Cardano (ADA)

Cardano, named after Italian Renaissance mathematician Gerolamo Cardano, is a third-generation blockchain designed to have smart contract functionality with an emphasis on scalability, sustainability, and decentralization.

Cardano is well-known for the team’s systematic peer-review approach to blockchain development, which has arguably led to a blockchain that can execute relatively faster and cheaper transactions.

Also, Cardano claims that users can worry less about security and architecture accuracy than if they had used other “Ethereum killer” competitors.

How does it work?

Cardano is a blockchain platform that operates on a layered architecture and uses a Proof-of-Stake (PoS) consensus mechanism. Here’s how it functions:

Layered Architecture

Cardano’s blockchain is structured into two main layers:

  1. Cardano Settlement Layer (CSL):
    • Handles ADA transactions and serves as the ledger for the cryptocurrency.
    • Responsibilities:
      • Recording and validating ADA transfers.
      • Maintaining the balance of user accounts.
      • Processing transactions using the Ouroboros consensus mechanism.
  2. Cardano Computation Layer (CCL):
    • Dedicated to smart contracts and decentralized applications (dApps).
    • Provides:
      • Execution environment for smart contracts.
      • Support for dApp development.
      • Enhanced privacy and flexibility for transactions.

Consensus Mechanism

Cardano uses a PoS consensus algorithm called Ouroboros, which:

  • Selects validators based on the amount of ADA they stake and how long they’ve held it.
  • Rewards ADA holders who participate in staking.
  • Aims to be more energy-efficient compared to Proof-of-Work (PoW) systems.

Its latest iteration, Ouroboros Hydra, can theoretically process 1 million transactions per second.

Some projects also prefer the Cardano blockchain because it’s written in Haskell, a programming language that can test project components in isolation and decrease the chances of security and architecture errors.

The speed and security offered by Ouroboros and Haskell make Cardano a good option for DeFi and NFT projects.

Governance and Development

The development of Cardano is overseen by three key entities:

  1. Cardano Foundation: Focuses on standardizing and promoting the Cardano ecosystem.
  2. IOHK (Input Output Hong Kong): An engineering company responsible for building and advancing the Cardano blockchain.
  3. Emurgo: Concentrates on commercial applications and driving the adoption of Cardano.

What are the key advantages of Cardano?

  1. Scalability:
    Ouroboros Hydra and the layered architecture enable faster and cheaper transactions compared to many blockchains.
  2. Security:
    Peer-reviewed research and formal verification reduce the likelihood of bugs or vulnerabilities.
  3. Sustainability:
    Its treasury system ensures continued funding for development and innovation.
  4. Flexibility for DeFi and NFTs:
    Cardano’s robust infrastructure supports a wide variety of decentralized finance (DeFi) applications and non-fungible tokens (NFTs).

Team background

The Cardano project began in 2015 when Ethereum co-founder Charles Hoskinson left the Ethereum Foundation with colleague Jeremy Wood to establish Input Output Global (IOG or IOHK).

Cardano is currently being developed by three entities: IOHK develops and engineers the Cardano blockchain; Swiss-based non-profit Cardano Foundation hires IOHK and supervises the development of the project, while Emurgo seeks commercial opportunities and helps integrate businesses into the Cardano ecosystem.

Key Entities Behind Cardano

The development and governance of the Cardano ecosystem are managed by three primary entities, each with specific responsibilities:

  1. Input Output Global (IOG/IOHK):
    • Led by Charles Hoskinson, IOG is responsible for the engineering and technical development of the Cardano blockchain.
    • It employs a rigorous, research-driven approach to blockchain development, relying on peer-reviewed academic research to guide its design and implementation.
  2. Cardano Foundation:
    • Based in Switzerland, this non-profit organization oversees the development and promotion of Cardano.
    • Its role includes advocacy, standardization, and growing the Cardano community. The Foundation also hires IOHK to carry out technical work and ensures compliance with global regulations.
  3. Emurgo:
    • The commercial arm of Cardano, Emurgo focuses on driving adoption by integrating businesses into the ecosystem.
    • It seeks commercial opportunities and provides funding to developers and entrepreneurs building on Cardano.

What is the ADA token?

Cardano’s native token ADA (₳) is named after Ada Lovelace, a 19th-century mathematician who is often regarded as the world’s “first computer programmer.”

Key Uses of ADA:

  1. Transaction Fees:
    ADA is used to pay transaction fees on the Cardano network, ensuring smooth processing of operations.
  2. Staking and Network Security:
    ADA holders can stake their tokens to support the network’s proof-of-stake (PoS) consensus mechanism, Ouroboros. Staking allows participants to earn rewards while helping secure the network.
  3. Governance:
    In the future, ADA will function as a governance token, allowing holders to vote on proposed changes and upgrades to the Cardano platform.
  4. DeFi and Lending:
    ADA is used in decentralized finance (DeFi) applications and can also be lent or borrowed through platforms built on Cardano.
  5. Trading:
    ADA is widely traded on major cryptocurrency exchanges, making it one of the most accessible and popular cryptocurrencies.

Supply Information:

  • Circulating Supply: 35.28 billion ADA.
  • Staked Supply: 21.24 billion ADA, representing 60.20% of the eligible supply.
  • Inflation Rate: Approximately 0.22% per epoch (5 days), with 80% allocated to stake pool operators and delegators, and 20% to the treasury.
  • Maximum Supply: 45 billion ADA.
    Similar to Bitcoin, the rate at which new ADA is minted decreases over time, meaning the circulating supply will asymptotically approach the maximum supply.

Recent and Future Projects:

Cardano (ADA) is actively expanding its ecosystem with a variety of projects. Here are some recent and upcoming initiatives:

Recent Projects:

  • Mithril: A protocol designed to enhance blockchain efficiency and scalability by leveraging stake-based multi-signatures.
  • Daedalus Turbo: An enhancement to the Daedalus wallet, offering significantly quicker bulk synchronization for Cardano, improving user experience.
  • Sundial: A hybrid Layer-2 solution on Cardano for Bitcoin staking, aiming to integrate Bitcoin staking capabilities within the Cardano ecosystem.
  • Frigid.ai: Developing user-friendly applications that empower digital asset traders and collectors through AI models, blockchain analytics, and real-time portfolio management.
  • eUTxO.org: A visually engaging blockchain explorer that allows users to delve deep into the details of every transaction and block on the Cardano network.

Upcoming Projects:

  • Lace: A fast, easy, and secure Web3 platform for digital assets, DApps, NFTs, and DeFi, aiming to provide a comprehensive solution for interacting with the Cardano ecosystem.
  • Djed: A crypto-backed algorithmic stablecoin developed by IOG and issued by COTI, designed to act as an autonomous bank within the Cardano network.
  • Cornucopias ‘The Island’: A massive Play-To-Earn Cardano blockchain-based game, blending gaming with blockchain technology to create immersive experiences.
  • Empowa: The first RealFi property platform on Cardano, combining blockchain technology with sustainable housing projects to address real-world challenges.
  • FluidTokens: A platform that enables lending and borrowing using NFTs on Cardano’s first NFT-DeFi bridge, introducing new utilities for NFTs within the DeFi space.

Helpful Links: