What is Cardano?

Key Takeaways

One of the main problems in the blockchain ecosystem is the so-called trilemma, a term that describes the difficulty blockchain’s face in remaining secure and decentralized, while also scaling for the future. While no blockchain has officially solved the blockchain trilemma, some have made significant progress. One prime pioneer in this regard is the Cardano network.

Cardano is a blockchain that claims to have balanced security and decentralization with the all-important ability to scale. But unlike many other blockchain projects, it was developed with a research-driven approach, underpinned by academic research and a formal development methodology. In this article, we’ll explore what Cardano is, how it works, what the native token’s used for, wallet options on Cardano and the elements that make it a compelling platform for decentralized applications and smart contracts.

What is Cardano (ADA)?

Cardano is an open-source blockchain platform founded in 2017 by Charles Hoskinson, one of the co-founders of Ethereum. Hoskinson’s background in mathematics and his experience with Ethereum inspired him to develop Cardano.

Named after the Renaissance mathematician and physician Gerolamo Cardano, Cardano’s goal is to solve key issues in the blockchain space, including scalability, interoperability and sustainability. The platform aims to achieve this through a layered architecture and a rigorous approach to development. 

Its roadmap consists of five stages: Byron (foundation), Shelley (decentralization), Goguen (smart contracts), Basho (scaling), and Voltaire (governance). Cardano is currently in the Basho era with numerous decentralized applications already live on the platform.

Cardano uses a custom proof-of-stake consensus mechanism called Ouroboros. Compared to traditional proof-of-stake, Ouroboros offers enhanced randomness, improved scalability and increased security. Cardano’s native cryptocurrency is ADA. It empowers the Cardano ecosystem with utility and allows holders to stake their holdings as well as vote on governance.

Who Are the Founders of Cardano?

Cardano was founded by Charles Hoskinson, a mathematician and entrepreneur who was also one of the co-founders of Ethereum. He established Input Output Hong Kong (IOHK ), a technology company responsible for the development and maintenance of the Cardano platform. Aside from IOHK, there are two other entities involved in the development of Cardano:

• The Cardano Foundation is a non-profit organization dedicated to promoting Cardano to the public. It focuses on three main areas: educating people about Cardano, encouraging the adoption of the Cardano platform, and enhancing the operational resilience of the Cardano blockchain.
• EMURGO: An organization focused on new partnerships, investing in projects that use the Cardano blockchain, and providing education about the platform. It plays a key role in promoting the adoption and commercialization of Cardano’s blockchain technology.

How Does Cardano Work?

The Cardano network uses its own custom Proof-of-Stake consensus mechanism called Ouroboros. The network was designed to be energy efficient and capable of hosting an ecosystem of dApps, while remaining scalable for the future. 

Cardano has a layered architecture that consists of two layers:

• The Settlement Layer is the foundation of the Cardano network. It makes ADA transactions possible, validates them with Ouroboros, records them and securely transfers value between accounts. 
• The Computation Layer allows developers to create and deploy decentralized applications on the Cardano network. This layer is responsible for the execution and computation of smart contracts.

This separation between the two layers enhances Cardano’s scalability, security, and flexibility. Let’s take a closer look at how that works.

Scalability

Traditional blockchains often struggle with limited transaction throughput, which can lead to slower transaction times and higher fees. To overcome this, Cardano’s approach to scalability involves several strategies. This includes using sidechains, which allow transactions to be processed off the main chain, and the implementation of the Hydra protocol. 

Hydra is a scaling solution that has the potential to facilitate millions of transactions per second, making Cardano one of the fastest and most scalable blockchain platforms. In terms of scaling methodology, Cardano and Ethereum are somewhat similar.

Interoperability

Interoperability refers to the ability of different networks to communicate and interact with one another. Cardano aims to facilitate seamless interoperability across different blockchain networks by using protocols that facilitate cross-chain transactions. 

For example, Cardano’s planned implementation of atomic swaps will allow users to exchange ADA for other cryptocurrencies without needing a centralized exchange, thereby reducing the risk of hacks and theft. Additionally, Cardano implements sidechains and bridges, enabling secure data transfer and contract execution across various platforms.

Sustainability

Blockchain sustainability is the ability of a platform to develop and prosper over time. Cardano ensures sustainability through its treasury system, which allocates a portion of each transaction fee to a treasury fund. This fund can be used to finance future development projects, ensuring that the platform remains sustainable and self-sufficient, with an emphasis on continuous upgrades.

Additionally, the platform’s PoS consensus mechanism is energy-efficient, making it a more sustainable alternative to energy-intensive proof-of-work systems. Its focus on interoperability further bolsters its long-term sustainability.

Ouroboros: Proof-of-Stake on Cardano

Ouroboros is the first peer-reviewed proof-of-stake protocol. Unlike proof-of-work, which requires significant computational power, Ouroboros relies on ADA holders to validate transactions and create new blocks. 

Participants who wish to validate transactions must lock up a certain amount of ADA, turning them into stakeholders. The protocol randomly selects stakeholders to add new blocks, ensuring decentralization and security. Ouroboros also supports the delegation of staking power, allowing ADA holders to delegate their staking responsibilities to a stake pool operator while still earning rewards.

ADA Tokens Explained

Named in honor of Ada Lovelace, a 19th-century mathematician recognized as one of the first computer programmers,  ADA is the native cryptocurrency of the Cardano network. The ADA token serves multiple functions within the Cardano ecosystem, making it an integral part of the platform. It is used for:

• Transfers of Value
• Staking
• Governance
• Powering Smart Contracts

Transfer of Value

Like most cryptocurrencies, ADA can be used as a medium of exchange. Users can send and receive ADA for goods and services or trade it on various cryptocurrency exchanges. The transfer of ADA is fast and cost-effective, thanks to Cardano’s efficient network.

Staking

One of the unique features of Cardano is its proof-of-stake consensus mechanism, which allows ADA holders to participate in the network’s security. By staking ADA, holders can become validators or delegate their stake to a stake pool operator. In return, they earn annual yield rewards in the form of additional ADA, providing an incentive to secure the network.

Governance

Cardano has a special governance model that allows ADA owners to actively participate in the decision-making processes on the platform. ADA can be used to vote on proposals for protocol upgrades and other key decisions. This decentralized governance ensures that the community has a direct say in the platform’s development and its future direction.

Powering Smart Contracts

Cardano is a layer one blockchain, meaning it’s a platform for its own ecosystem of native dApps, all driven by smart contracts. ADA is used to power those smart contracts, making it the lifeblood of the Cardano ecosystem.

With the implementation of the Goguen era, Cardano introduced the ability to create and execute smart contracts. These contracts are self-executing agreements with the terms directly written into code, enabling decentralized applications and automated transactions. 

The amount of ADA required to deploy a smart contract on Cardano can vary based on several factors. These include the complexity of the contract, the size of the code, and the current transaction fees on the network. 

What Is the Total Supply of ADA? Tokenomics Explained

The total supply of ADA is capped at 45 billion tokens. So far, a significant portion of this supply is in circulation (35,9 billion) with the remainder allocated for future staking rewards and development. The fixed supply guarantees scarcity, while the distribution mechanism promotes decentralization and security.

Cardano Ecosystem – dApps and Projects on Cardano

Cardano aims to be more than just a cryptocurrency, it aspires to be a comprehensive decentralized app ecosystem. The platform’s smart contract capabilities enable the development of a wide range of applications, from DeFi platforms to metaverse projects. Here are a few examples:

DeFi Services

SundaeSwap is one of the most popular decentralized exchanges on Cardano. It allows users to trade ADA and other tokens in a decentralized manner. As one of the first native DEXs on the network, SundaeSwap had the advantage to solidify itself as the main DEX of the ecosystem. It offers a user-friendly platform for trading, staking, and liquidity provision.

Native dApps

Atala PRISM is an identity solution built on the Cardano blockchain. It was developed by Input Output and it aims to provide individuals with control over their personal information. Atala PRISM enables users to share data securely and selectively. This decentralized application has use cases in various sectors, including education, healthcare, and finance, offering a versatile solution for identity management.

Metaverse

Pavia is a metaverse project on the Cardano blockchain that aims to create a virtual world where users can own land, build assets, and interact with others. The platform provides individuals with a unique blend of gaming, virtual reality, and blockchain technology, delivering a decentralized and immersive experience.

Cardano Wallet Options

Cardano offers a variety of crypto wallet options catering to different user preferences and levels of expertise. Some of the more popular Cardano wallets include:

Daedalus Wallet 

One of the most popular choices is Daedalus, a full-node wallet developed by IOHK. It provides a high level of security and supports the full Cardano blockchain, allowing users to participate in network validation. 

Yoroi Wallet 

Another widely used wallet is Yoroi, a lightweight wallet developed by EMURGO. Yoroi offers a more streamlined experience, available as a browser extension and mobile app, making it ideal for everyday transactions.

Nami Wallet 

Another browser extension wallet that’s easy to use and perfect for everyday transactions. Just like Yoroi, it has a user-friendly interface and it supports ADA staking. One standout feature of Nami is its integration with Ledger & Trezor.

Ledger & Trezor Wallets

If you’re interested in hardware wallets, Ledger and Trezor both support Cardano network, meaning you can use them to secure your ADA tokens, while keeping your private keys completely offline. 

The Bottom Line

Cardano is a pioneering blockchain platform that addresses some of the most pressing issues in the cryptocurrency space, including scalability, interoperability, and sustainability. With its proof-of-stake consensus mechanism, comprehensive ecosystem, and robust governance model, Cardano is well-positioned to play a significant role in the future of blockchain technology. As the Cardano platform continues to evolve, it presents numerous opportunities for developers, investors, and users.

FAQ

How to Buy Cardano (ADA)

You can buy Cardano’s native ADA on various cryptocurrency exchanges, such as Binance, Coinbase, and Kraken. To purchase ADA, you’ll need to create an account on one of these platforms, complete the required KYC verification process, and deposit funds. You can then place an order to buy ADA coins.

How to Sell Cardano (ADA)

To sell ADA, you can use the same cryptocurrency exchange where you purchased it. Simply navigate to the trading section, select ADA as the asset you want to sell, and specify the amount. You can choose to sell ADA for fiat currency or exchange it for another cryptocurrency.

What’s the Price of Cardano??

The price of ADA fluctuates based on market conditions, including demand, supply, and broader economic factors. To find the current price of Cardano, you can check cryptocurrency tracking websites like CoinMarketCap or CoinGecko.

What dApps Are on Cardano?

Cardano hosts a variety of dApps across different sectors. Notable examples include SundaeSwap (DeFi), Atala PRISM (decentralized identity), and Pavia (metaverse). The ecosystem continues to grow as more developers and projects join the platform, expanding its range of applications and services.