What is Cardano (ADA)?

13 July 2023

Cardano (ADA) is a blockchain platform and cryptocurrency that is being developed with high security, resilience and scalability in mind. It was created to provide an innovative solution for building decentralized applications and smart contracts.

The main goal of the Cardano project is to create a sustainable and secure platform for developing the digital economy and solving complex problems faced by existing blockchain platforms. Cardano aims to provide high transaction speed, scalability, low fees and the ability to execute complex smart contracts.

The ADA cryptocurrency used on the Cardano platform is a medium of exchange and rewards in the ecosystem. It can be used for transactions, voting and staking (investing to support network security).

Cardano (ADA) is a promising blockchain platform that seeks to combine innovative technologies as well as a scientific approach to create a secure and scalable environment for developing decentralized applications and smart contracts.


History of Cardano (ADA)

Cardano (ADA) is a blockchain platform developed using research principles and an academic approach. Let's take a look at the history of Cardano's creation and its key moments of development.

Cardano was created in 2015 by Charles Hoskinson, who is one of the co-founders of Ethereum. The main goal of Cardano is to create a blockchain platform capable of providing security, scalability and sustainability for various applications.

The history of Cardano's development can be divided into several important stages:

  1. Founding and release of the white paper (2015-2017).  In 2015, IOHK (Input Output Hong Kong), a company led by Charles Hoskinson, began developing Cardano. In 2017, a white paper known as "Ouroboros: A Provably Secure Proof-of-Stake Blockchain Protocol" was released, which described the concept of Proof-of-Stake and other key aspects of Cardano.
  2. Core Network Launch (2017-2018). In September 2017, Cardano's core network was launched. This meant the official start of the platform and the possibility to conduct transactions using ADA cryptocurrency.
  3. Development of layers and protocols (2018-present). Cardano has developed its own architecture consisting of two layers, the settlement layer (smart contracts) and the invoice settlement layer (transaction and accounting management). Various protocols have been implemented, such as Ouroboros, which provides security and scalability to the network.
  4. Major Updates and Partnerships (2019-present). Cardano is actively working on developing and improving its platform. Important updates such as Shelley and Goguen have been released, expanding Cardano's capabilities for decentralized applications and smart contracts. The Cardano team has also established partnerships with various organizations and governments to apply blockchain technology to various industries.

Cardano aims to become a sustainable and evolving blockchain platform that can support a wide range of decentralized applications and provide a secure and efficient environment for network participants.

How Cardano works

Cardano operates based on a unique architecture that integrates multiple layers and protocols. Let's take a look at the main components and principles of Cardano's operation:

  1. Settlement Layer. The Settlement Layer is the core layer of the Cardano blockchain. It provides the functionality to send and receive transactions using ADA cryptocurrency. The Settlement Layer uses a Proof-of-Stake algorithm called Ouroboros, which provides security and consensus in the network. Network participants, called "stakers," can delegate their ADA coins to support the security of the network and receive rewards for their participation.
  2. Computational Layer (Computational Layer). The Smart Contracts Computational Layer provides an environment for developing and executing smart contracts on the Cardano platform. This layer uses the Plutus programming language, which is based on the Haskell functional language. Smart contracts on Cardano can be used to create a variety of decentralized applications, including financial smart contracts, decentralized exchanges, and more.
  3. Protocols. Cardano utilizes several protocols that provide security, scalability, and resilience to the network. One of the key protocols is Ouroboros, which provides a proof-of-stake consensus algorithm. Cardano is also developing protocols for transaction management, accounting, and other aspects of the network.
  4. Development and Updates. Cardano has a development plan that includes several phases such as Byron, Shelley, Goguen and beyond. Each phase introduces new features and functionality to the blockchain platform. Cardano is developed using research and formal verification to ensure high security and reliability.

Cardano is committed to building a blockchain platform that combines security, scalability, resilience and the ability to develop decentralized applications. Working on the basis of research principles and an academic approach, Cardano aims to provide innovative solutions to the challenges faced by existing blockchain platforms.

How Cardano works

Cardano blockchain architecture

The Cardano blockchain architecture is layered and modular, providing flexibility and extensibility for different applications and functionality. Here are the main components and layers of the Cardano architecture:

  1. Application Layer. This layer provides an interface for the development and execution of decentralized applications on the Cardano platform. Here developers can create smart contracts, decentralized applications and other innovative solutions.
  2. Settlement Layer. The Settlement Layer is the main layer of the Cardano blockchain. It is responsible for processing and validating transactions using ADA cryptocurrency. The Settlement Layer uses a Proof-of-Stake algorithm called Ouroboros to ensure security and consensus on the network.
  3. Control Layer. The Control Layer provides mechanisms for managing and coordinating the Cardano network. It includes protocols for transaction processing, balance accounting, signature verification, and other aspects of blockchain management.
  4. Consensus Layer. The Consensus Layer is responsible for ensuring consensus on the Cardano network. It includes protocols, such as Ouroboros, that define the rules and procedures by which network participants can agree on the state of the blockchain and verify its integrity.
  5. Network Layer. The Network Layer is responsible for information exchange and communication between nodes of the Cardano blockchain. It ensures the transfer of blocks, transactions and other data across the network, providing communication between participants.

Cardano's architecture is designed with security, scalability, resilience and flexibility in mind. It is based on scientific research and aims to provide a robust and innovative blockchain platform for a variety of use cases.

Cardano blockchain architecture

Proof of Stake consensus algorithm

The Proof-of-Stake (PoS) consensus algorithm is an alternative to the Proof-of-Work (PoW) algorithm and is used in blockchain systems including Cardano. Instead of using computing power to solve complex math problems, PoS relies on ownership and "staking" of the cryptocurrency to ensure security and consensus in the network. Let's take a look at the basic principles of the Proof-of-Stake algorithm:

  1. Network participants and staking. In the PoS algorithm, network participants, called stakers, must own a certain amount of cryptocurrency to be able to participate in the consensus process. They delegate their coins to support the security of the network and are rewarded for their participation. The more coins a participant has, the better their chances of choosing the next block and receiving a reward.
  2. Staker selection and block formation. In the PoS algorithm, the selection of the steaker that will form the next block is based on a random or probabilistic algorithm that takes into account the magnitude and structure of its steaking. The larger a participant's steak, the greater his chances of being selected. This ensures a more even distribution of rewards and power among network participants.
  3. Block Confirmation and Reward. The selected staker forms a new block containing transactions and other necessary information and signs it with his private key. This block is then transmitted and validated by other participants in the network. Once the block is successfully validated, the staker is rewarded in the form of new coins issued and commissions from transactions that are included in the block.

Advantages of the Proof-of-Stake algorithm include more energy-efficient operation compared to PoW, higher scalability, elimination of the need for specialized mining hardware, and greater user participation in the consensus process. However, as with any algorithm, there are potential drawbacks, such as the possibility of a 51% attack, where one participant or group of participants gains control of the majority of the steak and can forge blocks.

The Proof-of-Stake algorithm is used by Cardano to ensure security and consensus on the network, and it continues to evolve and improve to achieve better blockchain efficiency and security.

What is Cardano used for?

Cardano is used for a variety of purposes and has a wide range of applications. Here are some of the main uses of Cardano:

  1. Financial Transactions. Cardano enables fast, reliable and secure financial transactions using ADA cryptocurrency. This can be both ordinary fund transfers and complex financial transactions, including smart contracts and decentralized financial applications (DeFi).
  2. Development of decentralized applications (dApps). Cardano provides a platform for developing and deploying decentralized applications. Developers can use the Plutus programming language and Cardano's development tools to create innovative applications in various fields, including finance, logistics, healthcare and others.
  3. Identity and Data Protection. Cardano is committed to providing innovative solutions for identity management and data protection. With its secure and reliable architecture, Cardano can be used to develop identity systems, digital passports, access control systems and other data security related solutions.
  4. Supply Chain Management. Cardano can be applied to create transparent and efficient supply chain management systems. Thanks to its smart contract capabilities, Cardano can track and verify the origin and movement of goods, manage contracts and payments, and improve transparency and trust in the supply chain.
  5. Research and Academic Objectives. Cardano has a strong research foundation and academic approach. It is used to conduct research in cryptography, blockchain, distributed systems and other related fields. Cardano also supports education and research programs by collaborating with universities and academic institutions.

Cardano is being designed to be future-proof and scalable, and its use may expand as blockchain technology evolves and new applications emerge.

Cardano blockchain scaling up

Cardano blockchain scaling is the process of increasing the capacity and efficiency of the network so that it can process more transactions and support a growing user base. Here are some of the methods that are used to scale the Cardano blockchain:

  1. Division of the network into layers. Cardano uses an architecture consisting of two main layers - the Computation Layer and the Settlement Layer. The Settlement Layer is responsible for executing smart contracts and applications, while the Settlement Layer handles basic transactions and network security. The separation into layers allows each layer to scale more efficiently and be updated independently.
  2. Ouroboros protocol and network fragmentation. Cardano uses the Ouroboros consensus protocol, which is based on the Proof-of-Stake algorithm. The Ouroboros protocol provides security and consensus in the Cardano network. To increase scalability, Cardano implements network fragmentation, dividing the blockchain into smaller fragments and allowing parallel processing of transactions in different fragments.
  3. Bandwidth Improvement. Cardano is working to improve network throughput by implementing protocol improvements and optimizing consensus mechanisms. This includes increasing block size, improving compression and data transfer algorithms, and optimizing the transaction verification process.
  4. Development of scalable layers. Cardano plans to develop and introduce new layers and protocols that will facilitate scaling of the network. For example, Cardano's development plans include an Asset Registry Layer, which will enable the creation and management of various assets on the Cardano platform.

Scaling the Cardano blockchain is an ongoing process, and the development team is working to implement new technologies and improvements to provide an efficient and scalable network for its users.

ADA token

What is an ADA token?

The ADA token is a cryptocurrency used on the Cardano blockchain. ADA is a native token of the network that performs several functions:

  1. Medium of exchange. ADA is used as a digital currency for transactions on the Cardano network. Users can send and receive ADA, make payments, transfers and other financial transactions on the Cardano blockchain.
  2. Steaking and consensus participation. ADA holders can use their tokens to participate in the steaking process on the Cardano blockchain. Steaking is a process in which ADA holders hold their tokens on special wallets and help ensure security and consensus on the Cardano network. For this, participants are rewarded in the form of additional ADA.
  3. Voting and protocol management. ADA owners have the opportunity to vote and participate in decisions regarding the development and improvement of the Cardano protocol. By participating in voting, ADA owners can express their preferences and contribute to the development of the network.
  4. Use in decentralized applications (dApps). ADA can be used in decentralized applications developed on the Cardano platform. Developers can use ADA in their applications as a means of exchange, incentives and other features.

ADA is a core element of the Cardano ecosystem and plays an important role in ensuring the security and efficiency of the network.

How to store Cardano (ADA)

There are several ways and recommended methods to store the ADA token used in the Cardano blockchain:

  1. The official Daedalus wallet. Daedalus is the official Cardano wallet developed by the Cardano Foundation team. It is a full-fledged wallet that allows you to store, send and receive ADA. Daedalus is available for download on the official Cardano website and offers a safe and secure environment to store your ADA tokens.
  2. Cold Wallet. Wallets such as the Ledger Nano S or Trezor provide a high level of security for storing ADA. They are physical devices that store your private keys in an isolated environment, making them inaccessible to hacking over the internet. By connecting the cold wallet to your computer or mobile device, you can manage your ADAs securely.
  3. Online wallets. There are also online wallets, such as Yoroi or ADALite, that offer a convenient and affordable solution for storing ADA. Online wallets allow you to access your ADA tokens through a web browser, but it is important to choose reliable and trusted platforms.

Regardless of the ADA storage method you choose, it is important to take safety precautions:

  • Create a strong password to access your wallet.
  • Back up your private keys or recovery phrases in a safe place.
  • Never share your private keys or recovery phrase with other people.
  • Install and update your wallet and computer software to ensure security.

When choosing an ADA wallet, it is advisable to go only to official and trusted sources to avoid fraud or loss of funds.

How to store Cardano (ADA)

Description of the cons and pros of Cardano

Cardano, like any other blockchain platform, has its advantages and disadvantages. Let's take a look at some of them:

Cardano Pros:

  1. Scientific Approach. Cardano is developed based on a scientific approach and academic research. The development team thoroughly studies and analyzes problems before making decisions on the development of the protocol. This allows Cardano to build a solid technological foundation with scientific principles in mind.
  2. High Security. The Cardano blockchain provides a high level of security through the use of Ouroboros' Proof-of-Stake (PoS) protocol. This consensus algorithm ensures network security and protection from attacks.
  3. Scalability. Cardano strives for high scalability through the use of network fragmentation and multi-tier architecture. This allows for more efficient transaction processing and support for a growing user base.
  4. Resilience to future changes. Cardano is being designed with future changes and evolution of blockchain technologies in mind. Its modular architecture allows new features and protocols to be introduced without significantly impacting the existing protocol.

Cardano Cons:

  1. Development time. Due to the scientific approach and complexity of implementation, Cardano development can take a long time. This can cause delays in the delivery of new features and updates.
  2. Competition. Cardano competes with other blockchain platforms such as Ethereum, EOS and others. Rapid development and adoption of other platforms may pose challenges to Cardano's success in the market.
  3. Limited ecosystem. Currently, the Cardano ecosystem is still in the development stage, the number of decentralized applications (dApps) and developers on the platform is limited compared to some other blockchain platforms.
  4. Regulatory Risks. Like other cryptocurrencies and blockchain platforms, Cardano may be subject to regulatory risks in various jurisdictions. Changes in law and regulation may affect the adoption and use of Cardano.

Overall, Cardano is a promising blockchain platform that strives for a scientific approach, security and scalability. However, like any technology, it has its limitations and challenges that must be considered when assessing its potential and applicability.

To summarize: why you should try Cardano

Cardano (ADA) is a blockchain platform that offers a number of unique features and benefits. It is built on a scientific approach, provides high security through a Proof-of-Stake (PoS) algorithm, and has an architecture that promotes scalability.

Cardano's key strengths include a scientific basis for development, a high level of security due to PoS, a commitment to high scalability, and the flexibility to implement future changes. Cardano is also actively growing, focusing on building partnerships, expanding the ecosystem and attracting developers.

However, Cardano also has some drawbacks, including development time, competition with other blockchain platforms, limited ecosystem and regulatory risks.

Cardano is a blockchain platform with great potential and ambitious goals. It aims to offer solutions to the challenges of blockchain scalability, security and sustainability. However, before investing in or using Cardano, it is important to consider both its benefits and limitations, and assess whether its technology and goals are aligned with your needs and expectations.

If you want to expand your knowledge of trading and gain practical skills, experience, and tools that can be immediately applied to the cryptocurrency market, sign up for trading courses at the CRYPTOLOGY trading school.

Frequently asked questions about Cardano (ADA)

What is Cardano?

Cardano is an open-source blockchain platform designed for the development and execution of smart contracts and the transfer of digital assets. It was designed with the principles of sci-fi in mind and includes a number of innovations such as Ouroboros' Proof-of-Stake (PoS) protocol.

Who is behind Cardano?

Cardano is developed and maintained by an international team of engineers and scientists from IOHK (Input Output Hong Kong), led by Charles Hoskinson, former co-founder of Ethereum.

What makes Cardano different from other blockchain platforms?

One of the main features of Cardano is its development method, which is based on academic research and a scientific approach. This allows it to provide high security, scalability and resilience.

What is ADA?

ADA is a cryptocurrency used to perform transactions and pay fees in the Cardano ecosystem. It can also be used to store and transfer value, as well as participate in voting and decision-making.

What are the benefits of Proof-of-Stake (PoS) in Cardano?

The PoS protocol in Cardano allows network participants to participate in the process of decentralized transaction verification and the creation of new blocks, depending on the amount of ADA they hold. This method is more energy efficient and democratic than the Proof-of-Work (PoW) protocol used in earlier blockchains such as Bitcoin.

How can I buy ADA?

ADA is available for purchase on a variety of cryptocurrency exchanges including Binance, Coinbase, Kraken and others. To buy ADA, you usually need to have an account on the chosen exchange and use other cryptocurrencies or fiat money to make the purchase.
Join our mailing list. No spam.
Only exclusive offers.