What is Cardano (ADA)?

​I​ntroduction

​Launched in September 2017, Cardano is an open-source, decentralized public blockchain .Cardano is still a young project under development that aims to develop a smart contract platform where businesses will be able to build and run decentralized apps. Cardano is also a decentralized payment system planning to provide fast, safe, and secure transactions around the world.

Cardano defines itself as the third generation blockchain, the first generation being Bitcoin. Bitcoin is the firstborn of all cryptocurrencies worldwide. The decentralized currency was created in 2009 to facilitate financial transactions between individuals without any interference and at low transaction fees. However, Bitcoin only allows for monetary transactions. Later in 2015 came Ethereum, the second generation blockchain, a cryptocurrency that aims to decentralize the Internet. Ethereum offers developers a platform where they can build decentralized applications without worrying about shutdown or censorship.

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In its future projects, Cardano plans to fulfill both the functions of Bitcoin and Ethereum, thus become the third generation blockchain. To achieve this status, Cardano is planning to solve three main problems that face the cryptocurrency world: scalability, interoperability, and sustainability. In this article, we’ll see how they plan to make it happen.

Cardano is currently working on a two-layer solution: the settlement and the control layer. The layers were designed to provide businesses the flexibility to build smart contracts and accept payments. As of now,the settlement layer, which allows payments on the Cardano blockchain, is fully functional while the team still works on developing the second one. At the moment, Cardano is capable of processing hundreds of transactions per second.

The brain master behind Cardano is one of Ethereum’s co-founders, Charles Hoskinson. Cardano was built from a scientific philosophy and designed by a passionate team of leading academics and engineers. As the first peer-reviewed blockchain project, Cardano’s leaders had their white paper's protocols reviewed by various scholars before they were released.

The founding team made sure to share their written code with experts around the world to be approved.Cardano’s code was built from scratch in a programing language called "Haskell."  The system was then made open-source and subject to peer-to-peer review before being implemented.

Cardano has three organizations that work full-time to take care of the platform, including Cardano Foundation, Emurgo, and IOHK (Input Output Hong Kong):

  • Cardano is currently run and developed by the IOHK, which is partially led by Hoskinson. IOHK is contracted to help build the Cardano network until 2020.
  • Emurgo is responsible for driving commercial adoption. Moreover, the company offers venture capital to startups and other people desiring to build decentralized apps (Dapps) on the Cardano blockchain.
  • A non-profit based in Switzerland, the Cardano Foundation aims to educate Cardano users and promote the blockchain’s potentials to revolutionize the financial world.

ADA is the cryptocurrency that runs on the Cardano platform.ADA can be used as a digital currency to buy products and services or to allow users to execute various smart contracts on the Cardano platform seamlessly.Cardano managed to raise approximately $62 million during their ICO, two years ago. At the time, one ADA was valued at $0.02.

Once implemented, Cardano will be the best choice for corporations that heavily use contracts like real estate, law firms, banks, etc.

​How Does It Work

Referred to as the Japanese Ethereum, Cardano is amongst Ethereum’s fierce competitors.  It aims to be a decentralized global financial system and a platform where individuals or commerce can build and run decentralized applications and smart contracts.

As mentioned above, Cardano is trying to solve the scalability, sustainability, and interoperability problems experienced by its predecessor Bitcoin, Ethereum, and more:

1. Scalability

In scalability, Cardano is trying to solve the problem of transactions/second, network bandwidth, and data storage:

Network: Cardano has opted for RINA (Recursive Internetworked Architecture) to scale its system. Created by John Day, RINA technology projects to develop a system capable of offering privacy, scalability, and transparency to its users.

Data storage: A blockchain is a public ledger that records every single transactionon a given cryptocurrency network. For example, when a person A sends BTC coins to his friend B, his transaction is verified by thousands of computers on the Bitcoin network to check if person A really has the coins. 

Once validated, his transaction information (public address of the sender and receiver, the amount, date and time, etc.) will be recorded on a block and added to the blockchain where it will stay forever.Blocks are added chronologically to form a chain.

In Bitcoin, for example, one block has a size of 1MB and can contain approximately 3000 transactions. Since these networks prone transparency and decentralization, they allow members to participate in running and securing the blockchain. 

Therefore, every information is public and accessible to anyone. Besides, every participant has a copy of the blockchain on their computer. If you own coins of particular crypto, you are part of its community, and you can verify transactions. You can imagine what a hurdle it is for some users to store all this data on their average computers.

Cardano insists that not everyone needs to keep all that information; all they need to see is whether a transaction was legitimate. To reduce the amount of data a participant on the blockchain needs to have, Cardano is looking into three solutions, including pruning, compression, and subscriptions. Instead of having a copy of each transaction that happens on their network, Cardano appoints a specific number of nodes responsible for verifying and validating transactions.

Transaction per second:A cryptocurrency needs to handle multiple transactions per second to become a global payment system. As of now, Bitcoin processes seven transactions per second, while Ethereum manages a little over 20 transactions per second.On the other hand, global payment systems like VISA can execute thousands of transactions per second.

Cardano is working on ways to solve this scalability problem with their new consensus mechanism called Ouroboros, which runs on a proof-of-stake algorithm. Cardano plans to achieve full scalability by adopting a proof-of-stake (PoS) mining system, instead of proof-of-work (PoW) used by major cryptocurrencies like Bitcoin and Ethereum.

Bitcoin offers users all around the world a decentralized payment system. People around the world are now using BTC to send each fund, purchase goods, and services in stores or online. However, one of the cryptocurrency's major problems is that as many people adopt it and use it to execute daily transactions, it gets clogged and slow down the process. On average, it takes 10 minutes for a transaction to go through the BTC blockchain.

During busy hours, it can take up to hours, and fees would rise consequently. Ethereum is another blockchain-based platform that offers developers around the world a platform where they can create and run decentralized apps. However, the cryptocurrency’s transaction speed is also slow. Cardano wants to design a fast and secure platform that will serve as both a payment system and a platform where businesses can also build decentralized apps.

The proof-of-work process used to mine new BTC or ETH can be very slow since each transaction has to be verified and approved by every single computer on the network before its added on a block. It also requires a lot of computing power and electricity. The PoW consensus mechanism involves solving complex math problems.

When a new transaction takes place, the system that uses PoW will create a difficult math equation that users (miners) compete to solve in exchange for a reward.Once a miner solves the problem, every node or computer on that network has to verify the solution. Once validated, new coins are created.

Another problem with proof-of-work is that it requires expensive hardware and excessive computing power that a few numbers of people or organizations can afford. This issue compromises the decentralization protocol that needs as many people as possible to get involved in how the network is run. 

As opposed to other cryptocurrencies using the PoW system, you cannot mine ADA coins by solving complicated puzzles. Instead, you will have to stake your purchased ADA coins in exchange for a certain percentage. In a PoS, any coin holder can verify the transactions, thus take part in a new block generation. It will allow participants on the Cardano to save electricity, and since it doesn’t require any special mining equipment, they can also save money.

As written above, the Cardano network elects a few nodes to mine new coins. The selected nodes are called “slot leaders” or validators. Slot readers wait for new transactions, verify them and add them on a block, thus creating new coins. This process is called Proof-of-Stake.In a PoS system, people can mine new blocks depending on how many ADA coins they hold. The more ADA tokens you own, the more chances you have to be selected as a slot leader.

To take part in Cardano’s mining process, you will have to stake some of your ADA coins (you must own at least a 2% stake in Cardano). Once selected, slot leaders have to work together to discover the new block that needs to be added to the chain by placing a bet on it. When the block you validated gets added to the blockchain, then you will get a reward proportionate to your chances.Moreover, the compensation a validator receives also depends on how much stake he has.

Any stakeholder or coin holder on the Cardano blockchain has the right to vote for new slot leaders.If a slot leader doesn’t show up or complete his task on time, he will be removed.Users with the highest number of coins staked have more chances to verify transactions and generate new blocks.

Ouroboros is Cardano’s innovative proof-of-stake consensus mechanism. The algorithm divides time into epochs.

Each epoch is made of slots. Slots are short periods in which one block can be created.  They are more like factory working shifts. Each epoch has a slot leader who is a person elected by stakeholders. The slots leaders have the job to validate transactions to be added to the blockchain and secure the network.

Cardano plans to run multiple epochs in parallel and increase the amount of slot per epoch, making it highly scalable. 

Ouroboros will enable fast transaction processing and helps to save on energy costs. The system was designed by a highly talented team of academics led by Professor Aggelos Kiayias.

Again, to tackle the scalability issue, Cardano separates its functions in two different layers:

​1. One for the transfer of value called “Cardano Settlement Layer." This layer allows users to send and receive ADA tokens. The settlement layer is the place where the transactions and record-keeping occur.


2. One for the storage data called “Cardano Control Layer." It is the layer where smart contracts will be deployed. Cardano developers are working hard to design a unique programing language, Plutus, capable of creating and executing smart contracts on the platform. However, the control layer is still under development. Once launched, users will be able to design and build smart contracts and Dapps on it.


​For example, if you want to rent your house, you can create a smart contract on the control layer that will give your tenant access to the house once he sends a fixed amount of ADA coins to your account. The smart contract would then be sent to the settlement layer when the tenant fulfills the agreement and put the ADA coins to your account.

2. Interoperability

To achieve interoperability, Cardano wants to build an ecosystem that can easily communicate and interfere with existing financial networks such as other cryptocurrencies or banks.For example, you can’t exchange BTC for ADA without using an exchange platform. Once more, the only communication portal between cryptos and banks are the exchanges platform where you could trade crypto coins against traditional currencies like the US Dollar, Euro, etc. However, exchanges are not decentralized entities, meaning that each can impose its own prices or charge extra fees. Also, exchange platforms are less secure. The Cardano platform wants to create an ecosystem where you could easily exchange BTC in ETH or ADA into USD without the need of centralized exchanges. 

Another significant issue is that banks and other institutions don’t trust cryptocurrencies because they want to know the identity of the users and the nature of all transactions going through their network. Consequently, it will be tough for a company that received funds through ICO to deposit the money into bank accounts without providing the source of the capital, which is impossible.

The other problem that they want to solve is the regulations. Many people think that cryptocurrencies are used in irregular activities since they allow their users to hide their identities. Thus, it makes it challenging to work with banks or other governmental institutions. Many people still see crypto as platforms where people hide their identities to commit crimes like tax evasion, fraud, money laundering, conduct illegal businesses, etc. Cardano is working on a protocol that will allow users to share some info about their transactions. 

They want their platform to be interoperable with other mainstream finance ecosystems. For such,Cardano needs to build a system that will satisfy the users and the regulators. Cardano itself goes through a monthly third-party audit.

3. Sustainability

The Cardano team wants to build an efficient and sustainable ecosystem where individuals, organizations, and governments can run their day to day financial applications. Since the creation of Bitcoin (the original cryptocurrency) in 2009, there have been many hard forks that resulted from disagreements, hacks, etc. Those scandals have brought a bad reputation to the concerned networks and the whole cryptocurrency world.To avoid the same crisis over and over, Cardano plans to build a safe and legal ecosystem where users would voice their disagreements and propose productive changes.

​Where to Buy and Store ADA Coins

1. Where to buy ADA coins

Although Cardano remains under development, it has already gained attention both from developers and investors. Many people are starting to buy the tokens expecting to see the ADA’s price rise once Cardano completes its development. 

You can buy ADA coins on multiple cryptocurrency exchanges or online brokers. If you are a trader, you can also trade it against other cryptocurrencies. Cardano native cryptocurrency, ADA, is currently listed on over 30 exchanges, including Binance, Bitfinex, Huobi, Bittrex, etc. Nonetheless, you have to keep in mind that these financial assets can be highly volatile, thus risky. Therefore, make sure you only invest the money you can afford to lose.

ADA tokens are also currently available in Japan via ATMs and debit cards.

1. how to store your coins

Daedalus is an open-source crypto wallet specially designed to hold ADA coins. You can easily download the wallet on Daedalus.io for the safe storage of your ADA coins. In the future, Daedalus will be developed to become a universal cryptocurrency wallet where you can store your BTC, LTC, ETH, etc.

Daedalus is compatible with Windows, macOS, and Linux operating systems. With Daedalus, you are in full control of your private keys. Moreover, they will provide you with powerful backup features to recover your funds in case you lose your keys. It also comes with advanced security to protect your funds from eventual attacks.

​Price evolution

The demand highly drives the price of crypto. In the case of Cardano, the demand is deficient since the project hasn't been implemented yet.

ADA was traded for the first time on October 1, 2017, at the price of $0.02 per coin.It closed the year 2017 at $0.63.

ADA coin hit the price peak of $1.15 on January 4, 2018. Shortly after, the prices started to decline dramatically, reaching $0.14 by March 2018. At the beginning of 2018, the whole crypto market experienced a significant crush. At that time, many governments around the world put up bans on the cryptocurrencies, and Cardano was no exception to the price crash. 

On May 3, 2018, the cryptocurrency picked up its pace again and reached $0.37. Unfortunately, the Cardano price has been highly volatile and continued to fall until today.

ADA's price is expected to rise soon since Cardano promised to show the completion of its projects in 2019. Many people are investing in Cardano in the long run. As the crypto fulfills its promises, many people or organizations will be drawn to it, which will increase its price. Investors predict Cardano’s price to reach $0.06 by next year, and $1 in the next few years.

​Conclusion

Briefly, Cardano plans to build a scalable, flexible, super-fast, secure, and cheap cryptocurrency. Further, the platform has projects to combine privacy and regulations by balancing the needs of its users and regulators.

Through Cardano, Hoskinson and his team aim to build a platform that offers a more balanced and secure ecosystem for cryptocurrencies and other financial services. Cardano’s development team ismade of brilliant academics and scientists from the University of Edinburgh and the Tokyo Institute of Technology.

Cardano promises a platform capable of handling ten thousands of transactions per second. If Cardano achieves its objectives, it will be the go-to platform for corporations or even individuals to create smart contracts for their daily operations. Nevertheless, Cardano has a massive competition with other cryptocurrencies with the same goals and ambitions, such as EOS, IOTA, Dash, and Stellar.

As of December 12, 2019, the current price of one ADA coin is $0.034. With a market cap of $883.4 million,       Cardano holds the 13th position. Cardano has a fixed maximum supply of 45 billion of ADA coins ever to be mined, and there are currently 25.9 million coins in circulation. 


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