What is cryptocurrency Cardano (ADA) and how does it work?

What is Cardano (ADA)?

Cardano is a Proof of Stake (PoS) general purpose blockchain project. Known as a “third-generation” blockchain, Cardano has set about solving the common scalability issues plaguing most “second-gen” blockchains (such as Ethereum and it’s ever-increasing gas fees).

Cardano’s development is defined by a rigorous scientific philosophy along with copious amounts of academic research and peer-review.

The Cardano project has put together an in-depth development roadmap consisting 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 phase in the Cardano roadmap enables an integral piece of the final network, and when complete, the network will be fully decentralized – governed by ADA holders and funded by a portion of its own small transaction fees.

How Does Cardano Work?

Cardano is what’s considered a “third-generation” blockchain. Designed, in essence, to solve the scaling issues typically associated with both generation one (Bitcoin) and generation two (Ethereum), Cardano (ADA) is proving to be a constant source of innovation.

Where previous generation blockchains are prone to high transaction fees and low TPS (transactions per second) as a result of certain limitations in their design, Cardano is being built from the ground up to provide a truly decentralized, low-fee, high-TPS Proof of Stake (PoS) network solution.

Cardano aims to improve the speed and overall capability of its network in multiple ways. Standing at the forefront is ADA’s own Proof of Stake (PoS) consensus protocol, dubbed Ouroboros. Designed with efficiency in mind, Ouroboros greatly reduces the energy cost of the network – especially when compared to a Proof of Work (PoW) mechanism – without sacrificing security.

The upcoming layer 2 solution for the Cardano project is known as Hydra. Designed to enable theoretically infinite scalability, Hydra allows for an increase in throughput as each new node joins the network.

Cardano also boasts another unique feature – the Hard Fork Combinator. Essentially, this innovation allows the network to hard-fork without any real interruption to the blockchain. This was put to the test with the recent Shelley phase update, and it worked flawlessly.

Who Are the Founders of Cardano?

Cardano (ADA) was founded by Charles Hoskinson – one of the co-founders of the Ethereum network. He is the CEO of IOHK, who is developing the Cardano project.

Hoskinson first got involved in cryptocurrencies in 2011, when he began mining and trading. His first professional step into the world of cryptocurrency was later, in 2013, when he developed an educational course about Bitcoin that was taken by over 80,000 students.

After helping with the early development of Ethereum and the establishment of the Ethereum Foundation, Hoskinson left to pursue his own vision of a “third-generation” blockchain. Having seen the scaling bottlenecks traditional blockchains would inevitably face, the Cardano project was formed in 2015 as a means to usher in a new era of blockchain.

Cardano ADA

Buy

Bitcoin BTC

Buy

Ethereum ETH

Buy

XRP XRP

Buy

What Makes Cardano Unique?

One thing that makes Cardano rather unique is the fact that it is one of the biggest blockchains to successfully use a Proof of Stake (PoS) consensus mechanism. PoS is a far less energy-intensive mechanism than the Proof of Work (PoW) algorithm relied upon by Bitcoin.

Ethereum is in the process of upgrading to PoS, having witnessed the inherent benefits that come with it being enjoyed by other projects. Ethereum’s transition, however, is going to take place over time and could face difficulties at any stage. Cardano is already running a full-fledged PoS network.

The developers of Cardano have taken pride in ensuring that all of the technology developed is subjected to a rigorous process of peer-reviewed research, meaning every single idea pertaining to the network can be challenged before they are committed. This level of academic rigor helps the Cardano blockchain in both its resilience and stability – ensuring that many possible future issues are identified before ever becoming a real problem.

What Gives Cardano (ADA) Value?

ADA is the Cardano network’s native token, named after 19th-century mathematician Ada Lovelace. 57.6% of the total ADA supply was distributed to investors in an Initial Coin Offering (ICO), in which Cardano raised $62.2 million USD.

The ADA token is both a digital currency and a way to make transactions on the Cardano network (in the same way you need ether/ETH to transact on the Ethereum network).

ADA holders also have a literal stake in the Cardano network. The ADA tokens can be used in stake pools to earn staking rewards, and in the future the direction of the network will be entirely governed by ADA holders, using their stake to vote on developmental decisions.

How Many Cardano (ADA) Tokens Are in Circulation?

There will only ever be a maximum supply of 45 billion ADA.

At the time of writing, the current circulating supply of Cardano (ADA) is roughly 31 billion. Between September 2015 and January 2017, IOHK hosted five separate rounds of public sales, allowing interested investors the chance to obtain ADA tokens and support early development.

An estimated 2.5 billion ADA was allocated to IOHK once the network launched, while an additional 2.1 billion ADA was given to EMURGO, an international blockchain development company, for their work on the early foundation of the Cardano protocol. Additionally, 648 million ADA was given to the Cardano Foundation for promotion of the platform and a push for adoption.

When all was said and done, about 16% of ADA’s circulating supply went to the project’s founders – with the remaining 84% being split among investors.

How Is the Cardano Network Secured?

Cardano is secured through a custom-built Proof of Stake (PoS) protocol, dubbed Ouroboros.

Described as a mix of innovative technology and mathematically authenticated mechanisms, Ouroboros also has a dash of behavioral psychology and economic philosophy thrown in for good measure. The primary goal of Ouroboros is to achieve sustainable and ethical growth – with little to no impact on the environment.

The Cardano project has stated that Ouroboros improves upon the security of Proof of Work (PoW) consensus mechanisms while at the same time consuming far less energy – at a rate reported to be upwards of 4x more energy efficient than Bitcoin.

To ensure active participation from all nodes in the network, an incentive mechanism has been baked directly into Cardano’s design. Participants in the network are regularly rewarded with ADA for their involvement.

How is Cardano Used?

Cardano’s native ADA token can be used as a transfer of value, similar to how cash is currently used. Though many cryptocurrencies can boast this feature, ADA has other uses built into its design as well.

A central feature of the Cardano project is its Proof of Stake (PoS) consensus protocol where ADA is staked on the Cardano blockchain in order to verify transactions. Those who stake their ADA to the blockchain enjoy rewards for their participation – in the form of more ADA. This staking protocol ensures active participation and uptime while also helping to maintain security throughout the blockchain.

Another use ADA has on the Cardano network is in voting and governance. Cardano, unlike other blockchain projects, does not have miners to determine its future development – that duty falls to the ADA stakers as well. When a new change or enhancement to the network’s functionality is proposed, ADA holders use their tokens to vote on these proposals. This will eventually build to make Cardano a fully decentralized project, governed by those who invest in it.

With the launch of Phase 3 – Goguen, the ADA token will also be used to power the various smart contracts that will be enabled on the Cardano blockchain. Developers will utilize ADA to create and power these smart contracts and decentralize applications (dApps).

How To Choose a Cardano Wallet

Since Cardano (ADA) is a well-known cryptocurrency, it is supported by many wallets – both software and hardware varieties. There are more than enough options for users to pick and choose from, and each user will have to decide based on their specific needs.

Kriptomat offers a secure storage solution, allowing you to both store and trade your ADA tokens without hassle. Storing your ADA with Kriptomat provides you with enterprise-grade security and user-friendly functionality.

Buying and selling ADA tokens, or exchanging them for any other cryptocurrency, is done in mere moments when you store on our platform.

The Bottom Line

Cardano is an innovative and unique project that aims to provide a new form of blockchain infrastructure, combining the benefits of many bleeding-edge technological and mathematical concepts.

This third-generation blockchain project has the potential of becoming a dominant smart contract platform in the sector, but it still has much of its development ahead of it.

A truly ambitious project, only time will tell what the lasting effects of Cardano will be on the world of crypto and the world at large – but the future is definitely looking bright.

Cardano FAQ

How to Buy Cardano (ADA)

Buying Cardano (ADA) is as easy as visiting our guide on how to buy Cardano.

How to Sell Cardano (ADA)

If you already own ADA and hold it on a Kriptomat exchange wallet, you can easily sell it by navigating the interface and choosing your desired payment option.

Cardano Price

The current Cardano price is EUR.

The 24-hour trading volume of ADA is EUR. ADA is currently ranked of all cryptocurrencies by total market capitalization, with a market cap of EUR. It has a circulating supply of ADA.

Register now to begin your journey into the world of ADA and cryptocurrencies with Kriptomat!

If you’re experiencing any issues or have any questions at all, please don’t hesitate to reach our Customer Support Team. We’re always here to help!