Cardano (ADA) is a third-generation blockchain that builds upon Ethereum – a second-generation blockchain.
Cardano Logo (source: crowdwisdom.live)
As a third-generation blockchain, Cardano enhances those things that the second-generation blockchain Ethereum excelled at: scalability, efficiency, and security.
What Ecosystem is Cardano?
The Cardano blockchain is an open-source blockchain which means that its records are made public and are readily available. Cardano is also a decentralized blockchain network that, like Ethereum, supports self-executing computer programs by way of smart contracts.
The code and the agreements contained within the Cardano ecosystem reside in a distributed, decentralized blockchain network. With these smart contracts, the code controls the execution, and transactions are trackable and irreversible.
As such, Cardano was created to enable developers to build and publish smart contracts and distributed applications (dApps).
All smart contracts residing on the Cardano blockchain have certain similar traits.
For example, because smart contracts are coded into the blockchain, they have a status. This status or “state” is shared amongst every single blockchain node across the entire network. So, each node running this blockchain has a copy of the present status of every single smart contract residing on the blockchain.
Importantly, these smart contracts are also immutable. That is, they cannot be altered. Although there are ways to extend them or replace parts, there is no way to secretively manipulate the content of a smart contract without drawing the attention of the network.
In addition, the logic of a smart contract cannot be distorted. With a smart contract, there is no room for interpretation of the terms of the agreement. That is why these coded agreements are referred to as “contracts.” They act like an agreement between parties, but one which needs no third party to initiate, interpret, or oversee the results of the contract.
Cardano is structured so as to enhance these smart contracts making them easier to scale. With such a network, almost anyone – not just developers – can create their own decentralized applications.
What Coins are Part of Cardano Ecosystem?
The Cardano ecosystem supports peer-to-peer transactions using its cryptocurrency ADA. This token is named after Ada Lovelace, a 19th-century mathematician who is recognized as the first computer programmer.
Cardano currently has a circulating supply of 33.5M ADA coins. The maximum supply of the ADA is limited to 45 billion tokens which are to be released over time through minting. This limit is put in place by the Cardano blockchain’s code and represents the absolute maximum ADA that can be minted.
Much like the Bitcoin coin supply hard cap, ADA’s hard cap acts like a deflationary attribute to this token. ADA can be exchanged for fiat currencies such as the United States dollar and stored securely in hot and cold wallets.
ADA runs on Ouroboros which is a proof-of-stake-styled consensus protocol.
How Do You Buy Cardano Ecosystem Coins?
Among cryptocurrencies, Cardano presently has the sixth-highest market value at $35 billion, trailing behind Bitcoin’s $750 billion, and Ethereum’s second-place market cap of $304 billion. In 2021, Cardano experienced a decent year-to-date market value gain of 200x, having reached an all-time high of $3.10 last September.
Cardano One-Year Pricing Chart (source: coinmarketcap.com)
Select A Crypto Exchange
As the sixth most popular cryptocurrency, Cardano can be purchased on a number of different trading platforms or cryptocurrency exchanges. Crypto exchanges allow you to act as a buyer and/or seller by exchanging your fiat money (US dollars) for cryptocurrencies like Bitcoin or Cardano.
Some popular crypto exchange choices to purchase Cardano ADA include Binance, Coinbase, Kraken, SoFi, and eToro.
In considering a crypto exchange, you should investigate whether you want to use a fiat exchange or a crypto-to-crypto exchange.
A fiat exchange will accept your fiat or ordinary currency as a deposit which can then be used to purchase your ADA. A crypto-to-crypto exchange allows you to deposit your existing crypto coins, which you can then exchange for ADA.
In identifying the desired trading platform, you should also research the transaction fee structures as fees charged against your account can vary from one exchange to another.
Create an Exchange Account
Create a trading account once you have selected an exchange. To create a trading account, you will need to provide certain personal information, like your name, address, social security number, and perhaps one or more forms of identification. The exchange will then proceed to verify your personal information so that you can finalize your trading account.
Deposit a Balance into Your New Account
After verification, you can deposit a balance into your account. If your account is on a fiat exchange, you can link your account directly to an existing bank account, a credit card, or a debit car. Fiat or ordinary currency can then be directly deposited into your account so that you can begin trading.
If your established account is on a crypto-to-crypto exchange, depositing your existing cryptocurrency can be a little more complicated. To deposit your cryptocurrency into these accounts you must send the code for the coins that you want to be deposited. This may take longer than an hour or two to deposit, depending on the type of cryptocurrency and the type of exchange.
Begin Trading
Now that you have a verified account with a balance, you can begin purchasing Cardano ADA. Depending on the amount of your purchase and the current market price (today’s current price of $1.02), you will probably be buying one or more ADA tokens.
Store Your ADA
You can use your exchange account to store your purchased ADA. Alternatively, you can use a digital wallet to store and manage your ADA.
A digital wallet is a location where you can securely store your ADA. You actually do not store your ADA as a physical coin, but rather you store the keys that provide access to your ADA on the blockchain.
There are different types of crypto wallets such as a “hot” wallet (software) like the Coinomi wallet or a “cold” wallet (hardware).
There are two types of “hot” wallets. There are software wallets and online wallets. These two types of wallets require an internet connection that allows you to gain access to your ADA stored in your online wallet, hence the name “hot” wallet.
Perhaps the most secure type of wallet is called a “cold” wallet. A “cold” wallet is a digital wallet that stores your privacy keys offline on a physical device, such as a USB drive. Cold wallets are referred to as “cold” as they are, unlike a “hot” wallet, not actively linked to the internet.
Trezor Cold Wallets (source: trezor.io)
Wallets that can be used to store your Cardano ADA include:
Who Is Behind Cardano?
Charles Hoskinson is a co-founder of Ethereum along with Vitalik Buterin. During project development, Hoskinson advocated that Ethereum should be a commercial project. Buterin disagreed, thinking that Ethereum should be more of a nonprofit endeavor. Due to their disagreement, Buterin removed Hoskinson from the Ethereum team in 2014.
Having experienced the birth and initial evolution of Ethereum, Hoskinson set out to create a different type of blockchain. In 2015, he founded the Cardano ecosystem. Unlike any other blockchain system, Cardano is the first blockchain that is based on peer-reviewed research, rather than just a Whitepaper.
What is Mini Cardano?
Mini Cardano (MADA) is a type of reflection token.
Mini Cardano Logo (source: reddit.com)
A reflection token is a cryptocurrency that is set up to reward token holders based on the blockchain’s tokenomics. Reflection tokens are structured such that the transactions occurring on the blockchain are taxed and then a percentage of this allocated tax is redistributed to token holders.
Since holders are rewarded with new tokens, the tokenomics incentivizes token holders to HODL their tokens. Because of this, reflection mechanisms are seen as an effective way of keeping investors loyal to a project, while also benefiting from a potential price appreciation.
Launched last September, MADA saw a huge 500% increase coinciding with the ascent of Cardano (ADA) to its all-time high. MADA has a current market price of $0.00000462 and has a circulating supply of 0 MADA coins and a total supply of 100 Billion.
MADA has two key metrics.
First, based on a smart contract, MADA rewards token holders with both Binance Coin (BNB) and Cardano (ADA) rewards. Importantly, these rewards are automatically transferred to the holder’s crypto wallets every 60 minutes. Token holders therefore earn a steady stream of passive income based on two popular cryptocurrency coins.
Second, MADA has a lottery where a certain percentage (currently, 3%) of each on chain transaction is converted into ADA. This converted ADA is then placed into a MADA lottery pool and every time this lottery pool reaches 5,000 ADA, MADA completes a random lottery.
Is Cardano Better than Ethereum?
There are three main advantages of the third-generation Cardano blockchain over the Ethereum blockchain.
First, Cardano’s blockchain network is a multi-layered blockchain that utilizes two layers: a Cardano Settlement Layer (CSL) and a Cardano Computation Layer (CCL). The CSL is used for token transfers.
The CCL supports the smart contract functionality that enables developers to create decentralized applications. Separated blockchain layers result in operations on both layers being more efficient, hence increasing scalability and TPS.
A bi-layered approach allows Cardano to upgrade one of the layers while leaving the other layer intact or performing two separate upgrades with independent design criteria.
By contrast, Ethereum is a single-layer blockchain where all token transactions and smart contracts are supported on the same layer. This leads to undesired congestion and high transaction fees or gas fees.
Second, Cardano utilizes a proof-of-stake (PoS) consensus algorithm, referred to as Ouroboros. This PoS system is more scalable and energy-efficient than proof-of-work (PoW) and claims to be the first provably secure system of its kind.
In a PoS blockchain, each node in the network stakes its assets in the PoS blockchain. These staking nodes, referred to as validators, operate similar to the miners in PoW blockchains.
One difference between PoW and PoS is that rather than executing energy-intensive computing calculations, PoS validators put up a stake as a form of collateral. This collateral often takes the form of ADA.
By staking ADA to the network, these nodes now have the opportunity to organize transactions into blocks and successfully write these blocks into the Cardano ledger. Validators act to “validate” or ensure that the transactions within a new block added to the blockchain are indeed true and accurate.
Staked ADA acts to guarantee that the validators’ entries into the ledger are performed according to the network’s predefined rules. For example, if a validator attempts to upload an incorrect block or is offline for a certain period of time, the validator may sacrifice the staked tokens.
Validators help achieve consensus amongst other validators while at the same time building upon the PoS network. Successful validators earn different types of rewards, depending on the network. These are typically provided by way of transaction fees that are paid by network users or by the issuance of new coins.
Each validator has a chance to write the next block to the blockchain. However, the larger the stake or staking power, the greater the possibility of earning the right to validate the next block. Therefore, instead of competing head to head with validators having a large amount of staking power, some validators will combine their staking power by joining staking pools.
PoS provides for certain advantages over PoW networks, such as Ethereum. For example, PoS does not require energy-intensive data mining hardware to validate new blocks to the blockchain. In addition, PoS networks are faster and can process more transactions than PoW networks.
Third, Cardano is the first known blockchain to utilize a scientific peer-reviewed process prior to the release of any new service. Peer review provides a heightened degree of confidence and assurance than is offered by other cryptocurrency projects. Initially, academic papers are written to detail new proposals and outline underlying technologies. These academic papers are made publicly available and are open for critique and comments for independent review by computer scientists and other interested academic parties.
What will Cardano be Worth in a Year?
Like every cryptocurrency, Cardano has its risks. But with Cardano, the potential reward is worth the risk.
Cardano hit an all-time high last September. Since then, it has struggled and has fallen nearly 65% in value.
Yes, Carano has struggled over the last couple of months as evident from its one-year graph reproduced above. After reaching an all-time high of $3.10 last September, Cardano has experienced a bit of a market dip.
But Cardano is not alone. Ethereum, the second-largest cryptocurrency, has dropped roughly 35 percent since November. And the total market value of all cryptocurrencies lost about $1.4 trillion in value over the last three months.
The US stock market has fared no better. For example, year to date, the S&P 500 Index is down 7.0% and the Dow Jones is down 4.4%. So, Cardano’s struggles are similar to those experienced in other financial markets.
Cardano is well-positioned to see positive price action over the next year or so.
Scalability has been a major challenge for the biggest cryptocurrencies. Bitcoin processes about five transactions per second, and Ethereum processes about 15. That leads to slower transactions with higher fees. Visa, on the other hand, processes about 1,700 transactions per second.
In tests, Cardano has processed 257 transactions per second. And it’s also planning to add another layer, called Hydra, to its blockchain. With this technology, it could potentially process 1 million transactions per second.
Development on the Cardano network continues to see significant growth and is showing signs that it is gaining in popularity amongst developers. As of December, there are over 1,000 smart contracts live on Cardano’s Mainnet, which are mainly focused on DeFi. And there are currently 2,300 more smart contracts just waiting to go live on the Cardano network.
Conclusion
Cardano is a decentralized blockchain that offers organizations an efficient platform to conduct smart contracts and dApps. As a third-generation blockchain, it has a number of advantages over older blockchain technologies, such as the first generation Bitcoin and second-generation Ethereum. Cardano should experience continued growth over the next few years as its enhanced processing speeds will continue to attract DeFi developers.