What is Cardano (ADA)?


6 mins read January 23, 2023

Cardano (ADA), founded in 2015, is one of the largest cryptocurrencies by market cap. Cardano is often considered a rival to the second-largest cryptocurrency, Ethereum. 

Like many blockchain technologies, it aims to provide the world’s underbanked financial services. However, the top of the list for Cardano is to become the “Internet of Blockchains”, creating a blockchain technology that allows seamless interactions or interoperability between different blockchains. 

It is no surprise that Cardano has become a favourite in the crypto community. In this article, we’ll cover all you need to know about Cardano: its use cases, how it works and what makes it unique in the crypto space.

History Of Cardano

Cardano was created in 2015 but began trading publicly in October 2017 at $0.0024 before rising to an ATH of $3.18 in September 2021. Cardano was developed by technology company Input Output Hong Kong (IOHK), founded by Ethereum’s co-founder, Charles Hoskinson. 

Charles Hoskinson began developing Cardano after recognising the limitations of scalability associated with traditional blockchains. He founded Cardano to usher in a new era of blockchain, the third-generation blockchain, as an alternative to Ethereum’s second-generation blockchain. 

Cardano’s ticker symbol ADA is named after Countess of Lovelace, Augusta Ada King, the first computer programmer. 

What is Cardano?

Cardano is a multipurpose blockchain designed to be flexible and scalable and allow for the creation and development of decentralised finance apps, games, crypto tokens and more. Cardano is based on peer-reviewed academic research and has a versatile team of mathematicians, scientists, and engineers driven by mathematical principles and academic and scientific philosophy. 

Cardano has over 90 whitepapers on its technology, and using research generated by these experts has a defined purpose of solving the limitations of traditional blockchains in security, interoperability, and scalability. Similar to Ethereum, it aims to serve as a base layer for applications and other blockchain technology to be built on. 

However, Cardano still needs to be fully operational but, at the end of its development roadmap, is positioned to be a revolutionary project.

What is ADA?

ADA is the crypto token for the Cardano blockchain. Like Ether for Ethereum, ADA tokens allow users to pay transaction fees and are also issued as a reward for running its Proof of Stake system.  ADA fuels the Cardano blockchain and will be used as a governance token in the future, allowing holders to vote on the governance of the Cardano platform. 

Cardano has a limited supply of 45 billion tokens, with nearly 34 billion in circulation. The smallest unit of ADA is called a Lovelace. 1 Lovelace is equal to 0.000001 ADA.

How Does Cardano Work? 

Cardano was created to resolve the scalability limitations of the first generation of crypto (Bitcoin) and the second generation (Ethereum). This is why the Cardano community often praises it as the third generation. While seeking to resolve this, Cardano is also focused on creating an environmentally friendly and sustainable platform. This is why Cardano utilises the Proof of Stake consensus mechanism called Ouroboros. 

The Cardano blockchain is divided into two layers: the Cardano Computing Layer (CCL) and the Cardano Settlement Layer (CSL). The CCL is the aspect of the blockchain that allows for its interoperability. The CCL allows for other applications to be executed on the blockchain. The CSL is the Ouroboros consensus mechanism that contains its ledger of accounts, transactions and balances. 

Cardano’s dual blockchain is envisioned to allow it to process a million transactions per second, unlike Bitcoin and Ethereum. Like Ethereum, Cardano is decentralised and operates on an open protocol allowing anyone to secure the network, complete transactions and create decentralised applications on its blockchain. 

With its Ouroboros consensus mechanism, Cardano cannot be mined, unlike bitcoin, which uses a Proof-of-Work consensus algorithm. Instead, through staking, validators can validate a transaction and earn a reward in ADA for their contribution to the network. 

The Cardano Layer 2 solution, Hydra, allows it to scale and allow for new nodes to be added to its network.   

What makes Cardano Unique? Cardano Vs. Ethereum

One of the significant criticisms of top cryptocurrencies like Bitcoin and Ethereum is that they run on Proof of Work consensus mechanisms which are highly energy-consuming. However, since Ethereum moved to a Proof-of-Stake blockchain, there are a few differences between Cardano and Ethereum.

The major difference is that Ethereum runs a single layer, but Cardano runs a dual system (the CSL and CCL) to power its smart contracts and currency functionalities. At the same time, Cardano’s upgrades (forks) are based on academic research findings, while Ethereum focuses on a general consensus mechanism to decide its soft and hard forks.

Cardano Potentials And Reviews

Cardano is praised for providing unique features to the crypto community. Some of these include: 

  1. Transfer of Value: Similar to top cryptocurrencies like Bitcoin and Ethereum, ADA can be transferred as funds and sent and received in payment for goods and services. 
  2. Eco-friendly and scalability: One of Cardano’s strengths is its eco-friendly consensus algorithms. Cardano’s dual system allows it to scale and process more transactions speedily while consuming the least energy.
    At the same time, its interoperability provides an impressive blockchain to create new apps and crypto tokens that could revolutionise the financial ecosystem. 
  3. Governance: Cardano crypto holders can vote on proposal upgrades with upgrades to the Cardano blockchain. Cardano will be able to power several DeFi technology, and ADA community holders will be able to vote on these developments making Cardano fully decentralised.  

While Cardano has been praised for its systematic multidiscipline approach, there have been criticisms that this has some drawbacks. Cardano’s slow research-fueled upgrades allow developers enough time to roll out updates and quickly identify fixes effectively. However, this can be a disadvantage as other competitors have a faster development process that allows them to scale quickly and acquire market shares.

For instance,  Ethereum has claimed a position as a multipurpose blockchain that allows for the interoperability of blockchains and the creation of new technologies. Even Solana, which was launched in 2020, scaled before Cardano to enable these interoperability features. Even when Cardano launched its first dApp, Minswap, it was shut down with issues processing transactions. 

However, Cardano is steadily growing and now features decentralised exchanges, blockchain games, NFT marketplaces and more. 

What is the future of Cardano?

Cardano’s vision is to provide financial services to the unbanked and become the internet of blockchains. In order to achieve this, a road map was created for Cardano with 5 main phases:

  1. Byron: The first phase of the Cardano blockchain that allows for the transfer of ADA
  2. Shelley: The Shelley phase focused on decentralisation and took place in 2020, allowing for nodes to be operated by the Cardano community.
  3. Goguen: This is the era wherein smart contracts begin to go live on the Cardano blockchain. 
  4. Basho: The Basho era focuses on optimising interoperability and scalability

Voltaire: This is the final era in which Cardano is fully interoperable, and voting and treasury management of blockchain and network is fully decentralised.

Where to buy Cardano?

Cardano cannot be mined, and the only way to get Cardano is to buy it from a trusted crypto exchange like Yellow Card.

How to buy Cardano

You can buy and sell Cardano easily and cheaply on Yellow Card. All you have to do is: 

  1. Sign in on your Yellow Card account 
  2. Deposit funds in your local currency
  3. Buy Cardano 

You can buy Cardano directly from your Yellow Card wallet, send it to an external wallet or trade on the app. 

Key Takeaways

Resolving the limitations of scalability, security, and interoperability is the focus of Cardano. Cardano presents a future in which we can see varying applications, including DeFi, NFTs, and Metaverse, built on an eco-friendly blockchain. However, although Cardano operates differently from most blockchains, the price of ADA is still highly volatile. 

While there are concerns about the project's slow progress, Cardano is more long-term and prioritises a slow and steady approach to attain its vision. You can learn more about Cardano on its official website.

Disclaimer: This article is meant to provide general guidance and understanding of cryptocurrency and the Blockchain network. It’s not an exhaustive list and should not be taken as financial advice. Yellow Card Academy is not responsible for your investment decisions.

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