, So you know the top two players in crypto, but what about the Cardano Networks? Coin Ada. Ada is an altcoin meaning its an alternative to Bitcoin and is named after the 19th century, mathematician Ada Lovelace, who is considered the first computer programmer. Late. This summer of surge in interest in Ada pushed the cryptocurrency to the third largest behind Bitcoin and ether Ethereums currency. During the rise Ada reached a market capitalization of more than 90 billion and rose to a high of more than 3. Thats. Nearly a 2500 increase in price on a year over year, basis. Thats, primarily driven by retail investors., And I think, a lot of the ones that Ive talked to are saying. I want to kind of find the next Bitcoin., So maybe thats Cardonas Ada token. Narrator, Given the crypto markets volatility, the third largest changes, often, but with nearly 6000 cryptocurrencies in existence this year. Why is Cardonas Ada one of the few breaking through Well explain. Cardano describes itself as a third generation blockchain platform.. You can think about the blockchain generations, similar to the evolution of the cell phone. Bitcoin. The first generation is like the flip phone.. It was revolutionary in its creation, but only does basic things. The second generation Ethereum 1.0 thats, like your first few smartphones. It offers apps but is kind of slow to load.. The third generation Cardano and Ethereum 2.0 want to be more like phones today, where speed and usability are crucial.

. The key difference between the first generation and the third has to do with how the network works. Bitcoin, runs on something called a proof of work mechanism which runs something like this miners, not those ones. But people who set up computers allow the system to work their computers simultaneously race to guess a complex sequence of numbers in order to validate a block of transactions. The miner whose computer wins is awarded Bitcoin and records the validated transaction on the blockchain ledger.. A fancy word that essentially means the online record book. But aspect when prices rise, so do the barriers to enter for miners., Caitlin McCabe, So were seeing. Companies fully dedicated to mining. Were seeing miners taking over warehouses and factories to set up mining facilities. Narrator While secure this system requires huge amounts of processing power, simply because it requires all mining computers to work on the same puzzle. And it rewards those with more computing. Power. Just how much power In a year the Bitcoin network uses about the same amount of electricity as Washington, State. Weve, seen proof of work increasingly come under scrutiny because of the energy intensity that it uses. Narrator. This is one of the biggest challenges of the first generation of crypto and a main reason why Cardano is breaking through.. Cardano uses a different system called proof of stake. A system also adopted by Ethereum second model Ethereum 2.0, which is expected to be fully rolled out in the future.

. The proof of stake model is, I think, a very exciting prospect for people who are in the space because it uses an entirely different system in order to verify transactions on the blockchain. Narrator In Cardonas proof of stake model. Ada owners use their own holdings to help validate transactions.. This is called staking or delegating. Think of a stake as a commitment to keep the Cardona network operating and secure. To earn. Ada users join a stake, pool either one theyve made or another users., Not every user. In the stake pool is responsible for verifying transactions.. Instead, one user, a pool operator, does the work on behalf of the group cutting down on computer activity., So in short, in first generation crypto, every computer races to solve one math puzzle. In third generation. Only the state pool operator does the work., But the proof of stake system isnt. The only factor that helped Cardona breakthrough. Cardano recently introduced something called smart contracts to its system, with an upgrade it calls. Alonzo.. Smart contracts are seen as game changers because they allow the blockchain to host other operations., Again think of a smartphone. Its similar to the idea of an app store, except with a blockchain. These apps are called dApps or decentralized apps, and there is no company like Apple or Google, in between the user and the application.. Instead, the smart contract has programmed code to facilitate agreements and transactions between the user and the dApp. Users hope Cardanos.

Adoption will allow it to better compete with the Ethereum network, Where about 80 of dApps are built., But all that traffic has created issues.. The reason that Ethereum has faced some scrutiny this year is just because thereve been theres, been so much activity on the network that theres been more congestion and higher transaction fees in order to try to transact on the network.. So the idea for Cardano is to take the Ethereum model and make it more scalable. Narrator, While Cardanos promises may sound great in theory theyve, yet to undergo the most important test. Time. Well have to wait and see. You know how successful people are able to use the platform in order to you know, build decentralized applications and create non fungible. Tokens. Narrator. The introduction of smart contracts is stage three in a five part plan. According to the platforms, roadmap. Still to come are upgrades on scalability and governance.. Investors have to keep in mind. This is not going to be a steady investment., But I think people who, like to trade in mid volatility, thats one of the draws. Narrator, The blockchain engineering company behind Cardona IOHK, warned that expectations need to be managed with this upgrade..