what is cardano | cardano beginners guide

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What is Cardano? The Beginner’s Guide

Cardano has become one of the biggest smart contract platforms. It has been under development for a long time due to the academic approach. Cardano has finally enabled smart contracts. Now it can properly compete with rival platforms. This article is a Cardano beginner’s guide. We’ll go through the project history, technology, and the potential as an investment.

Cardano is a smart contract platform

First, let’s place Cardano into the correct crypto category. We categorize cryptocurrencies into three main groups: currencies, platforms, and tokens.

Bitcoin is the best-known currency, even if its narrative has shifted towards digital gold. Litecoin and Monero are other popular examples. Currencies are designed to be P2P digital money. They don’t have any other significant functions but to transfer & hold value.

Ethereum is the king of platforms. These are operating systems for smart contracts and Dapps. You can think of platforms like Android and iOS. Cardano is one of the biggest players in this category. Other popular platforms include Binance Smart Chain, Solana, and Avalanche.

Tokens are always created (minted) on these smart contract platforms. It means they don’t have a native blockchain. Tokens are usually either governance or utility tokens. They have purpose and usage inside a specific Dapp. Aave, Chainlink, and Uniswap are popular DeFi tokens.

Some cryptocurrencies are easier to categorize than others. With Cardano, there are no problems. It’s one of the best-known platforms on the planet. This also means Cardano is not a rival of Bitcoin in any way.

ADA is the native token of Cardano. The name comes from Ada Lovelace, who was an English mathematician in the 19th century. She is often regarded as the first computer programmer. If you invest in Cardano you don’t “buy Cardano” but you are buying ADA tokens instead.

ADA has similar functions as other platform tokens. It is “digital oil” inside the Cardano ecosystem. ADA is used to pay transactions and it’s also staked by the network validators.

Charles Hoskinson & the history of Cardano

Almost every cryptocurrency has a leader or a figurehead. Whether we are talking about a foundation, fintech company, or any other enterprise. Bitcoin is one of the few exceptions. It has a truly decentralized development team with no leader to give orders.

Charles Hoskinson is the man who gives a face to Cardano.

Many think Hoskinson is much older, but he’s born as late as 1987. He is a mathematically gifted person. Hoskinson studied math and cryptography in the universities of Denver and Colorado. It’s safe to say he is one of the best-known figures in the crypto scene.

Check this article if you want to read more about Hoskinson’s past. We also recommend viewing the Youtube video below. Hoskinson goes through the history of Ethereum and Cardano on it.

Despite his relatively young age, Hoskinson has been “in the game” for a long time. He was introduced to cryptocurrencies already in 2011. Hoskinson learned everything about mining and started quickly to understand the importance of cryptos in the big picture. His eyes opened fully after the Cyprus banking crisis of 2013.

Some readers might not know that Hoskinson is also one of the Ethereum founders. He was part of Vitalik Buteri’s core team. Eventually, Hoskinson grew apart from Buterin and left the project. Or, depending on the source, was thrown out.

Before Cardano, Hoskinson also established the Bitcoin Education and the Cryptocurrency Research Group projects. He has had hundreds of lectures and seminars all over the globe.

Charles Hoskinson made a big move in 2015. This is when he founded IOHK (Input Output Hong Kong) with Jeremy Woods. This is the most critical part of Cardano because IOHK is the company in charge of the development work.

cardano iohk - input output hong kong

IOHK won’t run Cardano forever. The idea is to guide the project to the Voltaire phase. After that, the community will vote for Cardano’s future.

As you can see from the image, IOHK is also involved in other projects. One of the major ones is Ethereum Classic. This is due to Hoskinson’s rivalry against Ethereum. IOHK has also developed the popular Daedalus wallet for storing & staking ADA.

Let’s circle back to ADA. This token was born in an ICO in 2017, like so many other coins. Almost 95 percent of investors were Asian. The idea back then was to build the “Ethereum of Japan” and have a strong focus on the Asian market.

The price of ADA was just 0,0024 dollars in the ICO. It went all the way to 1.33 dollars in the bull run of 2017. This means ICO investors cashed in handsomely. This is also when the public learned about Cardano. It attracted a lot of interest even though there was barely anything built yet.

ADA price tanked in 2018 along with the entire crypto market.

ada price 2017-2021

The price history shows that barely anyone was interested in ADA from 2018 to 2020. Milestones were delayed and rivaling platforms were launching MainNet products at the same time.

The first major step took place in the summer of 2020. This is when the long-awaited Shelley update was done. It brought staking to Cardano’s MainNet. Staking has been immensely popular in Cardano ever since. There are over 3000 active staking pools, and more than 70% of ADA tokens in circulation are locked in staking.

The second major step was taken in the spring of 2021. The Mary hard fork enabled user-created tokens and NFTs on Cardano. This helped ADA to a new all-time high price and way past 2.00 dollars.

In September of 2021, Alonzo hard fork was launched. This enabled smart contracts on Cardano. Finally.

Cardano has been called a hype project, which never delivers. Critics have been finally silenced. Cardano can fully compete with other smart contract platforms.

Cardano’s layered blockchain system

Let’s go through some of Cardano’s important technical features. This is a multi-level protocol, which is called a layered blockchain system. These layers are Cardano Settlement Layer (CSL) and Cardano Computation Layer (CCL).

Cardano has the following reasoning for this solution.

We have chosen the position that the accounting of value should be separated from the story behind why the value was moved. In other words, separation of value from computation. This separation does not mean that Cardano will not support smart contracts. On the contrary, by making the separation explicit, it permits significantly more flexibility in the design, use, privacy and execution of smart contracts. (Source:

The following picture is from

cardano layers

CSL is the layer where the Cardano blockchain is run. All ADA transactions are processed on this level. The blockchain is maintained using a Proof of Stake consensus algorithm called Ouroboros. The CSL layer handles also custom-made tokens and NFTs.

CCL is the computation layer. This is where Cardano smart contracts are run. They are programmed using the Plutus language. Separating transactions from computations is beneficial when the platform is updated in the future.

A good example of this architecture was seen in the spring of 2021 when Mary hard fork was executed. It enabled custom-made tokens and NFTs on Cardano. This was possible even without smart contracts. In Ethereum, transactions and computations are done on the same layer. Transactions cannot be done without using smart contracts.

In general, it’s important to understand the approach chosen by Hoskinson. Years of academic research were done for Cardano before writing a single line of code. This approach has been significantly slower than the “build & break” approach of its competitors. Cardano is finally catching up.

Cardano’s consensus algorithm Ouroboros

Cardano has chosen a Proof of Stake consensus algorithm like all competitors. Ethereum is the last one using Proof of Work, but this will also change in 2022. There are no physical mining machines required in a Proof of Stake system. The blockchain is maintained by validators who are staking the native token, in this case, ADA.

There are several different variations made of Proof of Stake. Cardano’s version is called Ouroboros.

In Ouroboros, time is split into units called epochs. These are further divided into slots, which are configurable time frames. Each epoch lasts several days (120 hours) and it includes 432,000 slots. At the time of writing this article, the Cardano blockchain is at epoch 290. The first was created on 9/23/17.

Below is a video explaining Ouroboros further.

This is where Cardano’s ADA token is needed. Since there is no mining in a Proof of Stake system, the block producers are chosen among the validators. You can become one by holding & staking enough ADA. The entity chosen to produce the block is called slot leader.

A new slot leader is chosen after each slot.

Cardano staking

Let’s look more at the staking process. As mentioned in the history chapter, Cardano staking has become exceedingly popular. You can see the network stats at The numbers are quite impressive.

ada staking

At the time of writing this article, over 71% of all circulating ADA tokens are staked. This means 23.4 billion out of 32 billion coins. There are more than 3000 staking pools. We can safely say that staking is decentralized.

Cardano staking became popular instantly after it was launched on the MainNet. This happened in the summer of 2020. Thousands of community members had already participated in the TestNet. There are over 800,000 unique addresses staking or delegating their ADA.

If you own ADA and you want to participate in staking, there are two options. You can either run your own staking pool or delegate your tokens to an existing one. This is roughly how other Proof of Stake platforms work as well. You can either become a validator or delegate.

ADA staking can be easily done by using one of Cardano’s own wallets (Daedalus). Other wallet manufacturers support ADA staking too. One of the popular ones is Exodus. In practice, you are delegating your ADA. It’s so easy even an amateur can do it with a couple of clicks.

There is lots of information about Cardano staking on Youtube and Google.

Cardano vs. competition

Cardano is fighting for market share in a very competitive niche. Ethereum’s position is extremely strong at the top. There is no real competition for the #1 platform position. However, there are several strong candidates fighting for the top 5 positions.

This article is written in September 2021. Right now, it seems like Ethereum 2.0 is 6 to 12 months away. Now is the time for Ethereum competitors to shine. All platforms offering cheap & fast transactions have an edge over Ethereum. Though, Layer 2 scaling solutions (Polygon, Arbitrum) are also gaining traction.

We can currently divide the platform category into two groups: EVM compatible platforms and others.

EVM is Ethereum Virtual Machine. It is processing all smart contracts on Ethereum. Many platforms have been built EVM compatible on purpose, such as Binance Smart Chain. This makes it easy to clone popular Ethereum Dapps and launch them on an EVM-compatible platform.
Binance Smart Chain is the biggest EVM-compatible platform after Ethereum.

EVM-compatible platforms are most likely to eat Ethereum’s market share in the short term. These projects will be in problems once Ethereum is scaling with the help of Layer 2 solutions and the 2.0 version. Then they have very little to offer for potential users.

Cardano is in the “others” category. Smart contracts must be programmed using a programming language called Plutus. The downside is that Cardano must be able to attract enough developers to learn a new language. In the long term, this solution is better.

Cardano’s academic approach has given it a big handicap. Smart contracts were released as late as September 2021. Many rivaling platforms have had a MainNet running for 1-2 years, or even longer. Not to mention Ethereum.

If we think about the network capacity, all 3rd generation platforms promise thousands (or tens of thousands) of transactions per second. It depends also on the stage of the development. It’s too early to say which platforms can handle high loads for long periods of time.

How about staking? Let’s look at the data provided by We can see that all popular platforms are in the same ballpark when it comes to staking percentage. Tezos and Solana are the leaders in this category. They have over 75% of the native tokens staked.

Cardano as an investment

Charles Hoskinson’s project has come far in five years. Yet, the most important steps are being taken now. Cardano hasn’t been a proper platform until smart contracts were launched. There will be no more speculation over possible success. It’s time for Cardano to show its magic.

Earlier versions of this very article have been full of speculation too. First about staking, then about the token launch, and recently regarding the smart contract launch. If you have been speculating with ADA price rises since 2019, you’ve made a lot of money.

Investors must take a different approach now because the framework is getting ready. Now we must follow the growth of the Dapp ecosystem. Especially the DeFi and NFT markets.

Below is a useful video from CoinBureau.

This article will be updated in early 2022 once we have more information about the Cardano ecosystem.

If investors are worried about something, it’s certainly the market cap. Cardano’s ADA token is already the third biggest cryptocurrency. The market cap is almost 80 billion dollars. Recently, it even hit 100 billion. ADA price has gone up 25x since the beginning of the year.

It’s not realistic to expect Cardano (or any other coin) to flip Ethereum and become number two in the market. Cardano has somewhat limited potential when compared to many of its competitors, which are much smaller in size.

Investors should make three projections:

  1. Cardano vs Bitcoin
  2. Cardano vs Ethereum
  3. Cardano vs Other platforms

The first one is the most important one when investing in any altcoin. Is ADA going to beat Bitcoin? Is the next bull run going to be led by Bitcoin or altcoins? If you think altcoins will do better, think carefully if ADA is going to rise faster than Ethereum.

These two projections could happen. ADA is still much smaller than ETH or BTC; even though also lacks brand and institutional interest. The third point is the most unlikely one.

Put Cardano against platforms like Algordand, Theta, and Elrond. Do you think ADA can bring you a better return than THETA? It takes 76 billion dollars to double the market cap of ADA while it takes less than 10% to double the market cap of THETA.

The bigger the market cap is, the more money is needed to move it higher. Cardano has become a more conservative investment after its massive market cap rise. It’s best-suited for those investors, who want to invest broadly to the “blue chip” cryptocurrencies.

It might be that the best investments lie in the native tokens of DeFi applications, which will be built on Cardano. This has been the case with numerous Ethereum and Binance Smart Chain tokens in the past few years.

Cardano ADA price and how to buy ADA

Cardano’s ADA token is nowadays listed in the most popular exchanges. You’ll find the best liquidity and trading pairs from Binance. This is the exchange we recommend for ADA purchases.

Buy ADA from Binance

Coinbase and KuCoin are also excellent options.

There is also a solid desktop wallet built for Cardano called Daedalus. You should also check Yoroi, which has become quite popular. Both support ADA staking. Exodus is the third option.

Follow for the latest news and discussion. We recommend following Charles Hoskinson on Twitter. His handle is @IOHK_Charles. The official website is

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