What is Cardano? The Beginner’s Guide

Cardano is one of the most popular 3rd generation platforms. The goals and high standards of this project have gained many fans around it. Cardano’s ADA token was also one of the biggest movers in the altcoin boom of 2017. But what is Cardano? This article is a Cardano review. It’s the ultimate Cardano beginner’s guide to past, present, and future of this project.

Cardano is one of the leading smart contract platforms

Let’s set Cardano first to a correct category among all cryptocurrencies.

As you may know, Bitcoin was the first cryptocurrency. Bitcoin, Litecoin, and many other projects born in the early years (roughly 2009-2012) are often titled as 1st generation cryptocurrencies. The purpose of these coins is to function as digital P2P money.

Vitalik Buterin published the white paper of Ethererum in late 2013, which started to get attention in 2014-2015. This was the first popular platform for smart contracts and Dapps. Ethereum is titled as the 2nd generation cryptocurrency.

Cardano is also in the platform category with Ethereum, but it’s a 3rd generation product. Other competitors include projects like EOS, TRON, and Tezos. The difference between the 2nd and the 3rd generation is that 3rd generation platforms have solved the scalability issues of Proof of Work blockchains. Cardano, EOS and other 3rd generation platforms use Proof of Stake consensus algorithm variations and scale up to thousands of transactions per second.

All this means that Cardano is not competing with Bitcoin, Litecoin, or Monero for example. Cardano is like iOS or Android, it’s an operating system for digital applications. It is competing against other operating systems, platforms, ecosystems, or whatever you want to call these projects.

Every platform has its own native token. Cardano’s native token is called ADA. The idea behind a native token is similar across all platforms: it is used as “virtual gas” in the system. ADA is used to pay transactions and transfer value inside the Cardano ecosystem. ADA has also significant use in staking in the Proof of Stake consensus mechanism of Cardano, which will be explained later.

Next, we’ll go through the history of the Cardano project. How was it born and who created it?

Cardano and Charles Hoskinson

Almost every cryptocurrency project has one popular figure, who is featured in news and interviews. Whether the project is run by a foundation, a tech company or a community. Bitcoin is one of the very few exceptions in the market. Charles Hoskinson is the man, who gives a face to Cardano.

Many people think Hoskinson is older than he is, but the American is just 33 years old. Hoskinson is a talented mathematician, who studied cryptography and maths in the universities of Denver and Colorado. He is one of the most known and liked persons in the crypto scene and very famous of his beard.

The following clip has an interview of Hoskinson from the spring of 2019.

Despite his young age, Hoskinson has been involved in many projects. He was first introduced to Bitcoin in 2011. Like many others before him, Hoskinson was first involved in mining. He started to see quickly the importance of this invention.

Hoskinson really saw the potential of cryptos after the Cyprus banking crisis in 2013. He has since founded The Bitcoin Education Project and Cryptocurrency Research Group projects and educated thousands of people all over the world.

Many might not know that Charles Hoskinson was also one of the founders of Ethereum. He was part of the core group with Vitalik Buterin and had a big impact on the birth of this platform. He was later derailed with other founders and left the team, or got fired, depending on the source.

Hoskinson took a major step forward in 2015 by founding IOHK with his friend, Jeremy Woods. IOHK (Input Output Hong Kong) is the most significant piece of Cardano because this is the company responsible for the development of the program code.

cardano iohk - input output hong kong

Screenshot from the home page of IOHK.

It’s important to understand, that IOHK is not going to have the same role forever. Their current contract extends to the end of the year 2020. After this, Cardano Foundation should take over. This foundation is also the Cardano project promoter.

As you can see from the image above, IOHK is also involved in other crypto projects. It supports, for example, the development of Ethereum Classic due to Hoskinson’s involvement in the project. IOHK has also developed the Daedalus wallet for storing Cardano’s ADA token.

The third major piece in the Cardano puzzle (besides IOHK and Cardano Foundation) is called Emurgo. That is the business partner of Cardano. The role of Emurgo is to support tech companies, which want to develop applications on Cardano blockchain.

As mentioned earlier, ADA is the native token of the Cardano blockchain. It was born in an ICO in 2017, as almost every single token in the past two years. Almost 95% of the early investors were from Asia, especially Japan. Cardano was titled early on as the “Ethereum of Japan” due to its strong presence in the Japanese market.

One ADA token was priced as 0.0024 USD in the ICO, and it rocketed all the way to 1.33 USD at the peak of the 2017/2018 altcoin bubble. ADA crashed hard during the crypto winter of 2018 like other altcoins as well. It is still more than 95% down from the ATH.

What is Cardano – a layered blockchain system

Let’s dig deeper into the Cardano blockchain. Cardano is a protocol built on two layers, hence it’s called a layered blockchain system. These layers are called Cardano Settlement Layer (CSL) and Cardano Computation Layer (CCL). gives brief reasoning for this.

”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.”

You should really check the page, which explains thoroughly all technical decisions behind the Cardano blockchain.

CSL is the layer, where all transactions are performed, and the data is stored on the blockchain. Cardano is currently using the UTXO model, which we know from Bitcoin. If you aren’t familiar with UTXO, please read this Reddit discussion.

cardano layers

Below CSL, there is the computation layer (CCL). This is where all the applications and smart contracts are run.

The third layer, KMZ Sidechains, is basically a connectivity layer on other blockchains.

Cardano wants to separate these functions from each other on purpose. Charles Hoskinson argues that a layered system enables better scalability in the future when data storage and application processing are separated.

Cardano’s Proof of Stake algorithm Ouroboros

Cardano blockchain will eventually use a Proof of Stake consensus algorithm, like all other 3rd generation blockchains as well. There is no machine-based mining in PoS like there is in Proof of Work, used by Bitcoin.

Proof of Stake has become the number one choice for all 3rd generation platforms, which are after high capacity and scalability. Cardano has developed its own PoS variant, which is called Ouroboros.

In Ouroboros, time is divided into units called epochs. Each epoch is divided into slots, which are, in practice, configurable slices of time. Each slot is roughly twenty seconds long, but this could change in the future. One epoch can be several days, so there are lots of slots inside each epoch.

Below is a great explanation of Ouroboros.

Now we can add Cardano’s ADA token to this equation. As mentioned earlier, there is no traditional mining in a Proof of Stake consensus method. This means that block validators are chosen among the holders of ADA token.

You can become a block validator by simply holding enough ADA. This is roughly the idea of competing solutions as well. The entity chosen to produce blocks is called the slot leader in the Cardano system. Block producers are changed after each epoch and they are chosen randomly each time.

This is different from the Delegated Proof of Stake systems, which are very popular among Cardano’s competitors. There is one thing you should understand, though. The current Ouroboros version used by Cardano is not the final one, where ADA holders are staking and running the network. Cardano is at the moment (05/2020) run by the development team. It’s like a bicycle with training wheels on.

The final Ouroboros version will be released in 2020. We’ll dive deeper into this topic in the roadmap section of the article.

Cardano review – interoperability, scalability, and sustainability

There are three clear themes which Cardano project wants to underline in its communication: interoperability, scalability, and sustainability. In practice, these are referring to Cardano’s connection to other ledgers, blockchain throughput, and sustainable development of the entire project.

Cardano doesn’t only want to solve the current issues of Proof of Work (electricity cost), but it also wants to provide unrivaled scalability and throughput. On paper, Cardano can reach even hundreds of thousands of transactions per second.

Cardano blockchain is aiming to solve these problems using RINA (Recursive Inter-Network Architecture) technology. This means that network nodes don’t need to maintain the information of all transactions ever made in the blockchain. This is the case now with Bitcoin, for example.

There are also various pruning and subscription methods which help to increase the capacity further by decreasing the amount of data needed to send. Otherwise, it’d be impossible to handle tens of thousands of transactions per second. The amount of data needed would exceed the capacity of physical network devices.

See the video below, where Charles Hoskinson is talking about scalability and Cardano.

There are also other problems, which the Cardano project is trying to solve. One trendy theme is interoperability, which means connectivity between different blockchains.

Even if Bitcoin would be a distributed and decentralized, you still need a centralized third-party service when you want to buy Bitcoins with USD, EUR or GBP. What if you want to exchange your Bitcoins to some altcoins? You need Binance or some other cryptocurrency exchange.

Cardano’s big plan is to create an internet of blockchains, where it would act as a judge and maintain order and integrity between blockchains. In practice, this means cross-chain transactions. Cardano is not the only project trying to solve this issue, though. You should also read about atomic swaps.

Then we have sustainability, where Cardano is offering a different solution. The problem is, that projects collect a bunch of money through an ICO, which gives them limited time and resources for development. Many projects have run out of resources during the long bear market of 2018-2019 and need more funding.

Cardano is planning something similar, which Dash has already developed. The idea is to build a treasury system for Cardano, which will have funds for future development. New features can be proposed by community members and voted. The idea is for IOHK to step out gradually and leave the Cardano foundation in charge of long-term development.

Cardano’s roadmap

It is very important to understand that Cardano is very much a work still in progress. This is the status in May 2020, when this article is being written. Even if there is progress in the roadmap, it’ll take several years before all features are fully implemented.

Charles Hoskinson has chosen a very academic approach when it comes to the development process. He wants to build slowly but surely something that is studied carefully. The programming language used in Cardano, Haskell, is a good example of this.

”Cardano is the first blockchain project to be built on peer-reviewed academic research. This level of scrutiny of the underlying technology is an industry first. Further to this, Cardano is unique in that it’s written in the Haskell coding language.

Haskell is considered to be one of the most secure programming languages, minimizing the number of errors and adding extremely robust security to the platform. This includes use of a technique called formal verification, which allows mathematical proof of the correctness of code.” (Source)

Cardano’s ADA token was a popular coin in the altcoin boom of 2017/2018. The small coin price combined with social media shilling brought in many investors, who had no idea where the project development really was. Cardano wasn’t much more than ideas on paper in 2017.

There are five major steps in the Cardano blockchain, which include dozens of smaller phases. These big steps are called Byron, Shelley, Goguen, Basho, and Voltaire. We are currently waiting for the Shelly step to be finalized.

The video below will give you a great overview of the Cardano roadmap.

The Shelley phase should be finalized in 2020, hopefully even in the second quarter. Three other phases are planned for the upcoming years, which means that the Cardano platform isn’t “ready to rock” and fully challenge its competitors for a long time. The major upgrade of the Shelley phase is the final version of the Ouroboros algorithm and the launch of the distributed network validation, which means the staking of ADA token.

As mentioned earlier, Cardano is using a proof of stake consensus algorithm like other 3rd generation blockchains. ADA token holders will be able to stake their coins through staking pools and essentially vote their favorite pool to run the network. In return, they’ll get staking rewards a.k.a passive income. All this is currently being done in the TestNet, not in the MainNet.

The MainNet of Cardano was launched in 2017, but it’s still run by the development team. It’s like a bicycle with training wheels. The upcoming Shelley update with all of its phases is going to effectively remove these training wheels. The network will be run by the ADA token stakers, as it should. This phase was supposed to happen in 2019, but Cardano was only able to do it in the TestNet environment.

The project launched a successful hard fork in February 2020, which was a significant step in the whole Shelley phase.


The state of Ouroboros in the spring of 2020.

The Ouroboros algorithm was upgraded from Ouroboros Classic to Ouroboros BFT, which also meant the end of the Byron phase. Now the project is kind of in-between Byron and Shelley. Hopefully, we’ll see the next upgrades done during 2020.

Check the video above to understand Cardano development phases better. Just remember, that the current network is still far from ready. You can also follow Cardano’s updates from

Cardano vs the competition

It’s a bit difficult to compare Cardano against its rivals because the project is so much behind in the general development. EOS and TRON launched their MainNets in early 2018, which means there have been Dapps launched for two years for these platforms. The networks have been running, staking is done, etc. Not to mention Ethereum, which has been there for 5+ years already.

We’ll update this article later in 2020 when Cardano gets the Shelley MainNet out and we’ll see how it starts to take shape. But, we can compare some features already.

As mentioned before, all 3rd generation platforms trust the Proof of Stake consensus algorithm. Ethereum differs from the pack with its Proof of Work mining, but even this dinosaur is moving towards a Proof of Stake model with the upcoming Ethereum 2.0 version. Hence, there won’t be soon big differences in this area.

Below is a good video comparing Cardano and Ethereum.

Cardano’s Ouroboros solution is a bit different from the DPoS used by EOS and TRON. The Delegated Proof of Stake model is developed by Dan Larimer and it has a very small amount of delegates running the network. With Cardano, we’re talking about staking pools, which there can be thousands. The network will randomly pick new validators from the staking pools after a certain time has passed (epoch).

Another significant difference comes from the programming language used to create smart contracts. Ethereum’s famous Solidity is not the most loved language. The thing is that Solidity offers plenty of chances for inexperienced programmers to make mistakes. Some developers called it a “wild west” language. Cardano has developed its own language called Plutus, which is very similar to Haskell, which was used to build the entire ecosystem.

TRON is also using Solidity and basically a copy of Ethereum’s Virtual Machine (EVM). This has some benefits because there are tons of Solidity developers in the world. This makes it easy for TRON to recruit them from the Ethereum environment. EOS is using the famous C++ language. Each platform has taken a bit different view on this matter.

There is no doubt that Ethereum is the king of the hill, despite its technical limitations. It’s as valuable as all other platforms put together and then some. We can’t really evaluate Cardano’s status until the Shelley MainNet is fully launched. It’s a bit surprising the project is still near the top 10 in the cryptocurrency ranking despite all those delays. It just shows how many fans Cardano has out there.

Cardano Beginner’s Guide – ADA as an investment

Cardano has been shilled and hated a lot since 2017. The project has been titled as a billion-dollar white paper and many newbie investors got burned badly with the ADA token in the altcoin rally of 2017. The price is still over 95% down from the ATH.

The biggest problem is probably the lack of knowledge. Many investors had no idea of the current state of the project when they initially bought ADA. Cardano was being shilled as the Ethereum killer already in 2017 when it was almost five years away from its final stages.

See the video below by Crypto Lark (09/2019). It goes through how the future looks for Cardano.

Cardano is so much behind its competing platforms, such as EOS, Tron, and NEO. They have all had MainNets running for over a year already and new Dapps are being developed every day. One shouldn’t really compare Cardano to these platforms just yet.

One should also remember, that Ethereum is also building the new 2.0 version, which will see the ecosystem move to a Proof of Stake consensus. Ethereum will eventually have the same scalability as its 3rd generation competitors.

We have to wait at least until 2021 until we can see the Cardano platform to materialize. One should also remember, that IOHK is not going to develop Cardano the same way forever. What is really going to happen after 2020, when the current contract ends?

If you are interested in Cardano, follow closely what happens with the Shelley stage.

ADA price

If you want to buy ADA with fiat money, the most newbie-friendly solution is probably eToro. Traditional crypto exchanges Kraken and Bittrex offer also ADA and USD pairs. If you already have bitcoins, you should buy ADA from Binance.

Once you have bought ADA tokens, it’s recommended to move them from Binance to your personal storage. The official desktop wallet is called Daedalus and it’s developed by IOHK as well.

Follow Cardano Foundation on Twitter at @CardanoStiftung. You’d also follow Charles Hoskinson, whose Twitter handle is @IOHK_Charles. The official Reddit page is There are also 100+ videos on the official Cardano Youtube channel. The official websites are and

If you are searching Youtube, try Charles Hoskinson instead of Cardano. For example Charles Hoskinson interview. Hoskinson has been in hundreds of interviews over the years. These are often the best resources.

Image: screenshot from

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