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What Is Cardano (ADA)?

Cardano is a third-generation, decentralized proof-of-stake (PoS) blockchain network that provides an efficient alternative to proof-of-work (PoW) networks.

It serves as a robust, flexible, scalable and sustainable platform for running smart contracts to help develop various decentralized apps (DApps), games, new crypto assets, and more.

What Is ADA?

ADA is the native token of the Cardano network. It’s named after Ada Lovelace, the 19th-century mathematician well-known as the "world's first computer programmer." ADA tokens fuel the Cardano platform, just as ETH tokens fuel the Ethereum network.

What Is Cardano (ADA) Used For?

Individuals can use Cardano tokens, or ADA, to transfer value just as we currently do with fiat currency.

ADA can also be staked to the blockchain, helping "staking pool operators" verify transactions successfully, thus maintaining security throughout the blockchain. Additionally, those who stake ADA to the blockchain are rewarded with additional Cardano crypto.

Unlike with other blockchain projects, ADA token holders get to vote on changes to Cardano, but not miners. Therefore, Cardano crypto holders can use their ADA to vote on proposals when new developments or changes are proposed to Cardano. In this way, anyone who owns ADA has a say in its development.

In the future, developers may also use ADA to create smart contracts and apps that work on the secure, decentralized Cardano blockchain. Without the native ADA token, there wouldn't be a way to execute these smart contracts.

Who Is the Founder of Cardano (ADA)?

Ethereum co-founder Charles Hoskinson led a team and created Cardano to solve existing challenges, such as the lack of adequate scalability and interoperability in existing smart contract blockchains like Ethereum.

One of the most notable aims of the Cardano platform is to develop a more sustainable and balanced ecosystem for cryptocurrencies. Although Cardano was originally started as a research project, it’s evolved into a unique and successful blockchain platform.

How Does Cardano (ADA) Work?

The Cardano ecosystem is secured through Ouroboros, an algorithm that uses the PoS protocol for mining blocks and validating transactions. The peer-reviewed Ouroboros protocol helps reduce energy expenditure during block production by eliminating the need for massive computing resources and hash power (which are fundamental to the PoW algorithm).

In Cardano's PoS system, staking decides if a node can create blocks: A node's stake is equivalent to the amount of ADA held by it over the long term.

How Ouroboros Works

Ouroboros divides physical time into epochs made up of slots. These slots are similar to the working shift times at a factory. The epoch and slot durations can be configured and changed at any time following an updated proposal.

At present, an epoch lasts five days. When one epoch ends, another starts. A slot, on the other hand, lasts just one second. Each slot has a leader appointed by a "lottery" system — the higher the stake, the greater the odds of winning the lottery.

Ouroboros needs a few ADA holders to stay online and sustain stable network connectivity. The algorithm also features the concept of a stake pool, which helps cut down on energy consumption. ADA holders can arrange themselves into stake pools and select a few to represent all of them during protocol execution. This process enables easy participation, and ensures that blocks can be created even if some users are offline.

Why Is Cardano (ADA) Valuable?

Conversations about crypto sustainability have led to a decrease in the value of Bitcoin and other big players. Bitcoin has even lost favor with its erstwhile supporter, Elon Musk, who stated that the lack of sustainability was why he dumped it for Dogecoin.

In such times, Cardano's energy efficient and "sustainable" properties have made it highly valuable to investors. ADA's sustainability is powered by its blockchain protocol. Unlike Bitcoin, Cardano doesn’t rely on supercomputers to create new ADA and process transactions. Instead, Cardano is based on a PoS system in which miners stake their crypto to validate a transaction. This process reduces Cardano's power consumption to a minuscule percentage of the Bitcoin network's usage.

In August 2021, there was a surge in ADA price and Cardano quickly became the world's third-largest cryptocurrency after Charles Hoskinson announced the launch of the Alonzo hard fork.

The Alonzo hard fork was announced to be officially launched on September 12, 2021, causing Cardano price to surge once again in the beginning of September ahead of its launch as smart contract functionality was finally available on the blockchain. Cardano's price broke the $3 mark at this time and achieved an all-time high of $3.101 on September 2, 2021.

Thanks to the Alonzo hard fork, users could develop smart contracts on the Cardano network. This also meant that decentralized apps (DApps) could be built on the Cardano blockchain platform.

What Makes Cardano (ADA) Unique?

Cardano distinguishes itself from other competing blockchains by using a unique multi-layer architecture and mathematical principles in its consensus mechanism. Let's have a look at what makes Cardano such a unique and compelling cryptocurrency.

Multi-layer Architecture

The Cardano blockchain features two layers: The Cardano Settlement Layer and the Cardano Computational Layer.

The Cardano Settlement Layer has already been completed and is presently functional. It’s designed to help consumers transfer ADA coins from one crypto wallet to another.

The Cardano Computational Layer, on the other hand, is under development. Its purpose is to help users initiate and sign up on smart contracts. While it may seem similar to that of the Ethereum blockchain, it has some advantages.

The Cardano Computational Layer is more adaptable, as it can be modified to meet the requirements of end users. For instance, each country has different monetary and financial regulations. Due to the computational layer, the same contract can be written to change how information is stored, processed and accessed per those regulations. Making the computational layer separate allows ADA holders to utilize the same currency in various countries, while complying with their laws and regulations.

The computational layer uses the PoS protocol to verify transactions. It also enables the Cardano project team to execute changes using soft forks without affecting the ADA or settlement layer. Validators (users who want to participate) must invest ADA coins to demonstrate their "stake" in the whole process, for which they are rewarded proportionately.

Proof-of-Stake Consensus

The PoS consensus enables nodes with the highest number of stakes (or coins) to generate transaction blocks. Cardano works on Ouroboros (described above), a specially designed PoS blockchain protocol for consensus. This consensus mechanism allows users to send and receive ADA easily and securely while maintaining the safety of smart contracts on Cardano. Furthermore, as a PoS consensus mechanism, Ouroboros rewards token holders who stake their ADA for network consensus.