transaction fees make it suitable for micropayments, allowing small companies to monetize digital content, such as articles, videos, and digital products.
- Supply Chain Tracking: Utilizing Cardano’s blockchain, small businesses can enhance transparency and traceability in their supply chain by recording every step of the production and distribution process. This helps ensure authenticity and quality.
- Tokenization of Assets: Small companies can tokenize their assets, such as real estate, intellectual property, or company shares, on the Cardano blockchain. This can open up new avenues for fundraising and investment.
- Smart Contracts: As explained above, Cardano’s smart contract capabilities enable small companies to automate various processes like contract execution, royalty payments, and other agreements without the need for intermediaries.
- Decentralized Finance (DeFi): Small businesses could access decentralized lending, borrowing, and trading services on the Cardano platform, potentially reducing reliance on traditional financial institutions.
- Rewards and Loyalty Programs: Companies can create their own customized loyalty tokens on Cardano, offering customers rewards for their continued business and engagement.
- Charitable Donations and Social Impact: Using Cardano’s transparent blockchain, small businesses can establish more accountable and traceable charitable donation systems, ensuring that funds reach their intended recipients.
- Data Privacy and Security: Cardano’s focus on security and privacy can be leveraged by small businesses to securely store and manage sensitive customer data.
Again, how many of these will truly prove useful with scaled adoption among small companies remains to be seen.
Remember that each use case will require careful planning, integration, and compliance with relevant regulations. It’s important to assess the specific needs of the company and how Cardano’s features align with those needs before implementing any solution.
Cardano Voltaire
Unlike other cryptocurrencies, Cardano does not have a whitepaper that details the asset’s technology and founding principles. Instead, the Cardano developers published a roadmap when the asset was launched, and this is continually updated as changes are made to the platform.
Each major update to Cardano is referred to as an era. The asset has been through five eras, Bryon, Shelley, Goguen, Basho, and Voltaire, the era into which it is currently transitioning.
Voltaire has created a lot of excitement among Cardano investors and in the wider crypto community. The developers maintain that Voltaire will see Cardano become fully self-sufficient and will bring about the realisation of true decentralisation.
As part of the Voltaire update, Cardano users will be given the chance to vote on any future changes to the network. This is decentralisation in its truest form; the users themselves will be responsible for the future direction of the asset.
Voltaire will also see Cardano implement something called a treasury system. Through this, fees charged for transactions will be redirected back into the platform itself and used to fund new updates, changes, and repairs.
Finally, Cardano developers are using the Voltaire era to establish a constitution for the asset. This will be a first in the crypto world, and this constitution will outline core principles of equal treatment for all users of the platform.
Conclusion
When Bitcoin was first launched back in 2009, the world looked on in awe at what, for the time, was something truly revolutionary. However, technology is improving all the time, and it wasn’t long before new cryptocurrencies were launched to rival Bitcoin. Cardano offers unique attributes relative to the rest of the industry, and as it develops through the Voltaire era, it could serve as a benchmark asset for all future cryptocurrencies.
About Scale Finance
Scale Finance LLC (www.scalefinance.com) provides flexible contract CFO & Controller services, business valuations, and support in raising capital, or executing M&A transactions, to entrepreneurial companies. The firm specializes in cost-effective financial reporting, budgeting & forecasting, implementing controls, complex modeling, valuing businesses, and other financial management, and provides strategic help for companies raising growth capital or considering M&A/recapitalization opportunities. Most of the firm’s clients are growing technology, healthcare, business services, consumer, and industrial companies at various stages of development from start-up to tens of millions in annual revenue. Scale Finance has a team of more than 45 professionals serving more than 120 companies in the Carolinas and beyond.
