Intro to Cardano
Cardano is a blockchain platform that is designed to process transactions using a committed cryptocurrency called ADA.
This platform can handle all sorts of transactions but the real goal is to become the “Internet of Blockchains”, building an ecosystem that lets seamless interchangeability between different blockchains.
As we said, Cardano is a blockchain, and ADA, a coin, is what powers the network. In some ways, this is similar to the Ethereum blockchain.
Cardano is one of the biggest cryptocurrencies according to market cap. It’s created to be the next-generation evolution of Ethereum, with a blockchain that’s a sustainable, scalable, and flexible platform for running smart contracts. The idea is that platform allows the development of a broad range of decentralized finance apps, games, new crypto tokens, and more.
History of Cardano
Cardano was established in September 2017 by Charles Hoskinson, co-founder of Ethereum, and it focuses to be a third-generation blockchain project.
Think of Bitcoin as “crypto 1.0”, then Ethereum often referred to as “crypto 2.0”. Cardano is “crypto 3.0”, and it upgrades functionality that Ethereum was missing at first. Cardano’s main goal is to be an energy-efficient and highly scalable smart contract platform.
Unlike Bitcoin and other popular cryptocurrencies that are based on proof-of-work, Cardano uses a proof-of-stake consensus mechanism, that offers a more scalable and sustainable blockchain.
How does Cardano work?
Cardano works towards being the most environmentally sustainable blockchain platform. It uses Ouroboros, a unique proof-of-stake consensus mechanism.
Proof-of-work is the original crypto consensus mechanism, first popularized by Bitcoin mining. Decentralized cryptocurrency networks have to make sure that nobody spends the same money twice, without a central authority as the middleman. To accomplish it, this is when proof-of-work comes in.
Proof-of-work demands a huge amount of processing power, which is contributed by “miners’ all around the globe, competing to be the first to solve a math function.
The winner gets to update the blockchain with the latest verified transactions, and of course, is rewarded with an agreed amount of crypto.
Instead of using a network of miners who want to be the first to solve a puzzle, proof-of-stake uses a network of invested members called validators. And instead of contributing processing power, validators stake their own ADA.
The networks select a winner based on the amount of ADA that each validator has in the pool, and the length of time they’ve had it. They are rewarding the most invested members.
Once the winner has validated the latest block of transactions, others can witness that the block is accurate. When a certain number of certifications have been made the network updates the blockchain.
All validators that participated get a reward in ADA, which is issued by the network in proportion to each validator’s stake.
The Cardano blockchain is split into two different layers, called the Cardano Settlement Layer (CSL) and the Cardano Computing Layer (CCL). The CSL contains the ledger of balances and accounts and is a place where the transactions are validated. The CCL layer is where all the computations for apps are executed, via the operations of smart contracts.
This idea of splitting the blockchain into two layers is to help the Cardano network to process as many as a million transactions in a second.
What is ADA?
Ada is the cryptocurrency for the Cardano platform, named after Ada Lovelace, a mathematician, also known as the world’s first computer programmer from the 19th century.
ADA tokens power the Cardano platform, similar to how ETH tokens power the Ethereum platform. They are used to pay transaction fees and they are staked by validators who help maintain the stability and security of the network in return for earning rewards.
It’s planned to in the future, ADA serves as a governance token, which will allow holders to vote on upgrades and changes to the Cardano platform.
How to buy Cardano?
You cannot buy Cardano, instead, you buy its coin, ADA. To buy the coin you can sign up for an account with one of the prime cryptocurrency exchanges.
You can store ADA either in a crypto wallet or on the platform. As one of the most popular cryptocurrencies, you can buy ADA from most top crypto exchanges, as we mentioned above. Coinbase, Gemini, Binance, and Kraken are a few of the major competitors that sell ADA.
How to use Cardano?
ADA is used like any other cryptocurrency. You can use it for purchases and exchange it, or you could hold onto it as an investment. Also, it can be used to cover transaction fees on the Cardano network and for staking to earn more tokens.
If you would like to hold Cardano long-term, you should pay attention to which wallet you use. Cardano has two official wallets: the Daedalus wallet (which is a full node) and the Yoroi wallet (light node).
Both of these wallets allow users to earn new Cardano by staking their assets and allowing them to vote in a fund awarding ADA to Cardano projects, called Project Catalyst.
Institutions and developers can use the Cardano network for projects, even if they don’t use the ADA token directly. There are plenty of non-fungible tokens and DeFi initiatives within the Cardano ecosystem.
Cardano native tokens
The Cardano blockchain introduced the ability to create native tokens on March 1st, 2021. Similar to Ethereum tokens, which include thing stablecoins like USD coins or NFTs, Cardano native assets can be created and distributed on the blockchain and are able to interact with smart contracts.
However, unline Ethereum tokens, the Cardano native tokens are not created via smart contract. Instead, they run on the same design as the ADA cryptocurrency.
According to the nonprofit Cardano foundation, this design makes Cardano native assets first-class citizens on the blockchain. Their native design can, in theory, make these tokens more secure and lower the fees associated with transactions.
Let’s take a look at the advantages and disadvantages of Cardano.
Advantages of Cardano
There are a few things that make Cardano stand out:
- Faster transactions
- More environmentally friendly
- Peer-reviewed network
Cardano is much faster at processing transactions than Ethereum 1.0 (Classic Ethereum) and Bitcoin. Cardano can process more than 250 transactions per second (TPS), compared with about 4.6 TPS for Bitcoin and between 15 and 45 TPS for Classic Ethereum, or Ethereum 1.0. This is what makes the Cardano network very scalable.
Cardano is one of the most environmentally friendly blockchain systems. In a few interviews, Hoskinson stated that Cardano is a 1.6 million times more energy-efficient than Bitcoin.
The Cardano team works closely with academics to produce peer-reviewed research to guide blockchain development. They claim its nature as a peer-reviewed and open-source blockchain helps ensure its evolution and survival.
Disadvantages of Cardano
Cardano is trying to create a better version of the blockchain, but other competitors like Ethereum have the advantage of longer histories of use and more consumption by developers.
One of Ethereum 2.0’s upgrades includes a proof-of-stake approach which could negate a key Cardano advantage.
The cryptocurrency market is overcrowded now more than ever, and it’s hard to stand out. There are a lot of competitors in the same place. Cardano doesn’t have that one thing that makes it pop out in the market just yet. However, with the low prices it gives, which are beneficial, this also means less demand for network space.
As smart contracts are being introduced into the network, there is a chance that this could change since smart contracts require more storage than payments.
The technology behind Cardano?
The investors of Cardano believe it could become one of the leading cryptocurrencies thanks to its environmentally friendly and innovative system. Cardano brings a whole new standard in technology. It’s open and inclusive, and it aims to challenge the old and activate a new age of globally-distributed, sustainable innovation.
Building gradually from small to global, Cardano improves how global society interacts, transacts, and creates – and ultimately operates.
As we said, Cardano is a blockchain platform developed using the Haskell programming language: a functional programming language that enables Cardano to pursue evidence-based development, for unparalleled security and stability, and is built on the innovative Ouroboros proof-of-stake consensus protocol.
Future of Cardano
Cardano is designed more for sustainability and less for short-term success. Cardano has a clear roadmap, and due to the clear development plan, the blockchain is constantly being further developed.
The developers analyze the weaknesses of other blockchains according to evidence-based standards and improve them on Cardano. It is the most technically mature blockchain on the market.
In the markets of late 2017 and late 2021, there was a massive price increase that enabled investors to make huge profits. Cardano is mostly characterized by the fact that it either stayed in the top 10 most valuable cryptocurrencies or was very close to them.
This is a long-term potential of Cardano because the cryptocurrency impresses with its consistency over the years.
Cardano powers a whole new, globally scalable, and more secure solution. Its technology is constantly improved upon through evidence-based development methods, and guided by an absolutely democratic voting system.
Every member has a voice. The opportunity of Cardano is completely flexible to your use case. It is an opportunity that creates other opportunities, continuously.