What is Cardano?
Posted by Frank Gogol
Updated on April 26, 2022
If you have dabbled in crypto investing, you will have come across the Bitcoin, Ethereum, and Cardano platforms. So what is Cardano and what makes it different from the rest?
Cardano (ADA) has become one of the fastest-growing blockchain assets in the entire cryptocurrency industry. It stands out from other competing blockchains by advancing the technology it uses at rapid speed.
Cardano is looking to create a decentralized application (DApp) development platform. The Cardano blockchain can be used to build smart contracts, and in turn, create decentralized applications and protocols.
Another popular and unique feature is Cardano’s proof-of-stake consensus protocol which is designed to reduce energy expenditure during the block production process. This protocol includes an infinitely scalable consensus mechanism.
Cardano’s energy efficiency and ability to scale makes mining easy and ensures quick transaction times on the platform. With Cardano, you can send and receive funds instantly with minimal transaction fees applying.
Read on to learn in more detail what is Cardano and how it could be a good investment choice for you.
Table of Contents
What is Cardano (ADA)?
Cardano is a third-generation, decentralized proof-of-stake blockchain platform created in 2017. ADA is the cryptocurrency of the platform.
Similar to other cryptocurrencies, ADA is a digital coin that can be used to store value or send and receive funds. The ADA cryptocurrency runs on the Cardano blockchain. Cardano runs on the proof-of-stake Ouroboros consensus protocol.
The heart of any blockchain platform is the algorithm it uses to create blocks and validate transactions. Cardano uses Ouroboros, an algorithm that uses proof-of-stake (PoS) protocol to mine blocks. Ouroboros was designed by experts in the fields of cryptography and engineering. It is based on scientific and mathematical principles to increase the efficiency and security of the platform.
Cardano’s development has been unique in that it has been informed by scholarly academic research. Each of Cardano’s development phases is supported by a research-based framework, incorporating peer-reviewed insights with evidence-based methods. This creates a strong foundation from which to make progress toward the future of both the blockchain network and the ADA token.
The proof-of-stake protocol that Cardano uses is designed to reduce energy expenditure during the block production process. Additionally, this protocol includes an infinitely scalable consensus mechanism. This scalability and energy efficiency allow for easy mining and quick transaction times on the platform.
How Does Cardano Work?
What is Cardano and how does it work?
Cardano Settlement Layer
The Cardano Settlement Layer is the accounting layer of the Cardano platform. It is where token holders can send and receive ADA instantaneously with minimal transaction fees. One of Cardano’s strengths is the separation between the accounting and computational layers. In this way, the platform is being built with the regulation in mind.
Cardano Computational Layer
The Cardano Computational Layer contains the proof-of-stake, Ouroboros consensus protocol. The protocol helps to run smart contracts, ensure security and compliance, and allow for other advanced functionality.
Cardano’s use of mathematics allows for the creation of a provably secure blockchain. It is less prone to attacks. The Ouroboros consensus mechanism also allows for ADA to be sent and received easily and securely at all times.
As a PoS consensus mechanism, Ouroboros provides rewards to token holders who stake their ADA to the network. Cardano needs token holders to stake their ADA to the network as that is what results in network consensus.
Network consensus is important as it allows for:
- transactions on the network to be validated,
- transaction blocks to be created, and
- newly-created blocks to be added to the Cardano blockchain.
Ouroboros is so effective because it requires a small number of ADA holders to be online and maintain good network connectivity. To further cut down on energy consumption, stake pools are created. ADA holders can organize themselves into stake pools and elect a few to represent the pool during protocol execution, making it easy to participate and ensuring block creation even if some token holders are offline.
Those who stake their ADA to the blockchain are rewarded for their efforts with more Cardano crypto in return. This staking system helps maintain security throughout the blockchain.
Uses for Cardano
The Cardano coin, ADA, can be used as a transfer of value in a similar way that cash is currently used. This is similar to the uses of other cryptocurrencies like Ethereum and Bitcoin.
But mostly, Cardano aims to be a decentralized application (DApp) development platform with a multi-asset ledger and verifiable smart contracts.
If you are investing in cryptocurrencies, you will definitely have heard of the Cardano vs Ethereum debate. Cardano and Ethereum are often compared to each other because both their networks provide similar offerings.
Developers can use both the Ethereum (ETH) and Cardano (ADA) blockchains for similar features, including running custom programming logic (smart contracts) and building programs (decentralized applications).
The major difference at the moment is that Ethereum’s proof-of-work blockchain is proving less flexible than Cardano’s proof-of-stake Ouroboros consensus protocol.
The flexible consensus protocol also means transactions can be verified very quickly. The ability to send and receive funds instantly, for minimal fees, has many applications in the world of business and finance.
Additionally, ADA is used in voting. In Cardano, everyone who owns the cryptocurrency has a say in its development.
Where to Buy Cardano?
Fortunately, Cardano is a well-established altcoin, so it’s an asset that you can find on almost every crypto trading platform.
You can buy Cardano on Coinbase, eToro, Kraken, Binance, etc.
Just create an account, deposit funds into the account, and use the deposited funds to buy ADA on the trading platform.
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What is Cardano? Like Ethereum, Cardano is a decentralized application (DApp) development platform. The Cardano blockchain can be used to build smart contracts, and in turn, create decentralized applications and protocols.
Additionally, Cardano’s proof-of-stake consensus protocol is designed to reduce energy expenditure during the block production process. This protocol includes an infinitely scalable consensus mechanism.
Cardano’s scalability and energy efficiency allow for easy mining and quick transaction times on the platform. The ability to send and receive funds instantly, for minimal fees, makes Cardano a very popular crypto asset.
If you’re interested to start investing in Cardano, you’ll be able to buy Cardano on the most popular cryptocurrency exchanges.
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