As the blockchain industry continues to flourish, Cardano stands out as a prominent player among developers. However, despite its strong positioning, some believe that the network faces certain limitations that could hinder its long-term growth. To address these challenges, experts suggest that a comprehensive overhaul might be necessary to enhance the blockchain’s efficiency and scalability.

The Need for a Fundamental Overhaul in Cardano’s Structure

Cardano’s Decentralized Finance (DeFi) sector recently came under scrutiny as cryptocurrency analyst Fallen Icarus criticized the network’s foundational issues. His remarks, echoed by Andrew Throuvalas, co-founder of Charmsdevs, emphasize the necessity for a complete revamp. Icarus argues that Cardano’s attempt to mirror Ethereum’s one-size-fits-all decentralized application (dApp) model may not be sustainable. This model encompasses various functionalities like high throughput, liquidity, instantaneous settlement, price enforcement, and censorship resistance, which may lead to excessive costs and scaling issues.

Throuvalas highlights that a more effective approach could involve layered scaling. This strategy allows users to choose trade-offs without sacrificing core functionalities. For instance, sluggish yet censorship-resistant settlements could be managed by Cardano Layer 1 smart contracts, while high-throughput tasks could be delegated to faster, less censorship-resistant Layer 2 applications like DeltaDeFi, the pioneering Hydra DEX.

Learning from Traditional Finance (TradFi)

Throuvalas points out that this layered model is already proven and successful in the Traditional Finance sector. In TradFi, the DTCC operates as a Layer 1 entity for order books, conducting simple balance updates, while Layer 2 infrastructures enhance market liquidity and facilitate swift trades through brokers like Fidelity.

Interestingly, this model aligns with the objectives of Bitcoin enthusiasts, who prioritize maintaining ultra-secure and decentralized base layers. Here, Layer 2 solutions focus on handling high-throughput applications, such as those used in Bitcoin transactions and token trades. This framework allows growth and scalability without overwhelming the foundational layer with every challenge at once.

Cardano, designed as a secure and decentralized platform, can benefit from this approach. As Throuvalas remarks, “Leave room for growth to the L2 solutions. It’s a long road, but the only one that makes sense.”

As Cardano implements key updates, it continues to solidify its status as a leader in the blockchain domain. Crypto analyst LaPetite commends the network for prioritizing core aspects like decentralization, security, reliability, and trust, instead of chasing fleeting trends and hype. Cardano’s track record of avoiding significant DeFi hacks underscores its robust architecture—an achievement attributed to its thoughtful design rather than luck.

### Frequently Asked Questions

Is Cardano’s approach better than Ethereum’s for DeFi?

Cardano and Ethereum have different architectural approaches to DeFi. While Ethereum’s monolithic dApp model integrates all functionalities into a single layer, Cardano’s layered scaling strategy offers flexibility and reduces overall costs and scalability issues. Each approach has its merits, depending on specific use cases and user preferences.

What are the benefits of layered scaling in blockchain?

Layered scaling allows for specialization, enabling Layer 1 to focus on security and decentralization, while Layer 2 handles high-throughput requirements. This segregation can result in increased efficiency, reduced costs, and better handling of complex applications without sacrificing security.

How does Cardano ensure the security of its network?

Cardano relies on a unique Proof of Stake consensus mechanism, which enhances its security. Moreover, its layered approach ensures that the primary blockchain remains secure and decentralized, while allowing scalable solutions at higher layers. This architectural choice has helped Cardano maintain a strong security track record.