What is Cardano (ADA)?

Cardano is a proof-of-stake blockchain platform with its own cryptocurrency called ADA.

Launched in September 2017 by Charles Hoskinson, a co-founder of Ethereum, Cardano was designed to be a new generation of cryptocurrency that could solve some problems that other cryptocurrencies face:

What problems does Cardano solve?

Problem 1: Crypto transactions tend to become slower and more expensive during times of high demand. Cryptocurrency should become better the more people use it, not worse.

Problem 2: Some cryptocurrencies (like Bitcoin) consume a lot of energy to work. Cryptocurrencies need to work in an efficient way that’s sustainable in the long run.

Problem 3: Cryptocurrencies aren’t very compatible with one another. To succeed in the long run, different currencies need to be able to work well with one another to create a seamless, easy-to-use ecosystem.

How does Cardano solve these problems?

The Cardano team developed a new system called Ouroboros. By building upon technology from older cryptocurrencies (such as Bitcoin and Ethereum), and founding their platform on peer-reviewed research, Cardano’s developers created a blockchain that’s infinitely scalable, able to be improved upon and uses less computing power.

Ouroboros uses a specially designed proof-of-stake protocol, instead of the time-consuming and energy-intensive proof-of-work consensus mechanism that Bitcoin uses.

Here’s how it works

Invested participants, called validators, contribute or ‘stake’ their ADA in the hopes of being chosen to verify a new block of transactions. The validators of new blocks are chosen randomly, but their chances increase based on how much ADA they’ve staked. This doesn’t require the high-powered computers that proof-of-work systems need, where people compete to solve increasingly difficult computational problems.

What makes Ouroboros unique among other proof-of-stake protocols is that it divides the Cardano blockchain into different slots. These can be assigned to different validators to share the workload among them, and each slot can be infinitely subdivided into smaller chunks, so no one is ever overwhelmed with too much work to do.

What’s in it for the validators? Well, if they correctly verify a block of transactions, they get rewarded with more ADA in proportion to their stake. If they get it wrong, or if they attempt anything malicious, it’s bye-bye to their ADA. At the same time, a portion of Cardano’s transaction fees are set aside in a treasury fund that pays developers for improving the blockchain.

All of this works together to encourage the sustainable, scalable growth of the Cardano blockchain.

What’s next for Cardano and ADA?

ADA isn’t trying to be the one coin that rules them all. Cardano plans to build bridges between different blockchains to allow for the easy exchange of different cryptocurrencies, without an intermediary. It also wants to get banks on board by giving people the option to attach more information to transactions, such as the names of the sender and recipient.

It still has a long way to go to achieve this vision, but Cardano aims to be the blockchain that works well with other blockchains, while playing nicely with the existing traditional financial system as well.