What is Cardano (ADA)?

Cardano is a well-known third-generation blockchain platform created in 2015 by Charles Hoskinson, one of Ethereum’s founders. It is distinguished from the others by its use of mathematical principles in the consensus mechanism and its unique layered architecture. It is also considered a very ecological blockchain. Here is your ultimate Cardano guide.

Despite their growing popularity, Cryptocurrencies grapple with issues like scalability, energy usage, and integration with traditional currencies. Cardano positions itself as a third-generation public proof-of-stake blockchain, aiming to address these industry challenges and enhance the foundations set by predecessors like Bitcoin and Ethereum. At the time of writing this article, Cardano’s ADA ranks as the 11th largest cryptocurrency by market cap (excluding stablecoins) on CoinMarketCap.

What is Cardano (ADA)?

Cardano was conceived with a research-first approach, unlike many other cryptocurrency projects born out of a desire for quick profits. Under the umbrella of IOHK (Input Output Hong Kong), the development team collaborated with universities worldwide to ensure that every aspect of the platform was peer-reviewed and scientifically validated.

This approach led to much criticism, which arises from its perceived slower pace in releasing updates, DApps, and projects compared to its competitors. While many rivals adopt the move-fast approach, Cardano prioritizes thorough research and academic peer reviews to ensure they introduce innovations correctly. Some detractors have even labeled Cardano a »ghost chain« due to this deliberate approach. So, Cardano stands out as one of the select networks striving to circumvent the challenges that often ensnare other platforms.

While we all know Bitcoin (which introduced decentralized money) and Ethereum (which introduced smart contracts) as the first and second-generation blockchains, Cardano is considered to be the third generation because of its focus on scalability, sustainability, and interoperability. Unlike Bitcoin (BTC), Cardano has no authoritative white paper that predetermines its position in the crypto world. Instead, Hoskinson envisaged building system layers to solve problems in other crypto ecosystems.

Where Do the Names »Cardano« and »Ada« Come From?

»Cardano« pays homage to Gerolamo Cardano, a renowned Italian polymath of the Renaissance era. Born in 1501. Gerolamo Cardano was primarily a mathematician but also a physician, biologist, physicist, chemist, astrologer, philosopher, writer, and gambler. Quite the repertoire, isn’t it? Cardano was the first to systematically use negative numbers and laid the groundwork for probability theory. His book, Ars Magna (The Great Art), published in 1545, is considered one of the seminal works in algebra.

By naming the project after this illustrious figure, the Cardano platform emphasizes its commitment to groundbreaking research, innovation, and bridging the old with the new.

»ADA«, the native cryptocurrency of the Cardano platform, derives its name from Ada Lovelace, a 19th-century mathematician and writer. Often hailed as the world’s first computer programmer, Ada was the daughter of the famous poet Lord Byron. Her most notable work was with Charles Babbage on his design for a general-purpose mechanical computer, the Analytical Engine. Ada’s notes on the engine include what is now recognized as the first algorithm intended for implementation on a computer, making her the first computer programmer.

By choosing “ADA” as the ticker symbol, Cardano pays tribute to Ada Lovelace’s pioneering spirit and her contributions to the early days of computing. It’s a nod to the project’s forward-thinking ethos and its roots in technological innovation.

History

Launched in September 2017, this phase introduced the ADA cryptocurrency and allowed users to transfer and trade it. Following Byron, the Shelley era was all about decentralization. Launched in July 2020, Shelley ensured that the Cardano community maintained the majority of nodes running the network, not just the core team. This era set the stage for a more secure and robust blockchain. Cardano’s roadmap includes several other phases, each with its objectives and innovations: Goguen, Basho, Voltaire.

Historical milestones

• 2015: Charles Hoskinson co-founds Input Output Hong Kong (IOHK) with Jeremy Wood, laying the groundwork for the Cardano project.

• 2017: Cardano’s mainnet is launched in September, introducing the ADA cryptocurrency to the world.

• 2018: Cardano releases its first paper on the Ouroboros Proof-of-Stake algorithm, showcasing its commitment to energy-efficient blockchain solutions.

• 2019: The Cardano Foundation partners with Berlin blockchain venture studio Konfidio to accelerate Cardano adoption in Europe.

• 2020: The Shelley era begins in July, marking a significant step towards the decentralization of the Cardano network.

• 2021: Cardano’s Goguen era is ushered in, introducing smart contract functionality to the platform.

• 2022: The last major update (hard fork) of Vasili took place in June, increasing the usability and scalability of Cardano by increasing the block size limit to allow multiple transactions to be entered in a single block.

• 2023: Over 1,000 dApps are now in development on Cardano, and a number of high-profile projects, such as the Atala PRISM identity solution and the Cardano dAppStore, launched in 2023.

The Cardano project

Charles Hoskinson, a name synonymous with blockchain innovation, is at the helm of Cardano. As a co-founder of Ethereum, Hoskinson’s credentials in the crypto space are impeccable. However, Cardano sought to address the challenges faced by earlier blockchains. His vision? A blockchain that’s scalable, sustainable, and interoperable. Under his leadership, Cardano has been steered with a research-first approach, ensuring every development undergoes rigorous academic scrutiny.

As mentioned earlier, the Cardano project consists of three main organizations:

1. IOHK (Input Output Hong Kong)

Every protocol undergoes meticulous scrutiny, ensuring that Cardano remains at the cutting edge of blockchain technology. Beyond Cardano, IOHK is also involved in other blockchain projects, emphasizing its broader vision for the decentralized ecosystem.

2. The Cardano Foundation

Established in Switzerland, The Cardano Foundation is the project’s supervisory and educational arm. Its role is to ensure that Cardano remains true to its mission and to foster its adoption across various sectors. The foundation actively engages with the Cardano community, ensuring every ADA holder’s voice is heard. The Cardano Foundation also ensures that Cardano’s utility is recognized and integrated across industries by forming strategic partnerships.

3. EMURGO

It offers tailored solutions for businesses keen on integrating blockchain into their operations and fosters innovation within the Cardano ecosystem by investing in promising startups, ensuring its continuous evolution.

How does Cardano work?

The team is inspired by scientific publications and has adopted their peer-review approach. This means that case changes and new features (including the network consensus algorithm) are developed, reviewed, and approved by academics before use. The network’s code is written in Haskell and used by companies like Facebook, Twitter, and Microsoft.

Similar to Ethereum’s initial approach, Cardano employs a proof-of-stake consensus method, which is considerably more refined than Bitcoin’s proof-of-work system. Hoskinson believes that perfecting proof-of-stake could lead to a network that’s 250 times more decentralized than Bitcoin. With more than 3,100 staking pools, Cardano already stands as one of the world’s most decentralized cryptocurrencies. Its user distribution across these staking pools is balanced, reinforcing its decentralized nature. Cardano’s K parameter plays a pivotal role in this by diminishing staking rewards when an excessive amount of Cardano is staked in a single pool.

Advocates of proof-of-stake contend that it not only bolsters network security but also drastically cuts energy use and carbon emissions. Cardano has already advanced in areas like identity management and traceability and has forged several partnerships, including one with Ethiopia.

Architecture

At its core, Cardano’s architecture is bifurcated into two primary layers, each serving a distinct purpose:

• Cardano Settlement Layer (CSL): The CSL is where all ADA transactions occur. It’s designed to handle the transfer of ADA between accounts and ensure that these transactions are secure, fast, and transparent. The CSL employs the Ouroboros proof-of-stake consensus mechanism, which not only ensures energy efficiency but also offers robust security against adversarial attacks.

• Cardano Computation Layer (CCL): The CCL is where the magic of smart contracts happens. It’s a separate layer designed to manage the computational logic of contracts without interfering with the CSL. Features: The CCL is flexible, allowing for different computational logic for different contracts. This means that users can create custom rules for their contracts without affecting the underlying protocol.

Ouroboros: A perfected proof-of-stake protocol

Consensus algorithms dictate the operations and creation of verified transaction blocks in distributed ledgers, ensuring the ledger’s current state aligns with its entire transaction history. Blockchains primarily operate on consensus methods: Proof of Work (PoW) and Proof of Stake (PoS). While the reign of Proof-of-Work (PoW) has been long-standing, the environmental and efficiency concerns it raises have propelled the search for alternatives – proof-of-stake (PoS) and, more specifically, Cardano’s Ouroboros—a beacon of innovation in this space.

At its core, Ouroboros champions decentralization, operating through a vast, decentralized network of stake pools. This ensures a balanced power distribution, fortifying the network against potential threats and centralization pitfalls. Moreover, the protocol’s energy efficiency is fresh air, especially when juxtaposed against the energy-hungry PoW mechanisms, marking a stride towards eco-friendly blockchain solutions.

Yet, its badge of provable security elevates Ouroboros above its peers. This isn’t a mere marketing gimmick or a theoretical assertion. Ouroboros has weathered the storm of academic scrutiny, with its security properties undergoing rigorous peer review and earning accolades at leading cryptography conferences. It’s a protocol that, in terms of security, stands shoulder to shoulder with Bitcoin’s PoW but without the accompanying energy-intensive mining rigmarole.

Ouroboros operates in distinct time periods known as »epochs,« which are further divided into »slots«:

• Slot leaders: Within each slot, a slot leader is chosen based on their stake, and they are responsible for validating and adding transactions to the blockchain.

• Fairness ensured: The protocol ensures that the process of selecting slot leaders is random and unbiased, giving every participant a fair chance based on their stake.

What is ADA?

ADA is the native cryptocurrency of the Cardano blockchain. The maximum supply of ADA cryptocurrency is limited to 45 billion tokens, which will be released gradually. The hard cap on the total supply of tokens ensures the deflationary attribute of the cryptocurrency. It is worth pointing out that ADA is not mined like Bitcoin. Instead of miners, there are validators, which are selected by the network according to how much ADA currency they currently own. If they are chosen to validate transactions in a block, they place a bet on how confident they are that they will be able to verify all transactions.

ADA serves multiple purposes:

• Medium of exchange: Like other cryptocurrencies, ADA can be transferred between users as a form of payment.

• Staking: ADA holders can “stake” their tokens, participating in the network’s proof-of-stake consensus mechanism, thereby earning rewards.

• Governance: ADA will play a pivotal role in Cardano’s governance system, allowing holders to vote on protocol upgrades and changes.

Where can I buy ADA?

• Binance: One of the world’s largest and most popular exchanges, Binance provides a seamless experience for buying and trading ADA.

• Coinbase: Known for its user-friendly interface, Coinbase is an excellent platform for both crypto beginners and veterans to purchase ADA.

• Kraken: With its robust security features, Kraken is another reliable platform from which ADA can be acquired.

• eToro: For those who prefer a more social trading experience, eToro offers ADA along with insights from other traders.

What can I do with ADA?

• ADA as a medium of exchange: At its core, ADA functions as any cryptocurrency should. ADA can be sent and received anywhere globally, offering a decentralized, secure, and rapid means of transferring value. Also, an increasing number of merchants and service providers are accepting ADA as a form of payment, expanding its real-world utility.

• Staking and delegation: By holding and “staking” ADA in the Cardano network, users can earn additional ADA as a reward. If you prefer not to stake directly, you can delegate your ADA to a stake pool, allowing them to stake on your behalf while you reap a portion of the rewards.

• Governance and voting: ADA holders can propose, fund, and vote on projects through Cardano’s Project Catalyst, driving the platform’s evolution. As Cardano grows, ADA will play a pivotal role in voting on changes and upgrades to the protocol, ensuring a decentralized governance structure.

• Smart contracts and decentralized applications (dApps): ADA can be used as collateral in decentralized finance (DeFi) applications on Cardano. As developers build decentralized applications (DApps) on Cardano, ADA will likely serve as the primary token for various functionalities within these apps.

• Digital ID: Cardano’s focus on sustainability and real-world solutions has led to innovations in identity verification, such as Atala PRISM – This decentralized identity solution by Cardano allows users to own their personal data, with ADA playing a potential role in verification and transaction fees.

Cardano: Pros

• Research-Driven Approach: Cardano stands out for its commitment to scientific research and peer-reviewed protocols. This ensures that every feature and update is backed by rigorous academic scrutiny, setting a gold standard in blockchain development.

• Sustainable Consensus Mechanism: Cardano’s Ouroboros proof-of-stake consensus algorithm is not only energy-efficient but also offers a more scalable solution compared to the traditional proof-of-work systems used by many other blockchains.

• Layered Architecture: Cardano’s unique dual-layer structure separates the settlement layer from the computation layer. This design ensures greater flexibility, allowing for easier upgrades and reducing the risk of network congestion.

• Strong Governance Model: With mechanisms like Project Catalyst, Cardano offers a decentralized governance structure, allowing ADA holders to have a say in the platform’s future direction and development.

Cardano: Cons

• Development Pace: One of the criticisms often levied against Cardano is its slower development pace. While its research-first approach ensures robustness, it can sometimes mean slower rollouts compared to other blockchains.

• Network Adoption: Despite its technological prowess, Cardano still lags behind some other blockchains in terms of widespread adoption, especially when compared to giants like Ethereum.

• Unproven Smart Contract Capabilities: While the introduction of smart contracts is a significant milestone for Cardano, it’s still relatively new, and its capabilities in real-world scenarios remain to be fully tested.

Ethereum vs. Cardano

Now here comes the big question – Cardano or Ethereum? The ongoing debate over which blockchain will reign supreme is a constant buzz in the crypto world. Indeed, this competition drives teams to enhance their platforms. While Ethereum has carved its niche as a pivotal player in the crypto economy, boasting a market cap surpassed only by Bitcoin, Cardano is a newer entrant, adopting a more measured rollout strategy and still in its initial phases of expanding its capabilities and audience. Yet, there’s a unique link between the two: Charles Hoskinson, co-founder of Ethereum and the brain behind Cardano.

Ethereum:

Ethereum (ETH), often dubbed the “world computer,” revolutionized the blockchain space by introducing smart contracts, allowing developers to deploy decentralized applications (DApps) on its platform. Both Cardano and Ethereum are used for peer-to-peer transactions or payment for services and processing power within their underlying networks. But there are also differences between them:

Cardano Partnerships

• Ethiopia’s Ministry of Education

In a groundbreaking move, Cardano, through its parent company IOHK, partnered with Ethiopia‘s Ministry of Education. This collaboration aims to create a blockchain-based national ID and attainment recording system. With the potential to onboard millions of students, this partnership underscores Cardano’s commitment to leveraging blockchain for real-world, impactful solutions.

• New Balance

Fashion meets blockchain in Cardano’s partnership with global athletic brand New Balance. Together, they launched the “New Balance Realchain” initiative, a pilot project to ensure the authenticity of the brand’s products. By providing a tamper-proof, Cardano showcases the diverse applications of its blockchain beyond just finance.

• Wolfram Alpha

Cardano’s collaboration with the computational knowledge engine Wolfram Alpha aims to integrate Cardano data into the Wolfram ecosystem. This partnership paves the way for advanced smart contract functionalities and broadens the horizons for Cardano’s data utility.

• Tokyo Institute of Technology

Cardano’s partnership with TIT is a significant development for the project. It could lead to developing new scaling solutions that will make the Cardano network more scalable and efficient. One of the scaling solutions that Cardano is working on with TIT is called Hydra. Hydra is a layer-two scaling solution that allows multiple transactions to be processed simultaneously. This can significantly increase the throughput of the Cardano network.

Vasil update

Cardano’s long-awaited Vasil upgrade launched on 22 September 2022 and was completed a week later. The Vasil hard fork represented a significant upgrade to the Cardano network. At its core, a hard fork represents a network upgrade, resulting in the network splitting into two versions: one following the existing features and the other being an upgraded version. The Vasil hard fork enhanced Cardano’s smart contracts, offering a superior experience for users and developers. The upgrade enabled streamlining of the application-building process on the chain and introduced improvements at the infrastructure level, such as increased block size and transactions per second (TPS), while preserving its Proof-of-Stake (POS) mechanism.

The primary goal of Vasil was to enhance the network’s scalability, stability, and connectivity, reducing transaction costs and boosting transaction speeds. This isn’t Cardano’s first major upgrade; the Alonzo hard fork was launched previously to enable the development of DApps using smart contracts. Vasil, named in honor of Vasil St. Dabov, a key Cardano community member, introduced several Cardano Improvement Proposals (CIPs) to improve transaction throughput, efficiency, block latency speeds, and more. The upgrade also refined Cardano’s smart contract language, Plutus, and enhanced the platform’s security.

Conclusion

Cardano, a third-generation blockchain platform, has emerged as a formidable contender in the crypto space. Founded by Charles Hoskinson, one of Ethereum’s co-founders, Cardano differentiates itself through a research-first approach. It ensures that every protocol undergoes rigorous academic scrutiny. Its unique layered architecture, combined with its Ouroboros proof-of-stake consensus mechanism, positions it as an energy-efficient and environmentally friendly blockchain.

With ADA, its native cryptocurrency, Cardano offers a medium of exchange, staking opportunities, governance, and a foundation for smart contracts and decentralized applications. Notably, Cardano’s partnerships, such as those with Ethiopia’s Ministry of Education and New Balance, highlight its potential for real-world applications. The recent Vasil upgrade further underscores Cardano’s commitment to continuous improvement, scalability, and enhanced user experience. While comparisons with Ethereum are inevitable, Cardano’s distinct approach and vision set it on a unique trajectory. Among other large blockchains – such as Ethereum, Solana, and Avalanche, it remains a beacon of innovation, sustainability, and academic rigor in the blockchain world.

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