What is Cardano?

Launched in 2017, Cardano (ADA) is a proof-of-stake blockchain platform that strives to bring positive global change by enabling innovators to develop decentralized applications and smart contracts. Cardano is named after the 16th-century Italian polymath Gerolamo Cardano, while its native token, ADA, is named after the 19th-century mathematician Ada Lovelace. Cardano is one of the biggest cryptocurrencies by market cap as of 2023 and has been designed to be a next-gen evolution of the Ethereum idea — with a blockchain that is flexible, sustainable, and scalable. The Cardano blockchain is divided into two separate layers: the Cardano Settlement Layer (CSL) and the Cardano Computing Layer (CCL). The CSL contains the ledger of accounts and balances (and is where the transactions are validated by the Ouroboros consensus mechanism). The CCL layer is where all the computations for apps running on the blockchain are executed — via the operations of smart contracts. The idea of splitting the blockchain into two layers is to help the Cardano network to process as many as a million transactions a second. The ADA token allows holders to participate in the operation of the network, including voting on proposed changes to the software. Cardano's technology is developed through a process of peer-reviewed research, ensuring the durability and stability of the blockchain. Unlike Ethereum-based tokens, Cardano native tokens aren't created via smart contracts. Instead, they run on the same architecture as the ADA cryptocurrency itself. According to the nonprofit Cardano Foundation, this makes Cardano native assets "first-class citizens" on the blockchain. Their native architecture can theoretically make these tokens more secure and reduce the fees associated with transactions.

How does Cardano work?

Cardano operates on a unique proof-of-stake consensus mechanism known as Ouroboros, which is less energy-intensive than the proof-of-work algorithm used by other blockchains. This mechanism allows Cardano to be secure and sustainable while using substantially less power. Cardano's blockchain is layered, which means it separates the ledger of account values from the reason why values are moved from one account to the other. This separation is intended to make smart contracts safer. Cardano's goal is to be the most environmentally sustainable blockchain platform. It uses a unique proof-of-stake consensus mechanism called Ouroboros, as opposed to the energy-intensive proof-of-work system currently used by Bitcoin.

What are the potential use cases for Cardano?

Cardano's technology has been leveraged in a variety of compelling use cases. For instance, agricultural companies have used Cardano to track fresh produce from field to fork, ensuring transparency and accountability in the food supply chain. Additionally, educational institutions have used the platform to store educational credentials in a tamper-proof way, while retailers have used it to clamp down on counterfeit goods. With the launch of the Alonzo hard fork, Cardano now supports smart contracts, opening up a myriad of potential applications in various sectors.

What is the history of Cardano?

Cardano was launched in September 2017 by Charles Hoskinson, one of the co-founders of the Ethereum network, and aims to be a third-generation blockchain (or blockchain 3.0) project — building on top of the technology pioneered by Bitcoin (first gen) and Ethereum (second gen). Hoskinson's involvement in the cryptocurrency industry dates back to 2011, and he has been a prominent figure in the space ever since. Cardano's development has been marked by a series of upgrades, each named after a famous figure in history. The Shelley upgrade, for instance, aimed to make the blockchain more decentralized, while the Alonzo hard fork introduced smart contract functionality to the platform. Cardano's development continues to be guided by rigorous academic research and a commitment to creating a more secure, transparent, and fair society. The Ouroboros consensus mechanism is based on peer-reviewed research by a team of computer scientists and cryptographers from the University of Edinburgh, Tokyo University, and other institutions. Their goal was to build a decentralized network that could validate transactions in a scalable, secure way — while ensuring that the Cardano platform would be as energy-efficient as possible.

Proof-of-work vs. proof-of-stake

Decentralized cryptocurrency networks need to make sure that all transactions are legitimate without the oversight of a central authority like a bank. To accomplish this, they use a "consensus mechanism" to verify transactions. The original crypto consensus mechanism, called proof of work, was first popularized by Bitcoin mining. Proof of work requires a large amount of processing power contributed by virtual "miners" around the world. Rather than using a network of miners, proof of stake uses a network of invested participants called validators. The network selects a winner based on the amount of ADA each validator has in the pool and the length of time they've had it there — rewarding the most invested participants. Once the winner has validated the latest block of transactions, other validators can attest that the block is accurate. When a threshold number of attestations have been made, the network updates the blockchain. All participating validators receive a reward in ADA, which is distributed by the network in proportion to each validator's stake. Becoming a validator is a major responsibility, but interested parties can also earn ADA rewards by "delegating" some of their crypto to a staking pool run by someone else. On March 1, 2021, the Cardano blockchain introduced the ability to create native tokens. Like Ethereum tokens — which can include things like NFTs or stablecoins — Cardano native assets can be created and distributed on the blockchain and are able to interact with smart contracts (once smart contracts are enabled on the platform).

Where can I buy Cardano?

Much like the Ethereum blockchain's native cryptocurrency is ETH, the Cardano blockchain's native cryptocurrency is ADA — which can be bought or sold via exchanges like Coinbase. Today, ADA can be used to store value (perhaps as part of your crypto portfolio), to send and receive payments, and for staking and paying transaction fees on the Cardano network.

How do I store Cardano?

You can hold ADA on Coinbase, in Coinbase Wallet, and using a number of crypto exchanges and wallets.