Cardano (ADA) is one of the most valuable cryptocurrencies. Find out in this article what Cardano is, how ADA works, and how the project aims to stand out from Ethereum.
Cardano (ADA) plays a special role among altcoins.
The project and the cryptocurrency are often described as a potential “Ethereum killer”. Cardano is a serious competitor to the cryptocurrency launched by Vitalik Buterin.
Meanwhile, according to intotheblock, Cardano already has over 260,000 investors who have held the cryptocurrency ADA for over a year. In February 2021, around 100,000 fewer investors had owned ADA for so long. This shows us that more and more people believe in Cardano in the long term, but why is that?
The specialty is that Cardano relies above all on scientific approaches to implement as effectively as possible. You can find out why this is so and what unique selling points Cardano has in this article.
In this article, we clarify the following questions:
- What is Cardano?
- How does Cardano work?
- How can I benefit from Cardano staking?
- Who is behind Cardano?
- Is Cardano Better Than Ethereum?
What is Cardano (ADA)?
To understand the concept behind the blockchain project and deal with its special features, let’s look at the official website cardano.org.
The website provides an official definition:
Cardano is a decentralized, public blockchain and cryptocurrency project that is completely open-source.
However, we can also apply this explanation for Cardano to many other cryptocurrencies. The website gives us a broader definition of the project:
Cardano is developing a smart contract platform that strives to provide more features than any other protocol ever did. It is the first blockchain to emerge from a scientific philosophy and the “research-first” approach. The development team is global and includes experts from engineering and research.
Now we can derive the first characteristics of the project:
Cardano is developing a smart contract platform.
This platform should be superior to other existing platforms regarding its functionality.
In addition, the project follows a “research-first” approach. This means that Cardano initially formulates concepts in the form of a white paper and has their suitability and quality assessed based on scientific methods by independent experts (so-called peer reviews).
The implementation only occurs when the peer reviews have ensured the quality and correctness.
One of the people behind Cardano is Charles Hoskinson, who was already a co-founder of Ethereum. This leads to a special competitive situation between the two projects.
Cardano sees itself as a third-generation cryptocurrency. The first generation of cryptocurrencies includes classic digital currencies such as Bitcoin, primarily used for payment. The second-generation describes cryptocurrencies that enable blockchain-based applications, so-called dApps.
Cardano (ADA) Features
How does Cardano work?
We have now clarified the question of what Cardano is.
The project aims to differentiate itself from the competition with a scientific approach. But how does this look in practice? To understand how Cardano works, we divide the functionality of the project into different subcategories.
Since the Cardano Blockchain’s actual transfer of value is decoupled from the condition for triggering a transfer, we need two components. The settlement layer and the computing layer. In the following, we will go into more detail on this multi-layer technology and the individual layers:
What does Multi-layer technology mean?
Cardano sees itself as a “technological platform that can map financial applications that are used every day by individuals, organizations and states.” Cardano relies on a multi-layer design with regard to the architecture. What does that mean in concrete terms?
In computer science, a layer describes a logical component of a system. The idea of dividing an entire system (= monolith) into individual logical components (= layer) has advantages. A prominent example is the TCP / IP stack that we use “to access the Internet”.
Individual logical layers take on individual tasks such as data transfer or routing. The logical decoupling creates more complexity and better maintainability, better performance, a clear separation of tasks, more flexibility, and so on.
This is particularly advantageous when updates are necessary. There is no need to update the entire network, as the developers can edit each layer separately.
Declaration on the Cardano Settlement Layer (CSL)
The settlement layer forms the basis of the system and is also known as the “Value Ledger” as it is responsible for the transfer of values via ADA.
The settlement layer is scalable.
Cardano has also set itself the goal of post-quantum cryptography. This means that Cardano also wants to be protected against hacker attacks by quantum computers in the future.
Blockchains are currently not considered hackable. However, the computing power of quantum computers is significantly greater than that of conventional computers. This means that calculations can be performed in seconds that our current systems take years to complete. In particular, many asymmetrical encryption methods are based on the P-NP problem, which can lead to discrepancies in our current encryption mechanisms.
Goguen Era: Smart Contracts on Cardano
The other layer is the computing layer. The computing layer now contains smart contracts and is therefore responsible for the process of “conditions and triggering a value transfer”.
Smart contracts are so-called “intelligent contracts”, in which executions are described under the occurrence of certain conditions.
Cardano sets high standards for itself. The system’s architecture is intended to ensure that a secure, flexible, and scalable technology is created. Millions of users can use that.
Cardano is also dedicated to so-called ‘mission-critical systems’.
What are critical Information systems?
Critical (information) systems map a business process that, in the event of errors, has far-reaching consequences with no inconsiderable damage. These are, for example, the aerospace and banking sectors.
Therefore, Cardano sees itself as:
“Platform of choice for large-scale and critical decentralized applications (dApps), which will represent the future of the economy.”
This makes Cardano particularly interesting for Decentralized Finance (DeFi) . With the Alonzo update on September 12, 2021, smart contracts are finally a reality after a long time.
With projects such as ERGO DEX, Empowa, MELD or SundaeSwap, there are already some exciting and promising decentralized exchanges and DeFi applications and protocols.
Overview of the Cardano ecosystem including all dApps pic
Cardano peer reviews: Scientific working method
At Cardano, the focus is on the scientific approach, as described.
A look at the roadmap shows that Cardano would like to give itself enough time to implement the aspects decided in theory in the best possible way.
The Cardano Roadmap started in 2017 and initially set a schedule for 2017 to the end of 2020.
The individual stages of development are named after philosophers: Byron, Shelley, Goguen, Basho, and Voltaire
Cardano roadmap pic
Each stage of development has a central point that should be implemented. The individual stages starting with the foundation are decentralization, smart contracts, scalability, and governance.
A fixed, scientific model is used for each stage of development: At the beginning of each stage is the definition of a goal and the associated research. This is followed by so-called prototyping.
If the prototype meets the previously defined requirements, the final step of development or implementation comes. Cardano documents the process for each of the five stages – the scientific papers, the current development status, and the individual code commits are published and are accessible to everyone.
The development team relies on the immutability of the blockchain by paying close attention to the little things from the start and testing the implementation extensively in advance so that no major changes have to be made afterward.
At Ethereum, a change in the code led to the split into Ethereum and Ethereum Classic. The highly intensive update to ETH 2.0 is currently ongoing at Ethereum.
Cardano (ADA) staking: How you can benefit
The native cryptocurrency of the Cardano Blockchain is called ADA. Currently, the main functionality of Cardano is still trading in the cryptocurrency ADA. By expanding the blockchain and its functionalities, such as smart contracts and dApps, ADA will play a role in the Cardano ecosystem similar to that of ETH in Ethereum.
ADA would then be comparable to a voucher to purchase services or goods. A unique feature that Cardano has implemented with the Shelley upgrade is the staking of ADA.
A special feature of Cardano is the consensus algorithm called Ouroborus. Ouroborus is a modified proof-of-stake algorithm that is supposed to be particularly secure – the scientific approach also plays a role here. Several tests have proved this.
Ouroboros: Proof-of-Stake consensus mechanism
You can find more information about the technical functionality in the research paper “Ouroboros: A Provably Secure Proof-of-Stake Blockchain Protocol” by Kiayias et al.
The following approach generally applies to staking:
The higher the percentage of a user in a network (= stake), the more likely he will also be able to create this next block.
Compared to a proof-of-work algorithm (example: Bitcoin Mining ), a proof-of-stake algorithm offers the main advantage that less energy is used.
Cardano Staking Rewards and Instructions
Investors can deposit ADA to receive a reward since the Shelley test network is now officially live. Individuals bundle their resources in so-called staking pools.
You will find the manual for stake pool delegation with Cardano on the official website. There is also a reward calculator there that calculates the return.
Staking is very popular at Cardano (ADA). This is shown by the data from PoolTool. More than 70 percent of ADA coins are staked and invested. The addresses that participate in the staking pools amount to almost one million at the current time (November 2021).
With the crypto broker eToro you have the opportunity to buy Cardano and stake automatically. This means that, compared to the conventional method, you don’t have to keep your ADA tokens on a Daedalus wallet, and you don’t delegate them to other pools.
If you want to use the simple variant via eToro, you can use the following button to go directly to the crypto broker.
Cardano Team and Partnerships
The Cardano project came into being in 2015. Behind it are mainly three large organizations that drive the project forward from both a financial and a development perspective.
These three organizations are:
- Cardano Foundation
- Input Output Hong Kong (IOHK)
Charles Hoskinson is often referred to as ‘the face behind Cardano’. Hoskinson himself used to work for Ethereum but then decided to focus fully on his new project.
Above all, he promotes the distribution of Cardano and ADA in a media-effective manner. Hoskinson himself is also the person who often announces new partnerships and collaborations. Hoskinson is particularly active on Twitter and YouTube.
Cardano is also particularly committed to collaborations. Due to the scientific approach, states and public institutions, in particular, welcome the transparency of the project.
Cardano’s partners include:
- the Georgian government
- the European Union
- PwC (PricewaterhouseCoopers)
The list of partners of Cardano is long. At the Cardano Summit 2021 in Berlin, the partnership between Chainlink and Cardano attracted attention. The Chainlink network delivers real data for the smart contracts on the Cardano blockchain through collaboration. This can be weather data or sports results.
As you can see, many engineers, software developers, and researchers work on Cardano. The team is set up worldwide. Charles Hoskinson is arguably the central point of contact and one of the biggest drivers for the project.
Partnerships with public institutions and states like the European Union or Georgia are in the bag. The project is working with PwC and the marketing company that has already designed campaigns for Coca-Cola and other large companies for better adoption and reach.
Cardano Prediction 2022: Goals for the ADA Price
Cardano has temporarily achieved third among the most valuable cryptocurrencies without implementing smart contracts. This is particularly evident from the Cardano price development in 2021.
Cardano price development since 2017 | Graphic: coinmarketcap.com
Cardano has proven to be an extremely attractive investment property since its launch. After Cardano lost around 95 percent of its value after the 2017/2018 rally, the cryptocurrency recovered significantly and set new records in 2021.
The implementation of the roadmap is important for the future price development of Cardano. Even if there have been some delays recently, Cardano usually delivers the scientific aspects in practice. The number of increasing long-term holders confirms that Cardano will continue to grow in the eyes of many investors.
The current question is whether the Cardano network can withstand decentralized applications in the future. If this succeeds, the Cardano price should certainly rise again. You can find a more detailed analysis in our Cardano price prediction 2022.
Buy Cardano: How to invest in ADA
If you want to invest in Cardano (ADA), you have numerous options. A popular option to buy ADA are crypto exchanges like Binance or Coinbase.
Remember, however, that you are responsible for your coins yourself at all times.
Therefore, it is best to opt for a hardware wallet to store your ADA in the best possible way.
Therefore, so-called crypto brokers are also suitable for buying Cardano. Here you normally don’t buy the cryptocurrency directly but speculate on the price development. An exception to this is eToro.
At eToro you not only receive ADA in physical form but can also stake it directly via eToro and thus generate passive income. We therefore recommend eToro, especially for beginners, to buy Cardano. In addition, eToro is the only platform from our crypto exchange review that supports PayPal as a payment method.
Is Cardano the new Ethereum?
Cardano or Ethereum? This is a question not only asked by investors but also by many experts in the cryptocurrency space. In principle, both projects have the same goal.
Throughout its history, Ethereum has already offered a platform to thousands of decentralized applications, something that Cardano is a long way from being able to show. Nevertheless, the hype surrounding Cardano is considerable. This is mainly because Cardano had only implemented the ADA token for a long time.
Cardano has relied on the proof-of-stake process from the start, Ethereum is currently making the switch. While Ethereum is also known for its high fee structure and poor scalability, Cardano wants to shine in performance. At least in theory, the project seems to be working.
It will depend on whether Cardano gets the points recorded in theory also technically implemented. However, it doesn’t necessarily have to be Cardano or Ethereum – both projects could prevail. Interoperability is also a big issue in the crypto sector. Perhaps neither of the two projects will succeed. There are enough competitors with Solana (SOL) or Polkadot (DOT).
Frequently asked questions about Cardano
This section provides answers to the most important questions about Cardano (ADA).
What is Cardano (ADA)?
Cardano is a platform for smart contracts. ADA is the native cryptocurrency on the Cardano blockchain.
Is Cardano the “Ethereum Killer”?
Since Cardano pursues the same goal as Ethereum, some refer to Cardano as a potential “Ethereum killer”. However, we cannot say with certainty whether Cardano will be able to prevail against Ethereum.
Will the Cardano rate rise again?
The crypto market is very volatile. This means that the Cardano price can rise again even after a major sell-off. Many analysts assume that the price could break the 5 dollar mark if the network is home to many decentralized applications (dApps).
How can I stake Cardano (ADA)?
You can stake ADA by simply leaving the coins on your wallet. However, staking Cardano is particularly easy and convenient with eToro.