Cryptocurrencies and blockchain technology have revolutionized the world of finance, and Cardano (ADA) is one of the most promising players in the space.
Cardano is a decentralized blockchain platform that aims to provide a more secure, sustainable, and scalable alternative to cryptocurrencies such as Bitcoin and Ethereum. With its unique architecture and innovative features, Cardano has attracted a growing community of developers, investors, and users who believe in its potential to transform how we transact and interact online.
This article explores what Cardano is, how it works, and what distinguishes it from other cryptocurrencies.
What Is Cardano?
Cardano is a blockchain-based platform that improves digital currencies' and smart contracts' security and sustainability. Its main goal is to provide a solid infrastructure supporting these technologies and offering enhanced features and capabilities. By leveraging its unique design and advanced protocols, Cardano aims to become a leading platform for decentralized applications and financial services.
Input Output Hong Kong (IOHK), a blockchain research and development company led by Charles Hoskinson, a co-founder of Ethereum, developed the Cardano.
Cardano uses a proof-of-stake (PoS) consensus algorithm, which enables the network to process transactions and create new blocks. Unlike proof-of-work (PoW) algorithms, which require computational power to validate transactions and create new blocks, PoS relies on nodes that hold a certain amount of the cryptocurrency as a stake.
Cardano, established in 2015, is among the leading cryptocurrencies in terms of market value. ADA is the cryptocurrency associated with Cardano we'll discuss later in this article, though the terms are often used interchangeably.
Cardano is a cryptocurrency and blockchain platform that runs decentralized applications through smart contracts. Smart contracts are essentially software that runs on the blockchain.
Cryptocurrencies with this characteristic are typically referred to as "layer 1" or "L1" cryptocurrencies, meaning they serve as a foundation on which other applications can be built. Other crypto projects' developers can construct their solutions on Cardano's blockchain, which is much more convenient and secure than creating their blockchain from scratch.
Key Takeaways
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Cardano is a blockchain-based platform that focuses on enhancing the security and sustainability of digital currencies and smart contracts by providing a robust infrastructure.
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Cardano uses a proof-of-stake (PoS) consensus algorithm, which relies on nodes that hold a certain amount of the cryptocurrency as a stake.
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Cardano's native cryptocurrency is ADA.
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Cardano uses a unique programming language, Haskell, to write smart contracts.
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Cardano strongly focuses on sustainability, aiming to reduce the network's energy consumption.
What is ADA?
ADA, the native token of Cardano, is a digital currency named after Ada Lovelace, a 19th-century mathematician known as the first computer programmer and the daughter of Lord Byron. It is a secure exchange of value that allows users to transact without intermediaries. Every ADA transaction is recorded permanently, securely, and transparently on the Cardano blockchain.
Holders of ADA also have a stake in the Cardano network. By storing ADA in a wallet, they can delegate it to a stake pool and earn rewards by participating in the network's successful operation. They can also pledge their ADA to a stake pool to increase their reward chances. In the future, ADA will also be used for various applications and services on the Cardano platform.
If you want to buy or sell ADA, you can do so for fiat or other cryptocurrencies through cryptocurrency exchanges. Check out the list of exchanges that support ADA on CoinMarketCap.
However, as an ADA holder, keeping your funds secure by keeping your private keys private is essential. It is highly recommended to avoid keeping your cryptocurrency in exchange for an extended period and use a cryptocurrency wallet instead. If you don't know which wallet to store or stake ADA, check out the article where we gave an overview of the most popular wallets in the ecosystem.
History of Cardano (ADA)
The history of Cardano (ADA) dates back to 2014 when Charles Hoskinson and Jeremy Wood left Ethereum due to a dispute with Vitalik Buterin. Hoskinson aimed to accept venture capital and create a company, while Buterin wanted to keep Ethereum as a nonprofit organization. The two co-founders went on to establish IOHK, a business aimed at developing blockchains for corporations, governments, and educational institutions.
In 2015, Hoskinson and Wood set out their plans for Cardano. After two years of development, Cardano was launched to the public in 2017. That same year, IOHK partnered with the University of Edinburgh to establish the Blockchain Technology Laboratory, which aimed to develop the Ouroboros protocol.
Aggelos Kiayias led the lab, which had six post-doctoral and academic positions, creating up to 35 jobs. The Cardano Foundation, based in Zug, Switzerland, supervises and oversees the Cardano project.
In May 2021, Cardano reached a market cap of $77 billion, making it the fourth-highest-valued cryptocurrency. Cardano's success can be attributed to its unique approach to blockchain technology, which has been praised for its high scalability and sustainability.
In August 2022, advertising agency MBLM ranked Cardano 26th out of 600 brands for brand intimacy, making it the highest-ranked cryptocurrency.
Despite being relatively new compared to other cryptocurrencies, Cardano has quickly become a significant player in the industry. Its innovative approach to blockchain technology and growing community have ensured its continued success.
How does Cardano work?
The Cardano blockchain is a third-generation platform that operates on two distinct layers: the Settlement Layer (CSL) and the Computation Layer (CCL). These two layers work together to facilitate every transaction on the platform.
One of Cardano's developers' primary goals was to separate a transaction's value from its computational data. The Settlement Layer is responsible for managing the transfer of value between parties. It acts as the routing layer for all control systems and layers, ensuring that transactions are executed efficiently.
To accomplish this, the CSL employs two unique scripting languages - Plutus and Marlowe. These languages move value and enhance support for overlay network protocols.
The Computation Layer of Cardano is designed to replicate the smart contract platform of the Bitcoin ecosystem's Rootstock (RSK blockchain). The CCL is implemented to help scale specialized protocols as technology advances, including adding hardware security modules (HSM) to the existing stack of protocols.
With the two distinct layers of Cardano, the platform can efficiently implement changes to support faster and more secure transactions while eliminating irrelevant user metadata. This approach ensures the ecosystem remains scalable and adaptable to evolving technologies and user needs.
Cardano uses a unique programming language, Haskell, to write smart contracts. Haskell is a programming language that is known for its mathematical rigor and a high degree of safety. This makes it easier to write smart contracts that are secure and free from bugs.
Cardano also uses a PoS consensus algorithm, which enables the network to process transactions and create new blocks. Nodes with a certain amount of ADA as a stake are selected to create new blocks and validate transactions. The more ADA a node holds, the higher its chances of being chosen to create a block and earn rewards.
Proof of Stake vs. Proof of Work
PoS and PoW are two consensus algorithms blockchain networks use to validate transactions and create new blocks. While both mechanisms serve the same purpose, they differ in their approach to mining and their impact on energy consumption.
Proof of Work is the original consensus mechanism used by the world's first cryptocurrency, Bitcoin. In PoW, miners compete to solve complex mathematical equations using computational power. PoW requires massive energy to maintain the network, as miners must continuously perform computations to validate transactions.
On the other hand, Proof-of-Stake aims to reduce energy consumption by removing the need for miners to perform computations. Instead, validators are chosen to create new blocks based on the amount of cryptocurrency they hold and have staked in the network. Validators are incentivized to follow the rules of the network, as they stand to lose their staked tokens if they act maliciously.
One of the major benefits of PoS is that it reduces the risk of a 51% attack. In PoW, an attacker can potentially control the network by controlling more than 51% of the computational power. Still, in PoS, an attacker must control 51% of the total staked tokens. This makes it more difficult and expensive for attackers to take control of the network.
PoS also has the advantage of being more scalable than PoW. As the number of validators grows, the network becomes more secure, and transaction times become faster.
Cardano uses a PoS consensus algorithm called Ouroboros, designed to be secure and sustainable while reducing the network's energy consumption. Ouroboros is divided into epochs, with each epoch consisting of multiple slots. Validators are selected to create blocks in each slot based on their stake. The more ADA a validator holds, the higher their chances of being chosen to create a block and earn rewards.
What is Cardano Staking?
Cardano is a PoS blockchain that relies on validators to keep the network decentralized and secure. Validators are network participants who lock a certain amount of native tokens within the network. In return for their commitment, they receive a reward in the form of tokens.
To become a validator, one must hold many tokens and operate a node that runs validator software. However, not everyone has the necessary skills or resources to become a validator. There is a simple workaround to participate in ADA staking, and that is delegation.
Delegation is an essential aspect of the Cardano network, enabling ADA holders to entrust the stake associated with their digital assets to a validator or stake pool of their choice. It allows ADA holders to participate in the network and earn rewards without running a node themselves. The rewards are distributed in proportion to the amount of stake delegated. To participate in Cardano staking, ADA holders must choose a trustworthy and reliable stake pool, such as Everstake.
How Do Cardano Staking Pools Work?
Stake pools are run by reliable operators, individuals, or businesses with the knowledge and resources to run the node consistently.
Staking pools are a crucial aspect of the Cardano ecosystem, allowing Ada holders to delegate their stake and participate in the network while receiving rewards. The more stake that is delegated, the higher its chances of being selected as a slot leader. When a pool is selected and produces a block, it receives a reward shared between the pool operator and delegators.
Cardano has developed an extensive system that incentivizes participation and rewards investment to ensure a level playing field. Several technical parameters influence stake pools and rewards, including the pledging mechanism, which allows pool operators to pledge a part of their stake (or the entire stake) to make the pool more attractive.
Saturation is another key parameter, indicating when a particular stake pool has too much stake, leading to diminishing rewards. This mechanism discourages centralization and encourages delegators to diversify their delegation across multiple pools. It also incentivizes operators to set up additional pools to continue earning maximum rewards.
Finally, the decentralization parameter is a tunable parameter that controls the ratio of slots created by federated nodes compared to those by stake pool nodes. Its implementation will allow the network to stabilize and ensure long-term sustainability.
As for stake pool operators, they are responsible to both ADA holders who delegate to them and the network itself. This requires a stable and reliable network infrastructure, expertise in system operation and server administration, and experience in development and operations. In conclusion, Cardano's stake pools are a critical component of its decentralized network, incentivizing participation and encouraging stakeholders to work together to ensure its continued success.
Cardano (ADA) Pros and Cons
Pros:
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Cardano uses a unique programming language, Haskell, to write smart contracts, which makes it easier to write secure and bug-free smart contracts.
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The PoS consensus algorithm Cardano uses is designed to be more sustainable and energy-efficient than PoW algorithms.
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The Cardano network is highly scalable and can process up to 1,000 transactions per second.
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Staking rewards in ADA incentivize users to participate in the validation of transactions and the creation of new blocks, which helps to secure the network.
Cons:
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The Cardano network is still relatively new, so there is a risk of bugs and security vulnerabilities.
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The Haskell programming language used by Cardano is not widely used, which could make it difficult for developers to write smart contracts.
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The Cardano network has yet to be widely adopted, which could limit its potential use cases and adoption.
Future of Cardano
Cardano is one of the leading blockchains in the world, with a solid and dedicated development team and a clear roadmap for growth and development. The platform's unique approach to blockchain development, which emphasizes scientific research, peer review, and a modular approach to development, sets it apart from many other blockchain projects.
The Cardano community of developers and consumers has been presented with possibilities following the Vasil hard fork. This upgrade has dramatically enhanced the platform's innovative contract capabilities, providing developers with a more robust and feature-rich environment. Furthermore, platform users will enjoy lower transaction costs thanks to the improved efficiency of the Vasil hard fork.
Cardano's latest upgrade builds upon the Alonzo upgrade of 2021 while introducing a novel concept known as 'diffusion pipelining.' This enhancement improves data processing within and between chains, resulting in faster transactions per second (TPS) by significantly reducing the time it takes to move blocks.
To make matters even better, Cardano's native smart contract programming language, Plutus, has undergone another iteration, further enhancing its power and capabilities. New security features have also been implemented while keeping the transaction burden off-chain.
The engineers at Input Output Global (IOG) have leveraged the robust foundation of Cardano to create a groundbreaking toolkit that enables the development of custom sidechains. These sidechains are designed to be scalable and extendable without compromising the integrity or security of the main chain.
Using the newly developed toolkit, IOG has constructed an Ethereum virtual machine (EVM) compatible sidechain public testnet, which serves as a proof of concept for the platform's capabilities. This innovative approach allows for greater flexibility and adaptability, enabling developers to create customized solutions that meet their needs.
The implementation of sidechains is a significant milestone for Cardano, as it provides a more scalable and flexible platform for its users. By leveraging this technology, developers can create new and innovative decentralized applications that can be seamlessly integrated into the Cardano ecosystem.
Cardano's commitment to sustainability, environmental responsibility, and inclusivity is another factor that sets it apart from many other blockchain projects. The platform's treasury system, which enables community members to propose and vote on improvements and fund development activities, is a testament to its commitment to decentralization and community involvement.
Of course, the future of any blockchain project is inherently uncertain, and risks and challenges are always involved. However, given Cardano's strong development team, clear roadmap, and commitment to sustainability and community involvement, the platform has the potential to continue to grow and evolve in the years to come.
Roadmap
Cardano is a unique blockchain project in its development phase, and its roadmap can be split into five phases or "eras." Unlike other blockchain development teams, Cardano's approach is modular, i.e., they work simultaneously on all phases. Each era can be seen as a development track rather than a fixed timeline.
The first era, Byron, was named after Lord Byron, a poet and father to Ada Lovelace. This era marked the creation of Cardano's primary architecture, where the network's basic functionality and core technology were implemented. During this era, the Daedalus wallet and Yoroi, a light wallet designed for day-to-day use, were integrated into the Cardano ecosystem.
The second era, Shelley, focused on decentralization and introduced delegation and incentivization schemes. The Cardano ecosystem shifted from the federated Byron era to more community-run nodes, which improved the network's resilience and security. The Shelley era also saw the launch of Cardano's mainnet.
The third era, Goguen, brought smart contracts to Cardano, enabling the creation of decentralized applications on the network using the smart contract development language Plutus. Cardano also implemented a multi-currency ledger to facilitate the creation of new, natively supported tokens.
The fourth era, Basho, will focus on scaling the blockchain network, introducing solutions to enhance its performance and stability. The era will also introduce interoperable sidechains, which will significantly help Cardano handle higher throughput levels and parallel accounting styles that can facilitate greater interoperability for Cardano and its applications.
The final era, Voltaire, is dedicated to establishing an autonomous, decentralized network. This era will transfer the responsibility for Cardano's future to the community, where a decentralized entity will undertake development and maintenance rather than a centralized one like the Cardano Foundation. The community will take cues from Cardano's treasury, voting, and delegation systems to accelerate its evolution into a full-fledged, autonomous, decentralized protocol. Participants can propose improvements for stakeholders to vote on, and the protocol will distribute transaction fees to fund various development activities suggested by these improvement proposals.
Cardano's roadmap is an exciting and innovative approach to blockchain development. The network's continued focus on scalability, interoperability, and decentralization will make it an attractive choice for developers and users.
What Is The Best Place To Stake Cardano?
The best place to stake Cardano depends on several factors, including the amount of ADA you hold, your level of technical expertise, and your personal preferences.
One option for staking ADA is to set up your stake pool. It requires technical expertise and the ability to run and maintain your own server. However, running your stake pool gives you more control over your rewards and allows you to earn higher returns by charging lower fees to your stakers.
Another option is to delegate your ADA to an existing stake pool. It is a more straightforward option that does not require technical expertise, but it means you will have less control over your rewards. When delegating your ADA to a stake pool, it's essential to consider factors such as the pool's performance, fees, and reliability.
It's essential to do your own research and choose a stake pool that meets your individual needs and preferences.
If you are searching for a dependable validator to secure your assets and receive a reasonable reward, look no further than Everstake.
With over 625,000 trusted users, Everstake operates on more than 70 blockchain networks. When you stake your Cardano with Everstake, you can enjoy a yield of up to 5% and a 4% transactional fee. Your funds' security is ensured through bare metal servers located around the globe, with backup nodes available in case of emergencies. Additionally, the network is constantly monitored by dedicated DevOps staff who work around the clock.
To start staking ADA with Everstake, select it from the list of validators on your preferred platform. Alternatively, you can search for it using the following address: e4abcf4408584601e7c707a8902996c0c291e1a3c8300b327ae3f6ab.
Here is some other articles about Cardano staking:
- How to Stake Cardano (ADA)
- How to Stake Cardano (ADA) via Eternl Wallet
- How to Stake Cardano (ADA) via Typhon Wallet
You can find even more content about ADA staking here.
Should you have any concerns or questions about the security measures and conditions provided by Everstake, feel free to schedule a call with one of our managers.
