What is Cardano (ADA) – The Ultimate Guide

What is Cardano (ADA) - The Ultimate Guide

Making sense of the cryptocurrency sector can be an arduous task. It can seem next to impossible to make sense of the numerous blockchain projects, cryptocurrencies, ICOs or other decentralized technologies making the rounds.

However, one cryptocurrency is increasingly receiving more attention from observers – Cardano. However, even some of the most hardcore cryptocurrency enthusiasts can be forgiven for not knowing some of the details of Cardano. What, then, is Cardano, and why is it important?

First of all, the project is named after the 16th-century mathematician and polymath, Gerolamo Cardano. At its core, Cardano is a smart contract platform – much like Ethereum. This decentralized, blockchain-based system is primarily driven by the ADA coin. This is the cryptocurrency which underpins all of the Cardano platform.


Although some might use the terms ”Cardano” and ”ADA” interchangeably, this is an important distinction to make. Whilst Cardano references the entire platform and ecosystem, ADA is merely the cryptocurrency.

However, ADA is integrated natively into Cardano’s settlement layer, which makes it an essential part of the Cardano platform. Anecdotally, ADA is named after Ada Lovelace – a 19th-century mathematician, daughter of Lord Byron, and oftentimes referred to as the first computer programmer.

In order to understand all of this, one needs to take a step back and observe the entirety of Cardano. In essence, Cardano is an ambitious blockchain project founded by Charles Hoskinson, one of Ethereum’s co-founders.

The Cardano Foundation, IOHK, and Emurgo

Furthermore, Cardano as a whole is spearheaded by three separate entities. The first one of these is the non-profit foundation known as the Cardano Foundation. Whilst the Cardano Foundation has been embroiled in leadership struggles and other issues, it now seems as if these have finally been resolved.

In addition to the Cardano Foundation, ”Input-Output Hong Kong” (IOHK) and ”Emurgo”  are also key entities in Cardano’s continued development and prospective adoption. Although this three-pronged approach might seem nebulous to some, it is intended to structure and divide the work in furthering Cardano.

Specifically, IOHK’s primary responsibility has been described as being the development of the ”core collection of protocols that compose Cardano, from academic inception to applying formal methods to verify correct implementation.” Moreover, IOHK has been contracted to develop Cardano until at least 2020.

IOHK Emurgo

Emurgo, on the other hand, has primarily been tasked with furthering the adoption of Cardano. This is done by building global partnerships with various developers, and overseeing projects utilizing the Cardano protocol.

In addition to this, the Cardano Foundation was brought into being in an effort to advocate the usage of the Cardano Protocol. This included responding to the demands of the Cardano community, as well as growing and informing the community.

Nevertheless, it should be noted that these different responsibilities have been somewhat muddled as of late. This is primarily due to a decision to offload some of the Cardano Foundation’s functions on Emurgo and IOHK, following issues with the Cardano Foundation’s performance.

Cardano aims to provide a ”more balanced and sustainable ecosystem”

Cardano was founded to, in the project’s own words, ”provide a more balanced and sustainable ecosystem” for cryptocurrencies. Moreover, the project argues that ADA is the only cryptocurrency coin which uses a ”scientific philosophy and research-driven approach.”

This might seem like nothing more than standard technobabble to some, but Cardano makes sure that this ambition translates to reality. More specifically, Cardano employs a meticulous peer-review system, reaching out to both programmers and scientists from the academic world to help improve its open-source blockchain.

In addition to this, the Cardano Foundation has also initiated partnerships with several academic institutions. The aim of this is that they will assist in the research, creation and subsequent review of the Cardano blockchain.

Cardano also stems from a series of academic papers, rather than just a white paper – which is the case with many other blockchain projects.

Ultimately, the goal of these extensive academic partnerships and considerable peer-review efforts is that Cardano should be built using qualitative, ”high assurance code.”

However, those familiar with Ethereum will likely react to the many similarities between Cardano and Ethereum. Cardano and Ethereum are both smart contract platforms, they both run cryptocurrency projects, and they have both been partly founded by Charles Hoskinson.

Furthermore, due to its relative popularity in Japan, Cardano is regularly referred to as ”the Ethereum of Japan.” Anyone can, therefore, be excused for thinking ”what’s so special about Cardano?”

Cardano is intended to solve the problems of Ethereum

Put simply, Cardano is intended to address and remedy some of the shortcomings of Ethereum. Although the cryptocurrency community is far from in agreement whether Cardano’s way of doing this is the most efficient one, this is the platform’s primary aim.

In fact, Cardano intends to transcend not only Ethereum, but the entirety of the legacy cryptocurrency and blockchain sector. Whilst Ethereum is oftentimes referred to as a ”second generation” smart contract platform.

Although Ethereum has showcased some of the remarkable potential associated with blockchain technology, it still has some major hurdles to overcome. These are, essentially, related to scalability, interoperability, and sustainability.

In order to solve these preexisting and endogenous problems related to second generation smart contract platforms, Cardano was designed to be a ”third generation” protocol.

For example, Cardano aims to dramatically speed up transactions per second compared to Ethereum, as well as boost computational power. This is partly achieved by employing the so-called ”Ouroboros proof-of-stake” rather than a proof-of-work.

This amounts to improved scalability, and means that mining can be more energy-efficient. The Ouroboros proof-of-stake is a unique consensus algorithm developed specifically for Cardano.


Ouroboros is said to be especially secure. The security of this algorithm is mathematically proven, and was designed in conjunction with IOHK’s chief scientist, Aggelos Kiayias. It is also worth noting that it has undergone peer review. It has been said that the security of Ouroboros is comparable to that of Bitcoin – which has never been compromised.

Furthermore, this proof-of-stake approach allows Cardano’s blockchain to reduce the number of necessary nodes in a network. This is done through appointing ”leaders” that are responsible both for verifying and validating transactions from groups of nodes.

Specifically, the aim to boost Cardano’s interoperability means facilitating the portability of the cryptocurrency. This looks to eventually create a way to conduct cross-chain transfers between chains through the use of side chains.

This means that transactions will be completed and performed off-chain by two parties. The reasoning behind this is also quite plain. The current cryptocurrency ecosystem is somewhat fragmented.

There is no one clear ”token to rule them all.” Although Bitcoin is the premier cryptocurrency, Ethereum, Ripple, Litecoin and so on are all also prevalent. Moreover, these different entities face some trouble in communicating with each other, which complicates trading and information transfer.

Nonetheless, this is not a new or unique problem. Traditional banks face a similar problem, with differing systems – for example in using ACH or SWIFT – that impede interoperability.

If Cardano is indeed able to solve this, it would – therefore – present a major breakthrough. Although no such concrete solution has been delivered as of yet, it is nevertheless encouraging to see that interoperability is one of the main pillars of Cardano.

Cardano is also looking to develop a ”self-sustaining economic model” for its cryptocurrency. Primarily, this will be accomplished by providing incentives to stakeholders and miners.

Moreover, through the use of peer-review and ”high assurance code” Cardano is attempting to ensure the project’s quality. This is intended to prevent bad governance over projects, as well as eliminate the need for splits or hard forks.

In the absolutely most simple of terms, Cardano can be regarded as taking the best from both Bitcoin and Ethereum. Cardano is intended to combine the transactional ease of Bitcoin with Ethereum’s smart contract system and support for decentralized applications (dApps).

However, Cardano is taking this to the next level – as it employs ”third-generation” blockchain technology, improving many of the aforementioned fundamentals.

Cardano is a layered system

There is a veritable plethora of different technical specifications for Cardano that one can delve into. One of the most important ones, however, is the fact that Cardano is a so-called ”layered system.”

This means that Cardano has a separate layer which runs smart contracts, as well as one layer which runs ADA exchanges. ADA is a part of Cardano’s so-called settlement layer – however this is something that Cardano eventually intends to supersede.

Rather than a mere settlement layer, Cardano is planning to establish a more extensive control layer. This will allow for a ”trusted computation framework” that supports more advanced and sophisticated systems – e.g. gaming systems or betting.

If Cardano is indeed able to expand its blockchain beyond merely the ADA cryptocurrency, and create a control layer, this will create abundant new opportunities. More specifically, developers will be able to create new services that have hitherto been unheard of in the cryptocurrency and blockchain sector.

As for the smart contract layer, this is a move to ensure that Cardano’s smart contracts are especially secure. In fact, Cardano has previously argued that the smart contracts are more secure than on any other blockchain, as their layered nature prevent tampering with the data once it has been entered.

In addition to this, Cardano is also being built using the ”Haskell” programming language. This is a unique programming language to the platform, which features a high degree of fault tolerance.

Moreover, Haskell comes with a comparatively high degree of flexibility. This means that Cardano will be able to change as the system continues to develop. However, the smart contracts powered by Cardano are slated to use a different programming language than Haskell.

This programming language is called ”Plutus” and will result in strict contracts that cannot be altered without either party’s consent. Both Haskell and Plutus are so-called ”functional” languages.

This means that ensuring ”high assurance code” becomes easier. Furthermore, individual functions can more readily be isolated and debugged. In addition to this, the overall development and maintenance of the code become easier.

How to buy Cardano (ADA)

The Cardano cryptocurrency, ADA, is a quite traditional cryptocurrency in the sense that it is used to send and receive digital funds. However, the only wallet on the market with support for ADA is currently the Daedalus wallet.

Daedalus is a so-called ”hierarchical deterministic” multi-platform wallet which is designed with security in mind. However, there is no need to fret for those looking to store their ADA off an exchange – Daedalus is available on both Mac and Windows.

In addition to this, Daedalus allows users to view information regarding the state of the blockchain. Daedalus also has native support for private keys – for addition security -, encrypted spending passwords as well as a feature for exporting these onto a paper certificate.

Furthermore, it is possible to buy ADA on several different exchange platforms. The cryptocurrency exchange with the highest ADA trading volume is Binance. Specifically, Binance offers ADA as a trading pair with Bitcoin and Ethereum.

Nonetheless, most platforms require those looking to purchase ADA to first buy Bitcoin or Ethereum on another platform and then to transfer it over. This comes as it is not currently possible to purchase ADA using traditional, fiat-issued currency.

What is Cardano (ADA) - The Ultimate Guide

Cardano has, however, previously announced that it will be possible to buy ADA at some special ATMs in Japan.

What does the future hold for Cardano?

It should be noted that Cardano is not, in any capacity, the only platform striving to become the go-to blockchain platform. Rather, EOS, NEO, Lisk, NEM and – of course – Ethereum are all looking to compete with Cardano.

Although most of these benefits from being comparatively new projects, much like Cardano, Ethereum is still the most widely adopted of them. Moreover, Cardano is lagging behind EOS somewhat in terms of size.

It should also be noted that Dash – a project which has inspired Cardano’s governance – has similar ambitions. It will, therefore, be interesting to see how all of this turns out in the end.

Nevertheless, Cardano’s focus on highly secure coding, and well as creating a platform that puts scalability front and center, might end up paying off. However, it is worth highlighting that Cardano’s overarching aim for quality has slowed the development process considerably.

Be that as it may, Charles Hoskinson has previously stated that 2019 will be the year when Cardano’s scaling efforts come to fruition. Although some parts of the system have yet to be implemented and are still being developed, the Cardano platform is now perhaps becoming more relevant than ever.

It should, therefore, be stressed that Cardano represents far more than merely a cryptocurrency. Although ADA might be the public face of the project, Cardano’s aspirations are far greater than its current settlement layer.

Specifically, one of Cardano’s stated aims it to employ breakthroughs and innovations of the blockchain ”to build accessible financial services for all.” However, this goes far beyond merely creating a functional cryptocurrency.

Cardano is, first and foremost, a technological platform. Moreover, it is a technological platform intended to allow for financial applications – and dApps in general – used by everyone from individuals to governments.

Clearly, this is a lofty goal. However, the project’s focus on quality, peer-review, and scalability might make it a possibility. Furthermore, Cardano appears to be serious about its commitment to interoperability.

This means that Cardano might one day become the middle-ground for financial transactions – if it can deliver on interoperability. Cardano has previously mentioned its ambition to develop an ”internet of blockchains” of sorts.

It is not hard to imagine the transformative effects it might have if the platform indeed supplies a solution for individual blockchains to communicate with both other blockchains and legacy financial systems.

Undoubtedly, this requires Cardano to clear some major hurdles first. It should also be reiterated that Cardano development is comparatively slow due to its focus on quality and peer-reviews.

However, this sets the stage for long-term success for Cardano. It is currently too early to say whether this approach will pay off or not, but there is nothing conceptually wrong with taking one’s time. No matter what, the aspirations and technology underpinning Cardano and ADA are undoubtedly intriguing.

Image Credits: “IOHK, Emurgo, Flickr, Pixabay”

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