What is Cardano, and why is it in the top 10 most used cryptocurrencies? Cardano is an ever-growing, open-source, decentralized blockchain that’ll eventually allow developers to build decentralized applications and smart contracts using its native cryptocurrency, ADA.
|Original author||Charles Hoskinson|
|Date released||27 September 2017|
|Supply limit||45 billion|
What does a Renaissance Italian polymath from the 1500s have to do with one of the most traded cryptocurrencies globally? Cryptocurrencies are no strangers to peculiar namesakes, and this is no different in Cardano’s case.
Cardano made its debut into the crypto space in late September 2017 and had its all-time high price was $1.18 in the first week of 2018. At the time of writing, the cryptocurrency is worth $0.16 and ranks 9th of most traded according to CoinMarketCap, with about a $4.77 billion market capitalization (representing 0.70% market dominance).
So what’s special about Cardano? This article aims to answer the question precisely by defining Cardano, how it came into being, how it’s structured technically, its value proposition, and future plans.
As already established, Cardano got its name from the 1500s Renaissance Italian polymath, Gerolamo Cardano. However, a distinction between the platform’s name and the actual cryptocurrency exists.
Similar to other digital currencies, like Ripple, Cardano refers to the platform’s name. However, the native cryptocurrency used here is known as ADA, interestingly named after the 1800s English mathematician Ada Lovelace.
The developers of Cardano claim the coin will become a better version of Ethereum. One of the reasons for references between the two simply boils down to the creator, Charles Hoskinson, also being Ethereum’s co-founder.
The American maths genius founded Cardano in 2017 and is also the CEO of the blockchain engineering company, Input Output Hong Kong (IOHK). Most of the corporation’s activities are to fuel the innovations of Cardano.
Like the genesis of many digital currencies, Hoskinson and several like-minded individuals had the vision to build a platform for developers to create decentralized applications and cryptocurrency to power the network.
Fortunately, after development, Cardano successfully raised about $63 million during its ICO (initial coin offering) in five sale rounds between September 2015 and January 2017. Unusually for a cryptocurrency, Cardano was able to achieve this success without any whitepaper.
How does Cardano work?
Analysts tend to frequently compare Cardano to Ethereum due to sharing many similarities and visions. Cardano is simply a publicly distributed, open-source blockchain platform that will eventually allow the creation of decentralized applications and smart contracts.
Its native cryptocurrency is ADA, which we can use outside of the platform with an accepting merchant. As a traditional cryptocurrency, users can trade ADA on several major exchanges or directly from Cardano. Both entities afford the options of various wallets to store the coins.
Cardano prides itself on being secured through the proof-of-stake protocol known as Ouroboros, which is said to be environmentally friendly and can ethically scale up to four million times the energy efficiency of Bitcoin.
At its core, the PoS (proof-of-stake) model consumes significantly less electricity than PoW (proof-of-work). Instead of relying on intensive computational mining, proof-of-stake accounts for the size of the stake users control in the network.
As with many cryptocurrencies, ADA employs a fixed monetary policy where only 45 billion coins will exist, of which approximately 69% (31 billion at the time of writing) is presently in circulation.
Cardano’s proof-of-stake guidelines
Owners of ADA have a choice of either running their own pool or delegating their stake to an existing one since Cardano focuses more on these than individual nodes. One of the advantages of Cardano’s PoS is there is no amount required to stake.
Additionally, a user’s stake is not required to be locked for a specific term, meaning that coins never leave their wallet. ADA holders receive their rewards every five days or what is colloquially known as an epoch.
Although we were not able to conclusively find how much ADA Cardano produces daily, blocks created through slots occur every 20 seconds. As a stakeholder, Cardano (at the time of writing) claims users should receive about a 5.14% yearly return for delegating a stake and significantly more for running a stake pool.
What makes Cardano valuable?
Cardano has been using the proof-of-stake consensus mechanism for several years and is the only cryptocurrency in the top 10 that’s been doing so the longest. Although Ethereum, a higher-ranking coin, has recently changed to proof-of-stake, this will be a gradual change.
Therefore, Cardano technically has a headstart in this regard. Enthusiasts also regard the Ouroboros proof-of-stake technology as incredibly secure against blockchain attacks, a stark contrast to other PoW cryptocurrencies.
Unlike Ethereum that has a hefty staking requirement of 32ETH to become a validator (which equates to about $19,700 presently), there is no minimum amount to stake. Thus, Cardano affords earning capabilities to even cash-strapped investors who can stake very little.
Furthermore, there is no need to have your stake locked for a fixed term: one can withdraw at any time. Token holders will be able to vote on any protocol changes after their last of five planned eras known as Voltaire happens.
Future of Cardano
Although Cardano has existed for more than three years and sits firmly in the top 10, developers are still looking to add essential upgrades. They have divided these upgrades into five eras, nearly all of which Cardano has uniquely named after an important pre-1900s famous writer.
Investors in ADA will always keep an eye on when new significant development takes effect in anticipation of a value increase in the coin. However, generally, most speculators are bullish on many cryptocurrencies overall.
Currently, Cardano passed the ‘Byron’ era some time ago meant to create the ‘foundational architecture of the network.’ They successfully completed the second stage known as ‘Shelley’ in May 2020 to make their PoS blockchain more decentralized.
Cardano’s roadmap has scheduled the third phase, known as Goguen, to go live in March 2021. The main objective of this era is the creation of Plutus, a smart contract development language. Analysts believe this milestone would be a large piece in the puzzle for Cardano to truly compete with the likes of Ethereum.
With all the information above, we can see Cardano has avid ambitions to become one of the best cryptocurrency platforms for decentralized applications and smart contracts. Unlike coins with more of a singular function, Cardano’s developers realize the untapped potential of cryptocurrencies to become more than just money in the future.