What is Cardano (ADA)?

Cardano is one of the major cryptocurrencies in the market. Cardano’s founder, Charles Hoskinson, is one of the most well-known individuals in the crypto industry. Shelley, Mary, Alonzo, and Vasil hard forks have been the most significant updates for Cardano in recent years.

From a technical perspective, Cardano is a two-tiered system known as a layered blockchain system. Cardano utilizes a Proof of Stake consensus algorithm called Ouroboros. The maintenance of the Cardano blockchain is carried out by validators who stake ADA tokens.

The future of Cardano looks promising. To stay updated on the most important Cardano news, follow this website!

What is Cardano (ADA)?

Cardano is one of the major cryptocurrencies in the market. Cardano is a smart contract platform, which means it is an operating system (platform) for decentralized applications. Other popular smart contract platforms include, for example, Ethereum, BNB Chain, Solana, and Polygon.

You can think of smart contract platforms as operating systems like iOS or Android. They provide developers with an ecosystem and tools to create decentralized apps. Ethereum is by far the most popular smart contract platform, and Cardano is one of its biggest competitors.

Cardano’s native token is ADA. You can find the current price of the ADA token on this page: Cardano (ADA) price.

Basic information about Cardano (ADA):

The ADA token is named after Ada Lovelace, a mathematician who lived in the 19th century and is also known as the world’s first computer programmer.

ADA is used for paying transaction fees within the Cardano blockchain. ADA tokens are also used for staking because Cardano uses a Proof of Stake-based consensus algorithm (Ouroboros). Staking involves locking tokens for the validation and maintenance work of the blockchain.

In summary, Cardano has solidified its position as one of the top 10 cryptocurrencies in the market in recent years. It still faces many challenges, but the project has garnered a strong community and fan base over the years.

The history of Cardano

Cardano’s founder, Charles Hoskinson, is one of the most well-known individuals in the crypto industry. Many assume that Hoskinson is significantly older, but he is actually born in 1987. Hoskinson is mathematically gifted and has studied cryptography and mathematics at both the University of Denver and the University of Colorado.

Despite his young age, Hoskinson has been involved in many ventures. He first encountered cryptocurrencies in 2011. He focused particularly on mining and quickly grasped the significance of cryptocurrencies on a larger scale. His eyes were truly opened after the 2013 banking crisis in Cyprus.

Hoskinson is also one of the co-founders of Ethereum. He was part of Vitalik Buterin’s core team and played a significant role in the creation of the most popular smart contract platform in the market. Eventually, due to differences in the project’s development, Hoskinson diverged from Ethereum and parted ways with the platform.

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.

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.

Cardano’s native token ADA was created through an ICO in 2017, like almost all coins at the time. Almost 95 percent of early investors were Asian. The idea back then was to build the “Ethereum of Japan” and have a strong focus on the Asian market. We’ll take a look at ADA’s price development in a separate chapter.

The project was building quietly through the 2018-2019 crypto bear market. The most significant updates have taken place in 2020, 2021, and 2022. Let’s go through them next.

Cardano hard forks

Shelley, Mary, Alonzo, and Vasil hard forks have been the most significant updates for Cardano in recent years. These updates have transformed the Cardano ecosystem from its beta phase into a fully-fledged smart contract platform. Let’s now go through the key events one by one.

Shelley hard fork

The first major hard fork took place in July 2020 when the long-awaited Shelley update was launched. It brought staking to Cardano’s MainNet. Staking has been a huge success since it was introduced. There are over 3000 staking pools worldwide and more than 70% of the ADA tokens in circulation are staked.

Staking fundamentally changed the structure of the whole ecosystem. It moved Cardano’s blockchain to the management of thousands of staking pools. Shelley is definitely one of the most significant updates. It also made the transition from the Byron phase of the roadmap to the second phase.

Mary hard fork

The Mary hard fork in March 2021 was an important step in the Shelley phase of the roadmap. A dedicated token standard was activated in the Cardano blockchain. Users were able to issue their own tokens in the ecosystem. This meant NFT support in practice.

Cardano differs significantly from Ethereum and its ERC20 token standard. On the Cardano platform, no smart contracts are needed to transfer tokens due to its exceptional architecture.

Alonzo hard fork

The Alonzo hard fork, completed in September 2021, is the most hyped one in Cardano’s history. Its timing coincided with the final stages of the cryptocurrency bull market, which also caused a huge price jump for the ADA token. At the same time, the whole ecosystem moved from the Shelley phase to the third phase of the roadmap, called Goguen.

The Alonzo hard fork activated smart contracts on Cardano. This made Cardano theoretically a full-blooded smart contract platform, and at the same time turned Cardano’s ADA token from speculation into a more tangible investment.

Today, as smart contracts go live on Cardano, take a moment to appreciate how hard @IOHK_Charles & the team have worked & the criticism they have taken for so many years to make this happen.

It’s a huge day today.

Charles, Well done my friend. Proud of you.

— Ran Neuner (@cryptomanran) September 12, 2021

In the end, Alonzo’s hard fork was a disappointment, at least for investors. Many found out that Cardano was not technically compliant with the requirements of DeFi applications, which is why Cardano’s DeFi ecosystem did not take off as expected.

Vasil hard fork

If the Alonzo hard fork was Cardano’s most anticipated upgrade, the Vasil is the most important and demanding. At least if you ask founder Charles Hoskinson, who says that around half a million hours of programming went into the Vasil update.

Vasil addresses the limitations that have emerged since the Alonzo hard fork. It significantly improves the transaction capacity of Cardano and also brings updates to the Plutus programming language. Vasil is the update that investors expected Alonzo to be.

The Vasil hard fork was successfully completed in September 2022, several months behind the original schedule. This article has been updated a few days after the Vasil hard fork, so its broad implications are not yet known.

The Cardano roadmap can be found at roadmap.cardano.org. At the time of writing, we are in the Basho phase. Bryon, Shelley, and Goguen are passed already.

Cardano’s Layered Blockchain System

From a technical perspective, Cardano is a two-tiered system known as a layered blockchain system. These tiers are called the Cardano Settlement Layer (CSL) and the Cardano Computation Layer (CCL). Cardano.org provides background information on 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: Cardano.org)

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 the 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 utilizes a Proof of Stake consensus algorithm called Ouroboros. Validators in the Ouroboros blockchain maintain the network by staking ADA tokens, which means they lock them up for a period of time. Proof of Stake has become the preferred choice in the platform category in recent years, replacing the resource-intensive Proof of Work that requires physical mining.

In the Ouroboros system, time is divided into units called epochs. These epochs are further divided into slots, which are configurable time units. Each slot represents approximately 20 seconds. One epoch lasts for 120 hours or five days, consisting of 432,000 slots. At the time of writing this article, we are in epoch number 365. The first epoch was created on September 23, 2021.

Since a Proof of Stake system does not involve mining, the producers of new blocks in the blockchain are chosen from among the stakers of ADA. In the Cardano system, you can become a block producer by holding a sufficient amount of ADA tokens. The entity that is chosen as the block producer is called a slot leader. A new slot leader is chosen after every slot.

Cardano Staking

The maintenance of the Cardano blockchain is carried out by validators who stake ADA tokens. Staking on Cardano has become incredibly popular in recent years. You can check network statistics at adapools.org. The figures are undeniably impressive.

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 using one of Cardano’s 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 a lot of information about Cardano staking on Youtube and Google. Note for Scandinavian readers: Norwegian Block Exchange (NBX) has Cardano staking.

Overview of Cardano

The future of Cardano looks promising. Charles Hoskinson’s project has come a long way, but the most important steps are yet to come.

The Vasil Hard Fork, conducted in the fall of 2022, addressed many of the shortcomings of the Alonzo Hard Fork. It finally made Cardano a fully-fledged smart contract platform. With no more technical limitations hindering application development, investors anticipate growth, especially in the DeFi sector.

Time will tell whether Cardano’s EVM incompatibility becomes a significant obstacle. The majority of developers are proficient in Solidity, and this is where EVM-compatible platforms like BNB Chain and Avalanche come into play. They seek to attract attention from Ethereum by offering an easy way to migrate applications to their platforms.

Cardano currently lacks this option. Its Plutus programming language may pose a growth limitation. Whether Cardano is a better or worse investment compared to the aforementioned smart contract platforms or Ethereum is difficult to answer at the time of writing. Cardano’s market cap is roughly in the same ballpark as its competitors, suggesting it is neither significantly overvalued nor undervalued.

The growth of the DeFi sector is crucial for Cardano’s future. It is also important for its launched Djed stablecoin to gain sufficient popularity and support within the Cardano ecosystem.

If you are interested in buying Cardano, refer to this article: How to buy Cardano (ADA). It provides detailed instructions on acquiring Cardano’s ADA token and other useful information about Cardano as an investment.