Cardano is one of the top ten cryptocurrencies on CoinMarketCap — what's the deal behind this peer-reviewed crypto?
The Cardano team is made up of engineers, academics and an Ethereum co-founder. The eclectic group chose to do something different in 2015 and build a native blockchain from scratch.
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What Is Cardano?
Who Is Cardano (ADA) Named After?
Ada Lovelace was a brilliant mathematician, writer and is now recognized as one of the first computer programmers ever. Lovelace recognized the mathematical potential of computers early on and published the first algorithm in 1843 that such a machine could carry out. It is said that without Lovelace’s work, computers as we know it today wouldn’t exist.
Which Organizations Are Behind Cardano?
There are several other organizations that are working together to develop the platform, however three stand out. They are the Cardano Foundation, Input-Output Hong Kong (IOHK) and Emurgo.
What Is the Cardano Foundation?
What Is IOHK?
IOHK is an organization founded by Hoskinson and Jeremy Wood, which is focused on building technological solutions that aim to promote better financial inclusion.
What Is Emurgo?
How Cardano, a “Third-Generation Blockchain,” Came to Be
This is also the reason why they did not build on the already existing chains in developing Cardano; instead, they went on to create a completely independent network from scratch.
Cardano stands out from other blockchain projects as it follows a data-driven and very academic approach. Since the papers outlining the model and plans of the network are publicly available, expert engineers and developers can weigh in on its road ahead (interestingly, no whitepaper was published for Cardano). Furthermore, the platform is based on the Ouroboros blockchain – the first proof-of-stake (PoS) blockchain that has undergone a peer review.
Cardano’s Smart Contracts
Cardano’s Architecture: CSL and CCL
The CSL powers Cardano’s unit of account. Simply put, this is where peer-to-peer transactions are facilitated, such as the transfer of tokens between users.
In addition, CCL will enable a flexible data storage and access model that abides by the laws governing crypto that are implemented on the locality of any user.
What Is Cardano’s Transaction Speed (TPS)?
For a better comparison, Bitcoin can only process 4.6 TPS, with Ethereum 1.0 at a slightly higher 15-20 TPS. Clearly, ADA can process a higher transaction volume than the first and second-generation chains combined.
How Does Block Production Work on Cardano?
The slot leaders are chosen from staking pools based on the volume of their stake and a random seed. The seed uses a multi-party computation (MPC) system to determine which stakeholder can be nominated to generate the next blocks.
Decentralized Applications (DApps)
DApps are also a feature enabled by smart contracts. DApps function like computer programs and are designed to run specific purposes for users. A DApp is also used by network participants to interact with a blockchain through an abstracted user interface.
Byron (Foundation Era)
The Byron era of Cardano (named after Lord Byron, Ada Lovelace’s father) began in September 2017 with the launch of Cardano’s first version.
The Byron stage of Cardano enabled the buying and selling of ADA on a federated network powered by the Ouroboros consensus protocol, the first PoS protocol built on extensive academic research.
Shelley (Decentralization Era)
Shelley derives its name from Mary Shelley, author of the horror book Frankenstein, which represents a clever nod towards the network’s goal of becoming fully autonomous, much like the fabled horror creature.
With more users running the nodes of the network, Cardano hopes to achieve greater security and performance than its earlier Byron-derived approach. And if Shelley is successful, the Cardano team believes it can achieve the level decentralization it is striving for.
The backbone of the Shelley upgrade is the participation of ADA holders, who are also the validators powering the PoS system of the network. Like other PoS chains, Shelley enables ADA holders to also delegate their stake to other validators as a form of network participation.
Goguen (Smart Contracts Era)
Another feature that will be made available through the Goguen implementation is wider interoperability with other existing smart contracts, regardless of the difference in coding language used to develop them.
Its use of the Marlowe language (its DeFi platform), built on top of Plutus (its smart contract platform), will ensure that even those who do not have a lot of technical expertise can freely craft their own smart contracts.
In preparation for the launch of the Goguen mainnet, Cardano has already enabled token locking. This is to ensure the sustainability needed for the network to implement the next phase, the Voltaire era, where network participants will be given the ability to vote on protocol upgrades and modifications.
Basho (Scaling Era)
Cardano’s Basho era, the launch date of which is yet to be confirmed, will optimize the network, helping it to scale and become more interoperable.
Basho, named after famous Japanese poet and haiku master Matsuo Bashõ (1644–1694), will bring two core developments to effect sustainable scalability:
- Firstly, it will introduce sidechains that will be used as a sharding mechanism to scale the network capacity further without affecting its security.
- Secondly, it will launch accounting styles that run parallel to Cardano’s UTXO model, thereby fostering greater interoperability.
Voltaire (Governance Era)
Cardano’s Voltaire era, named after the famous 17th century French poet, writer and philosopher, will deliver the final touches to the network to help it mature into a fully self-sustainable and decentralized platform.
How to Stake Cardano
Staking can be an excellent way to earn passive income. The simplest way to stake Cardano is through a cryptocurrency exchange platform like Binance, Coinbase, Kraken and other major exchanges. You’ll need to open an account and purchase or transfer ADA tokens into the wallet of your exchange platform. Then, find the staking function of the exchange and select the staking duration. Finally, enter your desired amount of tokens, and voila, you have now staked Cardano!
You can also stake Cardano through a brokerage like eToro; all you need to do is purchase ADA tokens and hold onto them. However, keep in mind that staking with brokerages can be risky because if a brokerage suddenly shuts down, you have no access to your coins.
One of the most secure ways to stake Cardano is via a staking pool from a Web 3.0 wallet like Daedalus and Yoroi, which is described in greater detail below.
How to Stake ADA
As already mentioned, Cardano’s PoS network functions through validators who ensure its integrity. These are the nodes that are tasked with keeping an updated copy of the state of the blockchain, which will then be used to verify transactions later on.
ADA holders can delegate their stake using Daedalus or Yoroi wallets. Staking Cardano can be as simple as delegating your ADA tokens in your wallet to a preferred pool and letting an operator maintain their stake on their behalf. Stakers will then be entitled to a reward proportional to their stake, allowing them to earn passive rewards for validating blocks.
Where to Stake ADA
There are staking pools that compose Cardano’s validator network, and they are open for users to join.
ADA holders can join existing staking pools by delegating their tokens through the Daedalus or Yoroi wallet. In such cases, there is no need for the staker to maintain a constant internet connection. The only issue that the ADA staker has to consider is the fees charged by pools.
Those interested can also choose to run their own staking pool for ADA. However, establishing your own pool can be a much more complex process.
To operate an independent staking pool, a staker must make sure that their node is always online, which means that their hardware must stay on and connected to the internet at all times. Beyond that, you must also have the knowledge needed to run and maintain Cardano nodes.
Unlike other PoW-based networks, there is no need for a powerful mining rig when staking, but you do need a reliable internet connection. And even without holding ADA, anyone can operate individual staking pools by helping provide their technical expertise to other network participants who are staking as well.
Staking on Daedalus Wallet
Staking on the Daedalus wallet is straightforward and does not require much time. First, in Daedalus, navigate to the Delegation center. Select the stake pools tab, choose the stake pool you want to delegate to, and click on “Delegate to this pool”. Select the wallet that holds the funds you want to delegate. Then, confirm your stake pool selection. Finally, use your spending password or connect your hardware wallet to confirm the transaction.
Staking on Yoroi Wallet
Staking on Yoroi is slightly more complicated if you still have ADA coins in the Byron wallet. In the Byron and Shelley eras, different formats of wallet addresses were used. ADA holders have to convert to Shelley wallets before they can stake.
Converting to Shelley wallet requires users to reinstall their chrome extension of Yoroi. After reinstalling and creating a new Shelley wallet, users can transfer their ADA funds from their old Byron to the new Shelley wallet.
Ada Staking Rewards and What Stake Pools to Choose
From an off-protocol view, ADA holders might consider factors relating to the stake pools, such as whether it is operated by someone you trust or an NGO, or if it runs on green energy. Other factors to consider include if it donates to a charitable cause, its geographic location, stakeholder structure, transparency and user interface.
Cardano vs Bitcoin
Bitcoin is the biggest cryptocurrency in terms of market capitalization. It was launched in 2009 and has remained on top of every other altcoin ever since. And while it has been touted as the ultimate store of value and hard currency, it lacks customer support.
Cardano, on the other hand, is already on its way to include smart contracts via a new platform called Plutus, to be deployed in the forthcoming Goguen update. And while Bitcoin devs also have a plan of their own, it appears far from actual implementation considering its targeted smart contract language, named “Sapio,” is still under development. Furthermore, Bitcoin also has perceived limitations in running smart contract applications, unlike Cardano.
Cardano is stronger in terms of transaction throughput. Bitcoin’s scalability problem is seen from its capacity to only settle 4.6 TPS. This pales in comparison with Cardano, which can handle 257 TPS; therefore, Cardano is much faster than Bitcoin at its current state in facilitating peer-to-peer transactions.
Cardano vs Ethereum
The first point of comparison between Cardano and Ethereum is on their consensus algorithm. The Shelley-era for Cardano and the newly-launched Ethereum 2.0 will implement fully PoS-based consensus models. It can be difficult to compare both their performance on this end, since neither of them are completely operational.
However, on the current setup between Cardano and Etherum, Cardano appears much stronger than its competitor, Ethereum, in terms of TPS. When it comes to transaction costs, Ethereum also lags behind due to its problems with expensive gas fees.
Cardano vs EOS
Cardano’s strength against EOS lies in the difficulty of developing DApps on EOS. The health of EOS’ network depends on the dapps built on the platform. But as of yet, there aren’t enough dapps deployed on EOS that can support greater adoption.
Furthermore, unlike Cardano, there are only 21 block producers tasked to keep the EOS network secure, making it a semi-centralized network.
What Is the Best Cardano Wallet?
There are many wallets that can be used to store ADA, such as Daedalus, Yoroi, Ledger and Trezor. There are also hot wallets offered by cryptocurrency exchanges where ADA can be held under the custody of these platforms.
But more than being just a store of tokens, this wallet functions as a full Cardano node. It allows users to view every transaction they have made, including making specific inquiries on information concerning the state of the Cardano chain.
This also helps secure the network by keeping a copy of the whole state of the blockchain, as well as validating blocks and transactions before they are finalized and added to the chain.
Yoroi Wallet is a light, HD, browser-based wallet designed to store ADA. Unlike the Daedalus wallet, it is only connected to a full Cardano node linked to the Emurgo ecosystem. Since it does not need to have a copy of the full blockchain state and runs as an extension on Firefox or Chrome, it can be easily installed and set-up without requiring much system resources from the user.
Where to Buy ADA
In addition, those who already have ADA can apply for a debit card from Cardano that can be used just like a regular card. But while it stores ADA, it automatically converts the token to fiat so it can be used for regular transactions. Since it is linked to the application the user utilizes to interact with the Cardano network, the user can monitor their transaction and balance online as well.
How to Buy Cardano
In purchasing ADA, there are two initial steps that need to be done. One is to create a Daedalus or Yoroi wallet, and second, open an account in the crypto exchange of your choosing. Once you already have both, the next step is to purchase either BTC or ETH, then transfer it back to your ADA Wallet.
Step 1 - Set Up Your ADA Wallet
You can choose either the Daedalus or Yoroi wallet to store ADA. Both are downloadable online, you just need to find which version fits your computer.
After the necessary steps to set-up the wallet application, you will need to wait until the wallet is synchronized to the Cardano network. Once you have opened a wallet, find your wallet address from the “receive” button on the interface.
Step 2 - Get BTC, ETH, or Stablecoins
Step 3 - Exchange BTC/ETH/stablecoin for ADA
As soon as you have purchased BTC/ETH/stablecoin, you can then use the same exchange to purchase ADA.
Perhaps one of the most important pieces of advice on the process of accumulating ADA is to make sure that you keep it in your own wallet. This is not compulsory, but is highly recommended.
As soon as you’ve bought enough ADA, you can transfer them back to your wallet.
Make sure, however, that throughout your process of transferring, you have the wallet addresses right. Transactions that are broadcast to the chain cannot be reversed due to the nature of these systems. Always double check before you hit “send” every time you make a blockchain transaction.