With blockchain adoption taking off within and outside of the crypto world, Cardano (ADA) is an open-source project that can boast a platform developed based on science and peer-reviewed research. ADA trades at $0.93 per token with a circulating supply of about 33.6 billion, for a total market capitalization of approximately $31.1 billion.
What is Cardano?
Cardano was established back in 2015 by a blockchain development firm called IOHK (Input Output Hong Kong) as a fully operational open-source blockchain project with a native ADA cryptocurrency. Like Ethereum, the project is geared towards becoming an advanced smart contract network for the development of decentralized applications (dApps).
It is widely known that Bitcoin pioneered blockchain technology. However, Cardano brings in a new type of ledger that aims to ultimately increase the scalability, performance, security, and energy efficiency of blockchains through the Ouroboros Proof of Stake (PoS) consensus protocol.
To recap, a blockchain consensus protocol is a set of rules that govern operations in a network. Since a public blockchain operates without intermediaries, a consensus protocol allows the network’s participants to agree on the mechanisms and processes employed to record data on that digital ledger. Cardano’s blockchain stands out as it solves the inherent performance and scalability issues of legacy Proof of Work (PoW) blockchains with an energy efficient and scalable PoS protocol.
Cardano is currently hosting over 600 projects on its platform, thereby creating an ecosystem of DApps that cuts across multiple sectors and aims to cater to the needs of many crypto enthusiasts. Cardano classifies the projects into two groups, namely utility and NFT, and under each group, there are subgroups as well:
- Utility projects in Cardano Ecosystem:
- Decentralized exchange (DEX) – Liquidity: AdaSwap, Thotus, ADAX, etc.
- Wallets: Daedalus, Yoroi, Guarda, etc.
- Decentralized finance (DeFi): Acta Finance, Astarter, CarDAO, etc.
- Marketplaces: Meloot token, Artano, CNFTSwap, etc.
- Infrastructure: Integrates blockchain technology in the infrastructure services, such as telecommunication, housing projects. The examples include 3air, Blockfrost, DripDropz, etc.
- Launchpad: Works as an incubator or accelerator for new projects and includes: Flickto, CardStarter, Cardence, etc.
- Metaverse/Gaming: Drunken Dragon Games, 141x, etc.
- Social: ActivADA, GoKey, Profila, etc.
- Lending & Borrowing: Aada, Liqwid, MELD, etc.
- Stablecoin: ADADAO, Ardana, Stasis, etc.
- Oracle: Oracles are data feeds that connect the blockchain and the real world, thereby allowing users to query the data in the smart contracts. Cardano-related oracles include API3, Chainlink (LINK), Charli3, etc.
- Identity: Atala PRISM, Blockademia, etc.
- Payment: AdaPay, Bidali, COTI, etc.
- Data: CFC, lagon, Nunet, etc.
- Gambling: BetCNFT, BingoToken, Ridotto, etc.
- Community: ADApools, Cardamun, etc.
- Meme coins: Ada Inu, Baby Lobster, Charlie, etc.
- NFT projects in Cardano Ecosystem:
- NFT marketplaces: ADANFT, ALDEA NFT, Artano, etc.
- NFT makers: ADATAR.io, NFT-MAKER PRO, etc.
- Metaverse: BULLY-VERSE, Bitlands, etc.
- Gaming: Captivate, Cardano 4 speed, etc.
- 3D art: ADA Invadaz, Afrixx, Cycl:R, etc.
- Originals: CardanoSpace, Politikoz, etc.
- Mysterious: AdaverseX, Benjamin’s group, etc.
- Charity: Cardano Trees, Dognuts, Foster, etc.
- AI generated: Abstract Vibes, Adaz, EntheosAI, etc.
- Art & Media: Black, Call Me By Your Name, etc.
- Hand-drawn: ADDAX, Adaliens, Cardodo, etc.
- Pixel art: 8-Bit Mania, Kittizens, PunkAss, etc.
- Collectibles: AdaMeds, Cardacity, Elepman, etc.
How Does Cardano Work?
Cardano is built on two layers, i.e., the Cardano settlement layer (CSL) and the Cardano computational layer (CCL). The fully functional settlement layer is used for ADA transactions. On the other hand, the computational layer is the smart contract platform, namely the Alonzo upgrade that was released on September 12, 2021.
By separating the smart contract platform from the transaction settlement layer, Cardano can achieve a higher flexibility level, allowing users on both layers to operate with different parameters. In fact, Cardano is developing a new programming language for the development of its smart contracts. Therefore, CCL users will be able to create smart contracts with different rules than those operating on the CSL layer.
Cardano’s settlement layer uses technological and philosophical strategies to achieve its goal of building a scalable, energy-efficient blockchain. One of its central philosophical positions is based on the idea that a network with an “honest majority” will withstand adversaries.
In terms of technology, the Cardano blockchain is developed using a highly flexible programming language called Haskell (a fault-tolerant programming language). On top of a flexible programming language, Cardano’s PoS protocol, Ouroboros, is designed to sustain the network’s security while maintaining a high degree of scalability. Let’s examine how.
The Ouroboros Proof of Stake Protocol
Ouroboros is a proof of stake protocol that solves one of blockchains’ most significant challenges: the need for more computing power to mine blocks and secure a network. Cardano claims that Ouroboros is the first of its kind to be developed based on peer-reviewed research.
At its core, Ouroboros is Cardano’s security backbone. While miners on a PoW protocol are rewarded for the computational power they deploy, Cardano’s PoS system selects participants (in this case, stake pools) to validate blocks and receive ADA as a reward based on the amount of stake they control in the pool
The Ouroboros protocol uses a mathematically verified system that prevents hackers from infiltrating the network. As long as honest participants hold 51% of ADA, hackers and malicious actors cannot double-spend.
To incentivize honest behavior, Ouroboros rewards good actors with more ADA for completing delegation and staking tasks while maintaining fairness in the selection of staking pools through a random and unbiased selection process. This random selection process is necessary as it prevents the formation of predictable patterns that can be exploited by keen observers.
What is ADA and What Role Does It Play?
For most people, Cardano and ADA are synonymous. However, Cardano is the name of the blockchain project as a whole, while ADA is the network’s native cryptocurrency. With a current circulating supply of over 31 billion coins and a maximum limit of 45 billion, ADA is currently ranked among the top ten cryptocurrencies in terms of market capitalization.
Cardano has a number of stake pools composed of owners and delegators, or stakeholders. From these pools, slot leaders are randomly elected to produce new blocks. The more ADA one holds, the higher the chances of being selected. Any time a slot leader adds a new block, they receive ADA as a reward.
Slot leaders earn ADA during the periods in between the validation of new transactions. These periods are called epochs. Therefore, for each epoch, transaction fees are collected and distributed in the staking pool among the slot leaders based on the amount of stake they control.
ADA is also used in Cardano’s treasury, a system that funds developers who contribute to the Cardano ecosystem. Anyone interested in advancing the Cardano open-source platform’s development can apply for a grant through the treasury and receive ADA upon approval by the network’s stakeholders. The treasury is funded by a portion of block rewards from each transaction. The treasury is designed to allow for continual development even after IOHK exits the project.
What is Cardano Wallet?
Users need a wallet to store the ADA they earn and receive. Apart from the wallets offered by crypto exchanges, Cardano has two main wallets in its ecosystem, namely the Daedalus Wallet and Yoroi Wallet.
Where to Store ADA?
Daedalus is the official desktop wallet invented by IOHK. It’s a full node wallet, meaning that dissimilar to its counterpart, Yoroi, it downloads a full copy of the Cardano blockchain and independently validates every transaction in its history. This prevents the third-party network issue that may arise when users use the Yoroi. However, Daedalus is only available on the desktop, which brings about the inconvenience to some users.
As a contrast, Yoroi is a light wallet created by EMURGO, a Cardano’s partner, and engineered by IOHK. Unlike Daedalus, a light wallet like Yoroi connects to a full Cardano node hosted by EMURGO (a third party) instead of downloading the blockchain. The setup is instant and easy. Users can use it on a mobile phone and a desktop, making it a more user-friendly option compared to Daedalus. To learn more about where to store ADA, read Daedalus vs. Yoroi vs. AdaLite: Which Is the Best Cardano (ADA) Wallet?
Apart from being a wallet, both Daedalus and Yoroi are places to stake ADA as well. In fact, some fans think that these wallets are among the best and secure places to stake ADA, not just because they are Cardano’s own wallets, but also the fact that ADA coins staked here are not locked in for a set time period, which differs from ADA staking in other wallets and crypto exchanges.
What Problem Does Cardano Solve?
With so many blockchain projects available, scalability is one of the main factors determining success and performance. For example, with skyrocketing transaction fees on Ethereum’s network, scalability is a great challenge the more it expands.
The first generation of PoW blockchains required every miner to keep a copy of the ledger for the process of validation. However, as the network grows and the number of transactions increases, mining nodes get overwhelmed as they have to keep a record of all trades while also validating new ones.
Ultimately, this increases transactional delays rendering the network inefficient for daily micro-transactions. Cardano solves this problem by separating transactional data from the ledger’s history. For instance, a block validator on Cardano only maintains data relevant to the transaction as opposed to the entire blockchain.
In contrast to PoW blockchains, whose energy consumption has been compared to that of entire nations, Cardano’s blockchain is much more energy-efficient. As explained, this is because the network’s security is based on staking rather than computational power.
Pros of Cardano’s Blockchain
Cardano’s blockchain’s main selling point is that it has no scaling limit. Even with an increase in the number of transactions, Cardano is capable of remaining stable. What’s more, ADA transactions on Cardano are quick and cheap, making it a better form of digital money than most cryptocurrencies with lower transactional throughput. Thanks to its PoS protocol, Cardano is environmentally-friendly and secure.
ADA Price History
From an initial price of about $0.017 on October 1, 2017, ADA rose to its first peak of $1.11 in January 2018 due to the crypto bull run that year. Due to the 2018 crypto crash, ADA’s price fell to $0.37 on May 2, 2018, before dropping further to $0.20 on June 10, 2018. ADA remained steadily below $0.20 in 2019 and 2020.
In early 2021, the crypto market experienced another boom, with Bitcoin’s price lifting over 700% since March 2020. Riding this wave, ADA’s price began rising in February 2021, reaching its all-time high price of S3.10 on September 2, 2021. According to some experts, the 2021 crypto boom, Cardano’s smart contract upgrade (the Alonzo upgrade), and its green energy credentials were the main drivers behind ADA’s uptrend.
However, the crypto market witnessed another crash in February 2022. Given this current scenario, ADA’s price has eventually gone down and is now below $1 again. Currently, ADA trades at $0.9255 per token with a circulating supply of about 33.6 billion, for a total market capitalization of approximately $31.1 billion. ADA currently ranks #7 on CoinMarketCap’s cryptocurrencies leaderboard in terms of market capitalization.
What is The Future of Cardano and ADA?
Cardano held the Cardano Summit 2021 in six locations on September 25 and 26. During the summit, Cardano announced that it had moved into the Goguen Era (the third of the five eras laid down in the Cardano Roadmap; also known as the era of smart contracts) after the Alonzo upgrade. The project also established major partnerships to accelerate the development of smart contract integrated features.
One notable partner is Chainlink (LINK), which would help feed quality data and assist the developers in building accurate and workable decentralized finance (DeFi) smart contracts. Another important partner is EMURGO (a global blockchain solution provider), which provided a $100 million allocation that aimed to promote DeFi and non-fungible token-based (NFT) education in the ecosystem.
Even though the crypto market is experiencing a bearish downtrend, there is still a lot to look forward to as Cardano has a lot of plans in development. For example, the upcoming Cardano Hydra upgrade would boost the transaction processing speed from to 1 million transactions per second (TPS.)
Even though Cardano’s focus on code scrutiny and science-based development is a welcome addition to the nascent blockchain industry, many fans are actually not happy with the slow updates and progress. Cardano faced criticism during its last testing phase for its concurrency issue. The concurrency amount is a limit to the maximum number of operations that can be performed at the same time. Moreover, Cardano’s slow development pace hinders its adoption progress. Other competitors in the same smart contract space have been faster in setting up smart contracts, DeFi applications, and NFTs. For example, Solana (SOL) has over 1,300 blockchain projects, attracting numerous users onto its platform.
Unlike most blockchains that only seek to overhaul the financial industry, Cardano aims to create a system that will enable the creation of a transparent and secure DApp ecosystem that cuts across multiple sectors. Despite its research-based and methodical approach, Cardano is not a perfect project with its slow development pace, which has caused some frustration among its enthusiasts. Nonetheless, Cardano still holds value in the long term as it promises a future where scalable blockchain-based innovations can be developed to accommodate a wide range of use cases.