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What is Cardano (ADA)?
Carla Moretti
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Carla Moretti
If you have been in the cryptocurrency space even for a short time, you must have come across several dozen blockchain networks and cryptocurrency tokens. Each of them is in one way or another different from the rest, using a different working mechanism and tackling various problems. This can lead to confusion among new investors and makes it difficult to keep track of the different blockchain projects.
One of the most discussed cryptocurrencies in the blockchain world today is Cardano (ADA). With a market cap of over $17 billion, the cryptocurrency is ranked among the ten largest projects in the industry. But what is it that makes Cardano so unique? How is it unique from its competitors?
This article will dive deep into the Cardano project and go through everything you need to know before investing in the project.
What is Cardano (ADA) Cryptocurrency?
Definition of ADA:
ADA is used as the native coin of the Cardano ecosystem. The token is needed to execute transactions, as the Cardano blockchain requires users to pay the transaction fees in ADA currency. Apart from that, the token also plays a pivotal role in the governance model of the network. Cryptocurrency investors can earn interest on their holdings by staking them on the blockchain.
ADA has a fixed maximum token supply capped at 45 billion tokens, making ADA a deflationary cryptocurrency once this limit is reached. However, the current circulatory supply is around 33.93 billion tokens, with a total current supply of 34,512,850,429 tokens. At the time of writing this article, the Cardano price is at about $0.50, which means that the current market capitalization is almost $17.5 billion.
Interestingly enough, the cryptocurrency name ADA is a homage to a famous British mathematician of the 19th century, Ada Lovelace. She was the daughter of the famous English poet Lord Byron. Ada Lovelace is one of the most influential figures in the history of Mathematics and Computer Science. She is widely regarded as one of the first computer programmers to write an algorithm for a machine in 1843.
ADA is the native coin of the Cardano blockchain, used to pay transaction fees and in the governance model of the ecosystem. ADA token holders can participate in the network by staking their tokens to become validators and earn a reward. The smallest unit of ADA (0.000001 ADA) is called Lovelace.
What is Cardano Blockchain?
Definition of Cardano Blockchain:
Cardano is a decentralized blockchain platform developed on an open-sourced code to facilitate peer-to-peer transactions, eradicating the need for intermediaries like banks. The blockchain is named after an Italian polymath, Gerolamo Cardano. He is considered one of the most influential mathematicians of the Renaissance era.
Being open-sourced means that the code Cardano is designed to be publicly available for everyone to access. The governance model for Cardano is decentralized. In this model, the financial ecosystem needs no central authority, such as banks and courts, to function. The entire network is run by community-based governance policies.
The principles driving Cardano’s growth and development are scalability, sustainability, decentralization, transparency, interoperability, and ecosystem efficiency.
Who Founded Cardano?
Cardano is the brainchild of Charles Hoskinson – one of Ethereum’s co-founders. However, Hoskinson left the Ethereum development team due to a disagreement with Ethereum’s creator Vitalik Buterin. According to reports, Hoskinson wanted to make Ethereum a for-profit entity, while Buterin wanted to keep it running as a non-profit.
After resigning, Charles Hoskinson co-founded Input Output with Gavin Wood in 2015. Input Output is a blockchain infrastructure research and design company that is one of the three leading organizations behind the development of the Cardano blockchain platform, the other two being the Cardano Foundation (a Swiss non-profit) and Emurgo (sister company of Input Output).
During the 2015 to 2017 ICO bubble, the Cardano development team successfully raised around $62 million through early token sales. The mainnet was launched soon after that, in September 2017. Cardano (ADA) concluded that year with a whopping $18 billion market cap, showing massive retail and institutional interest in the project. Though most of Cardano’s development is already completed, the blockchain is still under construction.
How to Use Cardano (ADA)?
Following are a few ways you can use the Cardano (ADA) tokens:
Transaction Fees
The Cardano platform is a peer-to-peer and smart-contracts-compatible decentralized ledger that processes thousands of transactions every day. However, due to the decentralized nature of the ecosystem, there is no centralized entity, such as banks, to verify transactions. That job is done by the network users themselves. To incentivize users to participate in the ecosystem, Cardano pays all transaction validators a reward in the form of transaction fees. The transaction fee is paid in ADA tokens.
Governance
Like the rest of the decentralized blockchains in the world, the Cardano network is governed by its own community. It is the users of the platform themselves who make all decisions regarding its future and impending updates. Most decision-making is done through community voting.
However, to become eligible to vote, users have to lock up a certain amount of ADA tokens using cryptocurrency wallets. After completing the fifth and final stage of Cardano’s proposed roadmap, i.e., Voltaire, network participants will be able to use their ADA holdings to influence the development of the ecosystem.
Staking
Since Cardano is a Proof-of-Stake blockchain platform, staking Cardano plays a critical role in the consensus mechanism of the network. Not only the governance model but processing transactions and reaching consensus are also totally dependent on the staking protocol. More than a whopping 70% of ADA is currently being staked. The blockchain rewards stakers with some newly minted ADA tokens after a 25-day lock-up period.
Investment Options
Due to the explosive price increase Cardano (ADA) has witnessed over the past couple of years, many people in the crypto space see it as a profitable investment option as well. Despite the recent widespread crypto crash, alarming macroeconomic conditions, and the ongoing bearish trend in the market, ADA is up more than 200% from its price at the start of the last year. This growth has attracted a lot of retail interest in the project, making it one of the most popular investment assets in the crypto market.
Key Features of the Cardano Network
The Cardano platform is different from other cryptocurrencies in many ways. Let’s talk about some of its most significant features.
Transaction Speed
The older cryptocurrencies, such as Bitcoin and Ethereum, heavily depend on highly powerful computational power. In these networks, validators (miners) have to solve a complex logarithmic problem to mint a new block and record transactions on it. The process requires a considerable amount of time. As a result, these blockchains can process a very limited number of transactions in a given timeframe. However, on the other hand, Cardano’s PoS consensus mechanism allows it to validate and record transactions much faster, i.e., with the speed of 250 transactions per second.
Sustainability
One of the biggest criticisms blockchains like Bitcoin face is that they require a huge amount of electricity to function. Moreover, the hardware used to mine new Bitcoin tokens also needs to be upgraded quite frequently. This leads to huge consumption of resources, making these networks unsustainable in the long run. Cardano presents a working model which requires less than a fraction of these resources. Cardano’s underlying mechanism makes it one of the most energy-efficient cryptocurrencies in the industry today.
Interoperability
The crypto industry is crowded with a large number of different blockchain ecosystems. According to some reports, there are more than 1,000 blockchain networks active at the moment. Though each of these projects is trying to tackle a different problem, due to dissimilar operating mechanisms, it is very hard for them to communicate with each other. This limits their usability as they are restricted to only one specific area. However, thanks to Cardano’s innovative design and interoperable nature, the blockchain can communicate and exchange data with other networks in the crypto space.
Cardano’s Weakness
Undoubtedly, Cardano is an innovative third-generation blockchain that solves the trilemma of decentralization, scalability, and security in a highly efficient manner. However, there are a few departments where this blockchain project falls short and loses to its competitors.
Cardano’s first weakness is its slow progress due to its peer-reviewed development approach. Unlike most cryptocurrencies, before any update is integrated into the network, the Cardano development team gets it analyzed and peer-reviewed by experts around the world. Though this approach helps them build a much stronger infrastructure, it slows down the progress rate significantly.
Cardano must come up with a better plan if it wants to keep its position and reputation in the industry. The team needs to find a strategy that is more balanced.
How to Buy Cardano (ADA)?
Anyone can easily purchase ADA tokens easily following these steps:
1. Join a Crypto Exchange
The easiest way to buy any cryptocurrency is through centralized crypto exchanges, such as Binance and Coinbase. Usually, these platforms are compatible with your local banking services and allow you to purchase cryptocurrencies within a few minutes.
Before you sign up on a crypto trading exchange, make sure that it has the cryptocurrency you wish to buy (ADA in this case) listed on its platform. After that, create a new account and verify your identity.
2. Add a Payment Method
To buy Cardano, you must first add a payment method to your account. Some exchanges support crypto deposits while others do not. You can use a crypto token such as Bitcoin to purchase Cardano, and some also support fiat currencies. Your chosen payment method depends on the platform you use to buy Cardano and the country of your residence. Each payment method has its own fee and local laws. So, make sure you go through the terms and conditions carefully before you decide on a payment method.
3. Select Cardano from the List of Cryptocurrencies
Once you are done funding your account, go to the trading interface. Here, you will find a list of all the cryptocurrencies you can buy through that exchange. Some exchanges, like Binance, support up to 400 different cryptocurrency assets. In most exchanges, you will find a search bar where you can type the name of the token you wish to trade and select it. Some exchanges may also require you to type the name of the fiat currency you are using.
4. Place the Order
Next, you will need to fill up the order placement box. A typical crypto exchange order box asks users to input the number of crypto tokens they wish to buy, the type of order they wish to place (spot, margin, etc.), and the price at which they want to buy the tokens. After entering all this information, simply click on the “Place Order” button, and your purchase will be made.
Some exchanges also offer the services of a “Simple Convert” buying method for newcomers to the crypto space. Here, you simply enter the amount of the tokens you wish to purchase, and the exchange itself does the rest of the work for you. However, this type of purchasing typically incurs a higher trading fee.
Decentralized Cryptocurrency Exchanges (DEXs)
Another way to buy ADA is through decentralized exchanges, such as Uniswap and PancakeSwap. These exchanges are built on blockchain platforms and are not controlled by a single entity. As a result, users do not have to worry about high trading fees. Moreover, unlike centralized exchanges that are restricted to a limited number of crypto options, through DEXs, you can buy and sell thousands of crypto tokens. However, using them is not as simple as centralized exchanges, and you cannot finance them through traditional payment methods.
Best Places to Stake Cardano (ADA)
ADA token holders can stake their tokens to participate in the network and earn rewards in return. Several wallets and exchanges offer staking services for ADA tokens.
But, every option comes with its own APY rate, minimum stake limit, and staking period. That’s why it’s a good idea to make sure you look into these factors before you commit your funds.
Daedalus
Daedalus is the official desktop crypto wallet for the Cardano blockchain. It gives you access to the full Cardano blockchain and is a full-node wallet. Before you can begin using this wallet, you must choose a staking pool. Choosing the right pool can be confusing for newcomers, as there are a number of factors to consider. Once you’ve chosen a pool, it’ll take time to sync the entire blockchain, which takes a significant amount of storage space.
Yoroi
Yoroi wallet allows you to stake ADA on a browser extension without the need for a full node wallet. It’s the safest way to stake ADA, and you can view the history of all your previous staking through the blockchain records. It’s also the official wallet for IOHK. Yoroi’s browser extension has a list of staking pools, which you can filter based on the return on investment, share/pool size, costs, and pledge. Users can also choose to see their return on investment (ROI), average cost, and the number of blocks minted per epoch. Moreover, Yoroi allows you to switch between pools at any time. Unlike Daedalus, Yoroi also offers a social network and support site.
Binance
If you want to stake Cardano for higher returns, the best place is Binance. This centralized exchange supports DeFi lending and borrowing. Besides, you can earn rewards by staking ADA tokens for a set period of time. In addition, Binance offers SAFU to protect its investors from the losses caused by cyberattacks. If you want to maximize your returns, you must diversify your holdings.
Exodus Wallet
Staking is easy on the Exodus Wallet, and you can do it with your ADA tokens or a Cardano address. Once you have staking enabled, all you have to do is stake ADA and wait for 20 days to begin earning rewards. After this, you will get paid every five days. In addition, you can exchange other cryptocurrencies for ADA if you wish.
Uphold
Uphold is a popular cryptocurrency exchange that allows ADA staking. Staking ADA on Uphold is simple and hassle-free, as you can stake your ADA directly from your account. You can earn an APY of 4% annually with Uphold. If you’re new to cryptocurrency trading, it’s a great way to get started.
How to Store Cardano?
Choosing the right wallet to keep your cryptocurrency safe is crucial. Many people think that if they store their crypto on a centralized exchange, they have full control over their funds. However, this is not true. In fact, there have been cases where crypto exchanges were hacked, and users lost all their money. That’s why it’s essential to be careful when selecting a wallet for your crypto assets.
Hot Wallets
Most hot wallets are available as mobile applications, desktop software, and web extensions. These wallets allow you to store your cryptographic keys along with your crypto funds. Moreover, they provide you with quick and easy access to decentralized exchanges, NFT marketplaces, DeFi protocols, and blockchain ecosystems. Many Cardano hot wallets, such as Daedalus and Yoroi, even allow users to stake their tokens.
However, you must note that these wallets are not completely secure. Since they are actively connected to the internet, they are prone to online hacks and breaches.
Cold Wallets
Cold wallets are hardware storage spaces that allow you to transfer and hold your cryptocurrency funds with cryptographic keys. There are several companies offering hardware wallets. However, the most popular options are Trezor and Ledger. Apart from Cardano, these companies support a wide range of other crypto tokens as well. Since these wallets are not connected to the internet, they are safe from all online breaching attacks.
Transferring and trading cryptocurrency tokens through cold wallets is a slower and more complex process compared to hot wallets. This is why these wallets are not recommended if you wish to actively use your funds.
What the Future Holds for Cardano
Like any other blockchain network, Cardano’s future depends on how the project will perform and how effectively it will complete the milestones in the next few years. Its success will also be influenced by the development team’s performance. To ensure the growth and expansion of the Cardano platform, developers need to fulfil their promises according to the proposed roadmap.
The market cap of the Cardano cryptocurrency has reduced massively (around $17 billion only) due to the recent widespread crypto crash. However, the fact that it reached the $77 billion mark during the bull market in May last year is a clear reflection of the massive retail and institutional interest the project attracts.
Moreover, despite the downward price action on the charts over the last few months, the Cardano blockchain continues to grow as more institutions join the network by accumulating and investing in ADA.
Things may not look good for the time being, but you must consider that, just like the rest of the digital assets around the world, Cardano is also suffering from major macroeconomic setbacks. Nonetheless, keeping in view the ongoing development and expansion of the ecosystem, we can comfortably say that the cryptocurrency is expected to grow significantly in terms of price during the next bull run.
Closing Thoughts
Cardano has proven to be one of the most popular and active digital assets in the crypto space over the past year and a half. Moreover, the project has been able to secure multiple high-profile partnerships in the last few months. Considering that, we can comfortably say that Cardano is an investment worth considering.
Note: Cryptocurrencies are regarded as high-risk investment options due to major price fluctuations and their highly speculative nature. Always consult a professional financial advisor before putting your money into a crypto project.
Our extensive analysis of the different Cryptocurrencies doesn’t stop here. You can also check out our “What is Ethereum (ETH)?” guide to know more about another huge project.
FAQ
Most frequent questions and answers
ADA is the native cryptocurrency token for the layer-two Proof-of-Stake blockchain known as Cardano.
Cardano’s current circulatory supply is around 34 billion tokens which means only 11 billion tokens are left to be minted.
Bitcoin is a first-generation cryptocurrency blockchain that uses a Proof-of-Work consensus mechanism that relies on miners. On the other hand, Cardano is a Proof-of-Stake blockchain that facilitates P2P transactions and smart contracts. Cardano is much faster and more energy efficient than Bitcoin.
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