Cardano

What is Cardano (ADA)?

Cardano is an open-source blockchain project that attempts to take a systematic approach to the research and development of its scalability, security, and decentralization.

It is often referred to as a third-generation cryptocurrency, if Bitcoin is considered the first and Ethereum the second.

The project utilizes unique architecture and also relies on its research results being peer-reviewed, making it significantly different in many ways from its competitors. Still, at its core, Cardano is a proof-of-stake (PoS) blockchain that attempts to empower individual owners with voting rights.

Any proposed changes to the software are therefore voted on by holders of Cardano’s native ADA token. These same holders also vote on what projects within the ecosystem receive funding for development.

Cardano was named after the 16th-century Italian polymath Gerolamo Cardano, whereas the ADA token pays homage to the 19th-century mathematician and the world’s first computer programmer, Ada Lovelace.

When Was Cardano Launched?

The Cardano blockchain was launched in 2017.

However, the story of its founding dates back to that of Ethereum, which was developed in the years 2014 and 2015 by Vitalik Buterin alongside Dr. Gavin Wood, Anthony Di Iorio, Mihai Alsie, Amir Chetrit, Joseph Lubin, and Charles Hoskinson.

Following internal disagreements, Charles Hoskinson and his former colleague Jerry Wood left the Ethereum Foundation and established a new company called Input Output (IOHK). Hoskinson, the CEO of IOHK, had been involved in cryptocurrency since 2011. Within 2 years of IOHK’s establishment, he launched the Cardano blockchain.

How Does Cardano Work?

Like many other blockchains, Cardano forms a network of computers, also called nodes, that build and find consensus on a growing series of batches of transactions. These batches are the blocks that form the blockchain.

Each transaction batch has an identifier of the chain that must be present for the block to be considered valid. Whenever a node adds a new block to the chain, transactions in that batch are executed and reflect the new network state.

How is Cardano Secured?

Uniquely, Cardano currently uses a dual-layer architecture consisting of a settlement layer and a computational layer.

The settlement layer provides scalability, allowing ADA token holders to transact almost instantly with very low fees. The computational layer, on the other hand, supports smart contract operation while also securing the network.

What is Ouroboros?

Ouroboros is the name given to Cardano’s proof-of-stake consensus algorithm that dictates how networks agree on the addition of new blocks to the blockchain.

Ouroboros divides chains into 5-day epochs and further divides these epochs into 20-second time slots. A slot leader, who is responsible for adding a block to the chain, is elected for each of these time slots.

Each of these slot leaders needs to consider the last few blocks of the received chain as temporary. This creates a small settlement delay, which assures safety as long as more than 51% of the stake is controlled by participants following the protocol.

What Makes Cardano Unique?

Cardano was one of the first successful proof-of-stake blockchains. The project continues to take pride in the peer-review process that all of the developed technology goes through before launch. This is in stark contrast to the approaches taken by most other projects that tend towards ‘trial-by-fire.’

The Cardano team employs this approach to anticipate pitfalls in advance. Moreover, it allows ideas to be researched, challenged theoretically, as well as mathematically modeled and tested before they are specified to inform development.

Cardano’s focus on community and returning power to the individual has led to the development of very strong online support for the network. Because of this, Cardano has a vocal user base, while the founder Charles Hoskinson remains one of the cryptocurrency sphere’s most visible personalities.

Does Cardano Support Smart Contracts?

In September 2021, the ‘Alonzo’ hard fork brought Cardano into its ‘Goguen’ era, allowing users to develop and deploy smart contracts. Smart contracts allow for the automatic execution of a predefined action when conditions are met.

Smart contracts are transparent and visible to all on-chain. They function similarly to a vending machine that, when supplied with the correct amount of funds and the right selection, will give the customer the desired item.

These smart contracts have allowed for the creation of a growing ecosystem of decentralized applications (dApps) on the Cardano blockchain. Unlike centralized applications, dApps are controlled by the programming logic written into their smart contracts rather than an individual or a company.

How is Cardano Upgraded?

Cardano is developed by IOHK and its CEO and founder Charles Hoskinson. Its trend of divergence from other blockchains continues in the development area thanks to a more modular approach.

Phases of the Cardano roadmap are split into different ‘eras’ but do not function as a timeline. Rather, they are being worked on simultaneously and resemble more of a development track.

What is Cardano’s Roadmap?

The first phase, Byron, named after the poet and Ada Lovelace’s father, saw the creation of Cardano’s primary architecture and basic functionality in addition to the launch of wallet applications.

The following era, Shelley, further decentralized the network and shifted its reliance to community nodes along with delegation and incentivization schemes.

Smart contracts and the ability to support new tokens were brought by the aforementioned Goguen era, while the next, Basho, will add solutions for scalability, including sidechains.

The final era, Voltaire, will fully transfer the responsibility of Cardano’s future to the community using the treasury, voting, and delegation systems. This will allow ADA to evolve into a fully decentralized protocol.

How Much ADA Is In Circulation?

The native token of the Cardano blockchain, ADA, has a total supply of 45 billion tokens. 57.6% of this was distributed to investors via an initial coin offering to raise $62.2 million in funding.

2.5 billion ADA was allotted to IOHK following the network’s launch. Moreover, 2.1 billion ADA were given to a partner company Emurgo, and 648 million ADA went to the non-profit Cardano Foundation that promotes the platform.

ADA hit an all-time high of just over $3.10 in September 2021, ahead of the launch of the Goguen era which introduced smart contracts to the Cardano blockchain.

As of May 2022, there is a circulating supply of over 31 billion ADA. Holders of the currency that stake ADA are also considered validators. They function as nodes that track the network’s current state and are incentivized every epoch at an annual rate of around 4.5%.

How Do You Buy Cardano?

You can purchase Cardano on every major cryptocurrency exchange. It is typically traded against most fiat currencies, stablecoins, and major cryptocurrencies like BTC and ETH.

Not to mention, you can also purchase ADA on any decentralized exchange on the Cardano network, as well as in peer-to-peer transactions.

Is It Possible to Buy Cardano Instantly?

Cardano transactions aren’t instantaneous. That said, epochs are divided into time slots as small as 20 seconds, so transactions can be confirmed almost instantly.

While transactions on traditional financial systems are reflected instantly, those funds don’t settle for hours or even days. This makes Cardano far closer to an instant settlement system, like many other top cryptocurrencies.

However, purchasing ADA in different ways may lead to slight differences in transaction time and settlement.

For example, purchasing Cardano on a centralized exchange (CEX) may seem instantaneous, but the movement of ADA may not actually be taking place. Rather, the balance is simply reflected in the user’s account, although it remains in the wallet of the CEX.

In reality, Cardano will be transferred when the user withdraws the ADA from the CEX to a private wallet. This may take longer than the usual block mining time because of several reasons, including anti-money laundering protocols and batch transferring mechanisms used by the CEX.

Contrastingly, purchasing crypto on a DEX only depends on the block mining speed of the blockchain and the network congestion (if any). In Cardano’s case, it’s extremely fast and further solutions for improving scalability are being worked on as part of the Basho era.

How Do You Store Cardano?

Cardano is stored in wallets, which can come in several forms.

As mentioned above, many users hold their ADA on centralized exchanges. This is sometimes called an exchange wallet, although in reality the exchange holds the funds centrally and reflects a user’s nominal balance in their account.

Like any cryptocurrency, Cardano can be held in private custody by individual users as well, using either cold or hot wallets. This has the added benefit of further decentralizing the network, returning voting power to the individual’s hands.

Cold wallets, referring to cold storage, are not connected to the internet. Offline devices, such as computers or simply a piece of paper with private keys are some examples of a cold wallet.

A hot wallet, meanwhile, is a wallet that is connected to the internet. This could come in the form of either a node that stores the entire blockchain, a smaller piece of software, or even a browser plug-in or an app.

IOHK’s official desktop wallet, Daedalus, functions as a full node on a user’s personal computer.

What is Proof-of-Stake versus Proof-of-Work?

In a PoW blockchain, computers dedicate their processing power toward solving cryptographic puzzles that help to maintain the network’s security.

In contrast, a PoS blockchain normally allows validators to validate blocks in a manner proportional to their stake in the system. This structure is designed to disincentivize attacks on the system as the participants with the power to do so stand to lose the most.

However, this structure also has advantages for large centralized exchanges if smallholders predominantly use CEX accounts to store ADA. This creates large concentrations of the currency in exchange wallets, giving them more sway over the system’s voting power.

Cardano Energy Consumption

PoW blockchains rely on ‘miners’ to solve computationally complex equations to create new blocks. They are further secured by adding more and more hardware to the network, which increases both the computational power and the energy usage.

In Cardano’s Ouroboros PoS protocol, proof of stake participants, or stake pools, create new blocks. According to IOHK, at the same level of decentralization Cardano could consume 0.015 Gigawatt-hours annually compared to Bitcoin’s 67,000 GWh, or a factor of four million times less. Meanwhile, cryptocurrency’s direct competition, the banking system, was estimated by Galaxy Digital to consume over 263 TWh of energy every year.

Is Cardano a Good Investment?

Cardano’s vision of building global solutions to global problems is an example of the big-picture thinking that is beloved by its community. Meanwhile, the individual and the community are simultaneously empowered as smallholders leverage their stakes to participate in network governance.

Many have pointed to Cardano’s willingness to venture off the beaten track. For example, Cardano signed a landmark deal with the Ethiopian government to create digital identities for 5 million students and teachers.

Since the Cardano ICO of $0.0024, it hit an all-time high of over $3.10 in 2021, marking returns of over 1000x.