TL;DR

Cardano is a Proof of Stake blockchain project that has yet to reach its full potential. “Third generation” blockchains, seek to address the scalability issues inherent in second generation blockchains, very similar to the highly anticipated Ethereum 2.0.

Cardano's development is characterized by a scientific philosophy and a lot of academic research. With the launch of Shelley in 2020, Cardano is closer to achieving its goal.

Introduction

The Cardano project and the ADA cryptocurrency have attracted a lot of attention from the community since its launch in 2015. The academic rigor applied to its development makes Cardano somewhat unique in the crypto environment.

The Cardano project was developed primarily by technology company Input Output Hong Kong (IOHK), founded by Charles Hoskinson. Hoskinson was also involved in the development of Ethereum in its early days.

But what is Cardano, and what functionality does it have planned in its long roadmap? Let's find out.

What is Cardano (ADA)?

Cardano is a multi-purpose blockchain designed based on peer-reviewed academic research. Developed by a multidisciplinary team consisting of engineers, mathematicians, scientists, and business professionals.

Platform development is always achieved using a scientific approach. According to its creator, the main design principles behind Cardano are security, scalability, and interoperability.

Ada, Cardano's native currency, is used to perform operations on the Cardano blockchain, just like the relationship between ether (ETH) and Ethereum.

Cardano development is broken down into several business units. IOHK handles Cardano protocol development, while the Cardano Foundation oversees the project, and EMURGO is responsible for business development and driving adoption. IOHK has also been involved in the development of Ethereum Classic (ETC).

What about the Cardano (ADA) roadmap?

Cardano's roadmap consists of five main phases: Byron, Shelley, Goguen, Basho, and Voltaire. Byron, the first phase marks the launch of the network along with basic functionality, such as ADA transfers. The Shelley hard fork occurred in 2020, offering a further step towards decentralization. The nodes are currently operated by the Cardano community, with the staking pool run by ADA holders.

As of December 2020, functional smart contracts cannot be used on blockchain platforms. According to the roadmap, it will be launched as part of the Goguen update. After Goguen, the Basho period focused on optimizing scalability and interoperability, and the Voltaire period introduced treasury systems to handle governance.

How does Cardano (ADA) work?

Cardano was designed as a “third generation” blockchain, aiming to solve the scalability problems of generation one (i.e. Bitcoin) and generation two (i.e. Ethereum).

According to proponents of this classification, previous generations of blockchains experienced bottlenecks that would essentially limit the amount of throughput that could be handled. This makes first and second generation blockchains an inefficient choice for mass use worldwide. We can look at fluctuating BTC and ETH transaction times to prove this problem.

Cardano references VISA's computing power in its documentation for comparison:

the network reportedly handles an average of 1,736 transactions per second (TPS) with the ability to handle up to 24,000 TPS.

Cardano aims to improve yields in several ways. One of the most important pillars of this goal is its own Proof of Stake (PoS) consensus mechanism called Ouroboros. When compared to Proof of Work (PoW), Ouroboros reduces energy costs by providing provable security guarantees.

Cardano's Layer 2 solution for further scalability, Hydra, is named after the mythical creature of the same name. The idea is that throughput is increased as each new node is added to the network.

The hard fork combinator is also a key feature of Cardano, allowing hard forks to occur without disruption or the need to restart the blockchain. The success of the Shelley update is a testament to the effectiveness of this approach.

➟ Want to own cryptocurrency? Buy Bitcoin (BTC) on Binance!

Key features of Cardano (ADA)

As we discussed previously, Cardano's advantage is the academic and scientific philosophy behind it. The team developing Cardano has published more than 90 whitepapers on the underlying technology. The project has a well-defined roadmap, and the network aims to have integrated security, scalability, and interoperability.

Although not yet operational, the Cardano blockchain will enable smart contract functionality that can be expanded in capacity in the future. Built with VISA in mind as a competitor, Cardano has everything it takes to be a capable fintech disruptor.

Just like Ethereum, Cardano's possible use cases are very broad. This platform only aims to act as a base layer for the applications that will be built on top of it.

Cardano's big promises have not been fulfilled much – like almost all projects in the crypto world, apart from Bitcoin. Although Cardano appears to be very ambitious, its development is still relatively slow.

What are ADA tokens?

ADA is a Cardano token, named after the 19th century mathematician Ada Lovelace. 57.6% of ADA supply was distributed in an Initial Coin Offerin (ICO), where Cardano managed to raise $62.2 million.

This token is a digital currency as a way to carry out transactions on the Cardano network (similar to how you need ether to transact on Ethereum).

ADA holders also have shares in the Cardano network, which can be used in staking pools to generate rewards. Cardano staking is also available via Binance Earn.

How to store Cardano (ADA)

Developed by IOHK, Daedalus is an open-source desktop wallet software option for storing ADA. This is a full node wallet, which means the entire Cardano blockchain needs to be downloaded, and every transaction is verified for maximum security for users.

Light wallets, which do not need to completely download the blockchain, are Yoroi Wallet and AdaLite. ADA can also be stored in cold storage hardware wallets such as Ledger and Trezor via Daedalus, Yoroi Wallet, and AdaLite.

Conclusion

Cardano is an ambitious project that aims to provide blockchain infrastructure in the crypto ecosystem. With a big mission and goals, this project is progressing more slowly than some expected.

Will these third-generation blockchain projects become dominant smart contract platforms, or will their emergence on the market be too late? Is there a fourth generation blockchain that can do better? These questions remain unanswered as Cardano continues to perform according to the roadmap.

Do you still have questions about Cardano and Daedalus wallet? Check out our question and answer platform, Ask Academy, where the community will answer your questions.