The “cryptocurrency” Cardano sweat again a deadline and continues to run on three servers
The turtle Shelley. Coincidentally, a good illustration for Cardano's Shelley upgrade. Image by Richard Gillin via flickr.com. License: Creative Commons
Cardano postpones the Shelley update again. The cryptocurrency therefore continues to run on the servers of two companies and one foundation – but that doesn't matter because nobody uses them anyway. That doesn't stop founder Charles Hoskinson from throwing around the greatest and greatest promises.
In the realm of cryptocurrencies, you occasionally come across projects that are always extremely revolutionary but never completely accomplished. This is normal for startups. The difference, however, is that startups burn the money from professional investors in this way, while crypto projects feast on the money from private investors. One of these projects is Cardano (ADA). Since this coin keeps making smaller and larger messages, let's take a look at its history and present today.
Cardano emerged from an ICO end 2017, and is still not completely finished since he is still has not always made the leap to decentralization. There are always deadlines when the time comes, but these are constantly shifting. While most investors in Cardano made massive losses, founder Charles Hoskinson became one of the richest and most prominent people in the crypto universe.
But let's start at the beginning.
The solution of the proof of stake problem
Cardano is based on the scientific work of Charles Hoskinson and others. The just over 30 year old American co-founded Ethereum, himself but then crashed with Vitalik Buterin and the others over the question of how to coordinate future development. A little later he supported Ethereum Classic with his company IOHK, which had split off from Ethereum as a result of the DAO hack, but soon concentrated on his own project: Cardano.
Cardano is a proof-of-stake cryptocurrency that uses the Ourobous protocol. This protocol was formulated in the middle 2016 in a paper. According to Cardano's website, it was “the first proof of stake protocol that had been mathematically proven to be safe.”
Proof of Stake is an alternative consensus process. While at Bitcoin the miners burn electricity to secure the blockchain, at proof-of-stake the “stakers” simply deposit their coins. Instead of the hashrate, the number of deposited coins determines the chance of finding a block. This process is obviously less resource-hungry and probably less harmful to the climate.
Even though there have long been cryptocurrencies that use proof-of-stake, such as Peercoin, Whitecoin, Blackcoin or Gridcoin, the method was never considered completely secure. There are several problems, such as the nothing-at-stake problem or the lack of real entropy. It would be too much to explain these problems in detail here. They are about preventing false incentives and forks, under which the security of the blockchain is crumbling. Vitalik Buterin explained in a tweetstorm some time ago how Ethereum developers are trying to solve these problems in search of their perfect proof-of-stake system, like the “classic” PoS coins like Peercoin centralized checkpoints to be used, which can also be used manually after an attack.
With Ourobous, the developers now claim to have written a mathematically safe proof-of-stake protocol. The paper went through several peer reviews and seems to live up to the high promises.
Pure losses for investors
So far so good. After that, something happened that is relatively typical of the crypto world. Charles Hoskinson took this ideal protocol and hired some developers to make “the most precisely constructed cryptocurrency” (according to the website).
This cryptocurrency, called Cardano, should not only use the perfect protocol, but also be the first to be written in the Haskell programming language, a language with a strong academic background. In addition, Cardano separates the blockchain into two layers, one for the settlement of values, the other for the execution of smart contracts, which promises to solve all scaling problems and also perfectly combine privacy and identification. You could say that Cardano is an “ivory blockchain”: a blockchain that is perfect on paper, but in practice often fails to win the market.
Hoskinson funded Cardano through an ICO that ran between October 2017 and January 2018 took place, so it fell into the biggest crypto boom of all time. Hoskinson made a good 62 million dollars. The revenue was divided between three parties: Charles Hoskinson's IOHK, Emurgo, and the Cardano Foundation. These three parties should coordinate the development of Cardano.
The tokens were initially available for 2 cents and were launched early on exchanges, where their price exploded very quickly. From two to ten cents in early December, then from 10 on 40 cents until the end of December, on 66 cents on January 1st, and from there on January 8th to more than one Euro. Boom. If you had invested at the right time, you could increase your investment moment by 50 times within two months. Then it went down. Back to 60 cent. Less than 30 cents. In September 2018 the course was already below 10 Cent, since 2019 it is almost always under 5 cents. Today, a Cardano token (ADA) is worth 2.7 cents, which means a loss in value of more than 97 percent means.
Or, to put it another way: Anyone who has invested in Cardano since December 2017, regardless of what time has made losses. There are really few cryptocurrencies that have performed so badly.
At the same time, Charles Hoskinson poses on Twitter and other social media with his many trips and amusements. Sometimes he's at a party in a bunker, then he smokes cigars with friends, he's in Lisbon, New York, South Korea, on the ski slopes and on the beach, and so on. The poor performance of the ADA tokens as well as the self-staging of Charles Hoskinson as a crypto beta celebrity seems so absurd to some observers that they “a study of the correlation between Mr. Charles Hoskinson's travels, meals, amusements and the Cardano ADA price” wrote.
But let's not reduce the currency to the price or the person Charles Hoskinson. What has happened at Cardano since then?
The three-server ghost chain
Let's first look at how much Cardano is used. A look at the block explorer shows a ghost chain. Most blocks have exactly zero transactions. After a good two years Cardano there is no significant economic activity.
According to Cardano's website, it is a “decentralized public blockchain” – a description that is very doubtful about the circumstances. This can be seen at the latest in a blog that Charles Hoskinson on 28. December 2017 published. In it, in addition to a long-winded celebration of Cardano's great progress, he explains where the cryptocurrency is now and where it is going: “We made Byron (Cardano's September release) a minimal workable product to test the concepts on that Cardano is building. ”The experiment was an“ immense success ”. But the most exciting thing is that “Cardano will start to open up to the world in the year 2018. Delegation and staking will be rolled out during the first and second quarters. ”And that is exactly the crucial point.
At the Byron stage, Cardano is not a true proof-of-stake cryptocurrency. One might even doubt whether the term cryptocurrency is appropriate. Because “delegation is,” explains Hoskinson in a later post, “tied to the core nodes under the control of IOHK, Emurgo and the Cardano Foundation, and block rewards are turned off.” In other words, only the three parties behind Cardano are able to form blocks.
Cardano is a centralized blockchain with a privately negotiated consensus that is not used by anyone. This is the current state.
When is Shelley finally coming?
But this condition is only temporary. It was clear from the start that he would change soon. Hoskinson had already announced that Cardano would become decentralized in the first two quarters 2018. The update to initiate this is called Shelley.
The first quarter 2018 passed. Hoskinson announced a research program to make Cardano quantum safe and spoke to the London School of Economics about how Cardano would improve the world in Africa through a decentralized, secure blockchain. There is endless potential, a Cardano African Operation Manager assures on the blog. Finally, on April 9, Hoskinson announced the Shelley update. The developers are fantastic, you are on a very good path. However, he did not give a specific date. In the fall, Hoskinson finally announced that Shelley would appear in the first quarter 2019.
But also the first quarter 2019 passed. Instead of the live version, Cardano introduced Shelley's “formal specification” in April 2019. It was not until September that Shelley was finally activated – in a test network. Hoskinson confidently said that Cardano's scientific methodology would overtake most, if not all, of the cryptocurrencies on the market. From the first quarter 2020 Shelley would open in the live network.
Now the first quarter 2020 is coming to an end – and Shelley is still not activated after two years Delay. Cardano continues to run on the three servers of IOHK, Emurgo and the Foundation. After all, there is a “Testnet with incentives” in which participants can stack real ADAs – without, of course, participating in the Cardano consensus process. Hoskinson said there is a high possibility that Shelley will be there in the next two months, but he doesn't want to call deadlines this time. In return, he promises that Cardano will become “the most decentralized cryptocurrency” and that the 2020 years will become the age of Cardano becomes the dominant force of cryptocurrencies.
In a video he was also annoyed by the criticism from investors and the community. Cardano is a scientific project and that takes time. In addition to all the other challenges that Shelley brings with it, the developers would also have to optimize the Haskell programming language in order to revise libraries and solve compatibility problems.
Not so atypical …
There are some striking structural similarities between Cardano and IOTA: Both projects promise everything, but so far have done very little. Both projects are still enormously centralized and have for years blocked all deadlines that they have set for decentralization.
In addition, there are some details, such as that both also work on secondary construction sites such as security against quantum computers or have chosen an exotic infrastructure for unclear reasons – at Cardano the language Haskell, at IOTA the ternary design – and now surprisingly with have to fight the consequences of this decision. After all, both projects have been a source of disappointment and loss for investors for more than two years.
IOTA and Cardano kind of mark the pinnacle of an unsightly trend: You announce a revolutionary design, publish a “minimally workable prototype”, catch up with ICO funds, promise to make up for everything else, but miss one deadline after another distracts from this with new projects, secondary construction sites and partnerships. This is particularly blatant at IOTA and Cardano, because the two projects celebrate themselves beyond measure as the reinvention of cryptocurrencies right from the start, but conveniently have so far refrained from implementing the absolute core characteristic of cryptocurrencies – decentralization.
But the phenomenon, in a milder form, is not that rare. With ICOs, the promise without a product is a prerequisite, and even Ethereum is counting on developers to reinvent blockchain with Ethereum 2.0. But at least Ethereum has a working and decentralized network, even if it does not do what Ethereum actually promises to do.
For investors and investors, as well as for companies that want to use blockchains, only one thing can follow: Look very carefully at what you are getting into.