What Exactly Is Cardano (ADA)?
Cardano is a general-purpose blockchain project based on Proof-of-Stake (PoS). Cardano, a ‘third generation’ blockchain, has set out to solve the common scalability issues that plague most ‘second generation’ blockchains (such as Ethereum and its ever-increasing gas fees).
A rigorous scientific philosophy, as well as copious amounts of academic research and peer-review, have defined Cardano’s development.
The Cardano project has created a detailed development roadmap comprised of five primary stages:
- Phase 1 – Byron: The network goes live with basic functionality (transferring ADA).
- Phase 2 – Shelley: Steps are taken towards decentralization with community-run nodes.
- Phase 3 – Goguen: Smart Contracts are enabled on the network.
- Phase 4 – Basho: Sidechains are introduced, enhancing scalability and interoperability.
- Phase 5 – Voltaire: Governance and self-funding makes ADA fully decentralized.
Each stage of the Cardano roadmap enables an essential component of the final network, and when completed, the network will be fully decentralized – governed by ADA holders and funded by its own small transaction fees.
How Does Cardano Function?
As mentioned above, Cardano is regarded as a ‘third generation’ blockchain, and it’s proving to be a constant source of innovation – primarily by addressing the scaling issues that plague both generation one (Bitcoin) and generation two (Ethereum).
Whereas previous generation blockchains have high transaction fees and low TPS (transactions per second) due to design limitations, Cardano is being built from the ground up to provide a truly decentralized, low-fee, high-TPS Proof-of-Stake (PoS) network solution.
Cardano intends to improve the network’s speed and overall capability in a variety of ways. ADA’s own Proof-of-Stake (PoS) consensus protocol, dubbed Ouroboros, is at the forefront. Ouroboros, which was designed with efficiency in mind, significantly reduces the network’s energy cost – particularly when compared to a Proof-of-Work (PoW) mechanism – without sacrificing security.
Hydra is the upcoming layer 2 solution for the Cardano project. Hydra, which is designed for theoretically infinite scalability, allows for an increase in throughput as each new node joins the network.
Cardano also has a one-of-a-kind feature called the Hard Fork Combinator. Essentially, this innovation enables the network to hard-fork without disrupting the blockchain. The recent Shelley phase update put this to the test, and it worked flawlessly.
Who Are the Cardano Founders?
Charles Hoskinson, a co-founder of the Ethereum network, founded Cardano. He is the CEO of IOHK, which is working on the Cardano project.
Hoskinson became interested in cryptocurrencies in 2011, when he began mining and trading. Later, in 2013, he took his first professional step into the world of cryptocurrency when he created an educational course about Bitcoin that was taken by over 80,000 students.
Hoskinson left to pursue his own vision of a ‘third generation’ blockchain after assisting with the early development of Ethereum and the establishment of the Ethereum Foundation. After he had witnessed the scaling bottlenecks that traditional blockchains would invariably face, the Cardano project was founded in 2015 to usher in a new era of blockchain.
What Makes Cardano So Special?
Cardano is notable for being one of the largest blockchains to successfully implement a Proof-of-Stake (PoS) consensus mechanism. PoS is a far less energy-intensive mechanism than Bitcoin’s Proof-of-Work (PoW) algorithm.
Ethereum is in the process of transitioning to PoS after witnessing the inherent benefits enjoyed by other projects. However, Ethereum’s transition will take time and may encounter difficulties at any stage. Cardano already has a fully operational PoS network.
Cardano’s developers have taken pride in ensuring that all technology developed is subjected to a rigorous process of peer-reviewed research, which means that every single idea related to the network can be challenged before it is committed. This level of academic rigor contributes to the Cardano blockchain’s resilience and stability, ensuring that many potential future issues are identified before they become a real problem.
What Is the Value of Cardano (ADA)?
ADA is the native token of the Cardano network, named after the 19th-century mathematician Ada Lovelace. In an Initial Coin Offering (ICO), ADA raised $62.2 million USD and distributed 57.6% of the total ADA supply to investors.
The ADA token is both a digital currency and a means of transacting on the Cardano network (much like ether/ETH is required to transact on the Ethereum network).
Holders of ADA have a physical stake in the Cardano network. The ADA tokens can be used in stake pools to earn staking rewards, and the network’s future direction will be entirely governed by ADA holders, who can use their stake to vote on development decisions.
How Secure Is the Cardano Network?
Cardano is protected by Ouroboros, a custom-built Proof-of-Stake (PoS) protocol.
Ouroboros is described as a blend of innovative technology and mathematically validated mechanisms, with a dash of behavioral psychology and economic philosophy thrown in for good measure. Ouroboros’ primary goal is to achieve sustainable and ethical growth with little to no environmental impact.
According to the project, Ouroboros improves the security of Proof-of-Work (PoW) consensus mechanisms while consuming far less energy – at a rate reported to be up to 4x more energy efficient than Bitcoin.
An incentive mechanism has been built directly into Cardano’s design to ensure active participation from all network nodes. Participants in the network are frequently rewarded with ADA for their participation.
Choosing a Cardano Wallet
Because Cardano (ADA) is a well-known cryptocurrency, it is supported by a wide range of wallets, both software and hardware. There are numerous options for users to choose from, and each user must make a decision based on their specific needs.
Cardano Is Used in What Ways?
Cardano’s native ADA token can be used to transfer value in the same way that cash is currently used. Though many cryptocurrencies have this feature, ADA also has other uses built into its design.
The ADA project’s Proof-of-Stake (PoS) consensus protocol, in which ADA is staked on the Cardano blockchain to verify transactions, is a key feature. Those who stake their ADA on the blockchain receive rewards in the form of additional ADA. This staking protocol ensures active participation and uptime while also contributing to the overall security of the blockchain.
Another application of ADA on the Cardano network is voting and governance. Cardano, unlike other blockchain projects, does not rely on miners to determine its future development; this responsibility is shared by all ADA stakeholders. When a new change or enhancement to the network’s functionality is proposed, ADA holders vote on it with their tokens. This will eventually lead to Cardano becoming a completely decentralized project governed by those who invest in it.
The ADA token will also be used to power the various smart contracts that will be enabled on the Cardano blockchain with the launch of Phase 3 – Goguen. ADA will be used by developers to create and power these smart contracts and decentralized applications (dApps).