What is Cardano (ADA)?

What is Cardano?

Cardano, also known by the ticker ADA, is a competing layer-one blockchain protocol created by Ethereum co-founder Charles Hoskinson in 2015, designed to be the ideal flexible, sustainable, scalable, and interoperable blockchain for running smart contracts and decentralised apps.

To achieve this aim, Cardano runs on a slightly modified proof of stake consensus mechanism known as Ouroborus.

According to Cardano’s website, “Ouroboros is the first provably secure proof of stake protocol, and the first blockchain protocol to be based on peer-reviewed research.” This new peer-reviewed consensus mechanism is led by research teams of computer scientists and cryptographers mostly from the Universities of Edinburgh and Tokyo.

In short, it behaves a lot like Ethereum. The fundamental difference between the two comes down to personal philosophy and their target demographics.

Charles Hoskinson would leave his position at Ethereum after a disagreement with Vitalik Buterin on how the protocol should move forward. Essentially, Hoskinson wanted to move in a more commercial direction, while Buterin wished to remain a non-profit.

After a brief absence, Hoskinson would return to the crypto space with a brand new project, and this is where Cardano was born.

Unlike Ethereum, whose main objective is to get developers building on their network, Cardano also aims to offer practical solutions to problems people face in developing nations. A topic we’ll come back to later.

But first, what is Ouroboros?

If we listen to IOHK, the company behind Cardano, which currently handles its development. Ouroboros is the first provably secure proof-of-stake protocol and the first blockchain protocol based on peer-reviewed research every step of the way.

According to IOHK, Ouroboros also combines unique technology and mathematically-verified mechanisms, which, in turn, combine behavioural psychology and economic philosophy to ensure the security and sustainability of the blockchains that depend upon it.

Before concluding, “The result is a protocol with proven security guarantees able to facilitate the propagation of global, permissionless networks with minimal energy requirements.”

In simple English, this essentially means they claim Cardano runs on a more secure, scalable, and sustainable blockchain protocol for developers to create their dapps. In addition, what makes their network genuinely unique is this commitment to peer-reviewed research.

Every step of Cardano’s development has been led behind this philosophy. Each update is rigorously reviewed, tested, and amended before launch, ensuring no significant problems with the network so far.

Unlike during Ethereum’s early development, where the network was compromised so devastatingly, the entire Ethereum network forked in two – resulting in the creation of Ethereum, as we know it today, and Ethereum Classic.

So, is that all that makes Cardano unique?

As alluded to above, the direction ADA is taking is a crucial difference between Cardano and its rivals. Most layer-ones only focus on the technological aspects of blockchain technology, whereas Cardano seems to focus on the more pragmatic use cases, in addition to the technological ones.

For example, IOHK is genuinely looking to bring the benefits of blockchain technology worldwide by entering into various partnerships with developing nations, such as the governments of Ethiopia and Tanzania.

What Cardano aims to achieve with its Africa initiative is to show that blockchain technology can be used for more than just creating apps in developed nations. A clear example of this is their implementation of a privatised version of the Cardano blockchain set up and designed to help the Ethiopian government track students’ academic progress.

In addition to providing the necessary technology to carry out this aim, IOHK also looks to build the infrastructure and education required to make it happen.

Ultimately, this will slowly aid in the transition from unbanked to joining the digital revolution as it unfolds.

Therefore, Cardano is positioning itself as a public smart-contract blockchain and a private cloned version available for nations, banks, and other institutions to use without being publicly viewable.

Further encouraging adoption, as big corporations may not want their finances public, they still may want them processed on an immutable ledger to cut down on corruption internally.

Additionally, governments, in general, could eventually be looking for a private but immutable digital ledger. Perhaps, for example, as a transactional record for house and car sales.

By being immutable once written, it would settle most claims of ownership outright.

Any other benefits over competitors?

If we had to summarise the main selling points of Cardano, we would likely pick faster transactions, cheaper gas fees, a higher degree of decentralisation, eco-friendly, and user-friendly staking mechanics.

Faster transactions

Breaking it down a little further, when we say faster transactions, we are mostly talking compared to Ethereum directly, as quicker blockchains than both technically exist.

Yet, at 250+ transactions per second, compared to Ethereum’s 15, Cardano is still acres ahead of Ethereum in terms of transaction speed.

Cheaper gas fees

Additionally, when we mention gas fees, again, we are talking directly in competition with Ethereum. While ADA’s transaction fees are very modest, technically, there are cheaper networks out there.

However, at 0.1 ADA per transaction, this currently works out to around A$0.20 per transaction, which I think we can all agree when compared to Bitcoin or Ethereum, A$0.20 is a bargain. Currently, A$0.20 would make it around 100x cheaper than Ethereum and around 20x cheaper than Bitcoin.

Higher degree of decentralisation

Furthermore, the network is also seen as one of the more decentralised smart-contract platforms on the market. Likely, this is because any person can become a Cardano node that helps maintain the network for as little as 1 ADA – equating to roughly A$2, ensuring its spread around the globe on as many computers as possible.


On top of this, Cardano is also considered one of the more eco-friendly blockchains available. Thanks to the Ouroborus mechanism, Cardano’s PoS model uses 99% less electricity than either Bitcoin or Ethereum.

User-friendly staking mechanics

Lastly, Cardano makes being rewarded simple. As Cardano runs on Proof of Stake, there is no mining involved. Instead, users stake their ADA and, in exchange for doing this, are rewarded passive income.

Typically, staking your coins comes with the catch that you must “lock up” your tokens for a certain length of time to receive the bonus. On the other hand, Cardano doesn’t require any lock-up period, allowing users to stake and withdraw with no penalty.

With all that said and done, it is worth noting, Cardano isn’t complete yet.

Final Updates

According to Cardano’s Roadmap, two significant developments are still in the works. These are the Basho and Voltaire updates.

Basho Update

In short, the Basho update looks to introduce scalability through the introduction of side-chains. Essentially, side-chains help the network scale by taking data off-chain, processing it separately before reconnecting that processed information back with the main-chain at regular intervals.

Therefore, reducing congestion on the main network and allowing transactions to be confirmed quickly and effectively.

Basho will also see the introduction of parallel accounting, with the result being greater interoperability for Cardano overall and the ability to support new kinds of use cases on the network.

According to IOHK, “the Basho era will see Cardano become one of the most high performance, resilient, and flexible blockchain platforms in the industry. This will provide a network infrastructure with the capability to scale in a sustainable, secure way, as well as the ability to add new functionality without compromising the reliability at the core of the network.”

Providing the Basho update goes off without a hitch, it will likely prove a powerful update for the Cardano network as a whole.

Voltaire Update

Lastly, we have the Voltaire Era. During this phase of development, IOHK will hand over the running of the Cardano to the users.

A DAO, or decentralised autonomous organisation, will be set up where Cardano stakers will get to vote on proposals to the protocol. Their vote share is determined by how much they currently have staked to the network.

Voltaire will also see the addition of a treasury system, whereby a percentage of all transaction fees will be pooled to provide funds for any future development activities undertaken following this voting process.

When both the voting and treasury system are in place, Cardano will become a truly decentralised platform and no longer under IOHK’s management.

From this point, Cardano’s future will be in the hands of the community, who should then have everything they need to grow and evolve Cardano from the foundations established by IOHK.

In Conclusion

To summarise, Cardano is an Ethereum competitor.

ADA’s primary advantages over its rivals come in the forms of peer-reviewed research, a greener consensus mechanism, and targeting developing nations to improve digital infrastructure, transparency, and immutability to regions on Earth that could most benefit from blockchain technology in a practical sense.

It is currently faster, cheaper, and greener than its main competitor. However, the only elephant in the room is Ethereum 2.0, which threatens to do a lot of these things, and more when compared to Cardano or any other alleged “Ethereum killer.”

Regardless of who becomes the overall leader by market cap, we believe the market is big enough to accommodate both blockchains, particularly as they target different audiences and demographics.

Ultimately, Cardano’s growth will be dictated by how diligently this new management system navigates any future obstacles they face after IOHK hands over the keys.

Who will win by market cap, in the long run, remains to be seen. Yet, until then, we can expect to see steady growth throughout the years as this project moves forward.

We hope you have found this article informative, and you are leaving with a better understanding of what Cardano is, how it functions, and its role in the current market.

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Disclaimer: The information on this website is purely for information. Elbaite is not a financial adviser, and nothing stated here is to be taken as financial advice. You should seek independent legal, financial, taxation or other advice relevant to your financial situation before making any investment decisions.

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