Cardano is a third-generation blockchain and smart contract platform that was created to facilitate peer-to-peer transactions.
The term third-generation blockchain comes from the fact that Bitcoin came first, followed by Ethereum a generation after the original.
Given the fact that Cardano is the first blockchain to be peer-reviewed and academically developed by a group of experts, Cardano (ADA) is considered to be a global blockchain initiative.
An interesting point of difference when it comes to other similar blockchain projects such as Ethereum.
Sitting 5th by market cap on CoinGecko, Cardano is somewhat of a quiet achiever that is now once again starting to make some serious noise in the space.
This Cardano guide is an in-depth look at what the project is and why it’s worth watching.
Cardano is an entirely open-source, decentralised cryptocurrency project.
Its layered architecture technically now gives the blockchain smart contract capabilities to compete with Ethereum.
Something that the Cardano team makes no secret of their desire to do.
With Ethereum co-founder Charles Hoskinson breaking away and launching Cardano in 2015, the comparisons between the 2 will always be made.
The story goes that Hoskinson left Ethereum following an argument surrounding values that turned the relationship sour.
Hoskinson’s vision of keeping a blockchain project not-for-profit essentially birthed the Cardano model that we see today.
The 3 major stakeholders involved in Cardano are:
Now we have a basic understanding of what Cardano is, let’s move deeper into our latest crypto guide.
As we’ve introduced above, Cardano (ADA) is a third-generation, open-source PoS (Proof of Stake) blockchain.
It allows smart contracts and other decentralised protocols to be built and run.
Similar to Polkadot, Cosmos and Polygon (MATIC), Cardano addresses the scalability, interoperability and sustainability issues of Ethereum.
We also spoke about the Cardano project being launched in 2017 by Charles Hoskinson who is also the co-founder of Ethereum.
The Cardano team has followed the strategy of peer-reviewing by industry experts (or academic scholars), at each stage of development.
In this section of our Cardano guide, we will look at the key components of the Cardano Blockchain and discuss how it works.
Let's get started!
The Cardano Blockchain works on a Proof of Stake (POS) consensus protocol called Ouroboros.
Unlike Proof of Work (POW), POS is much more environmentally friendly and is able to provide fast transactions at a relatively small cost.
Ouroboros was custom-made from scratch by Cardano's development team and uses mathematics based on peer-reviewed research to provide a provably secure protocol that is permissionless.
This aids the distribution process on a global level.
The goal of every blockchain is to create blocks that contain verified transactions.
Well, the Cardano blockchain currently uses the Ouroboros Praos protocol which has been developed over time since the project's inception.
Ouroboros divides time into Epochs.
Each epoch lasts 5 days and consists of a number of slots with each slot lasting for one second.
Hence there are 432,000 (5d x 24h x 60m x 60s) slots per epoch.
On average, one Cardano node (block producer) is expected to be nominated every 20 seconds which gives a total of 21,600 nominations per epoch.
Out of these nominations, a slot leader will be selected randomly and their blocks will be added to the chain.
The rest of the block producers will be rejected.
The Cardano network has a number of stake pools that control ADA owned and staked by various different stakeholders.
Any ADA stakeholder can also delegate their staked ADA to another stakeholder since you cannot expect everyone to be online all the time to produce blocks continuously.
Please note that you can remove the delegation anytime since you still hold the rights to your stake.
Delegating it to other stake pools will only let them use it on your behalf.
Stake pools ensure the availability of the network round the clock since they commit to producing blocks and are available online most of the time.
As we know that Ouroboros is a proof of stake protocol, the probability of getting selected as the slot leader is proportional to the ADA stake owned by a particular node in their stake pool.
The slot leader's job is to check the validity of each transaction based on the data provided by the sender.
Each transaction costs a minimal fee and if the sender has sent enough funds to cover it, the transaction will get included by the slot leader in their next block once all parameters are met.
Unlike PoW which uses hashing power, Ouroboros uses the power of stake that promotes decentralization in a better manner and also provides mathematical security in choosing block producers.
When compared to Bitcoin and Ethereum, it's efficient, scalable, sustainable, and environmentally friendly.
Cardano’s blockchain architecture has two main components in the form of layers. Both of these have different purposes:
These layers are kept separated from each other to account for more flexibility in case there is a need for development in the future.
Cardano staking comes with an amazing feature where you can delegate your ADA stake to "Stake Pools" and earn a passive income in the form of ADA coins.
As explained in the above section, StakePools are reliable nodes that participate in block production and helps stabilize the network.
The best part about delegating your stake is that you still have full ownership of your funds and delegation can be removed from stake pools anytime.
The staking feature on Cardano was launched in July 2020, there were ~13.8 billion ADA reserved as stake incentives.
Each epoch (5 days) the protocol distributes 0.3% of this total reserve pool between all active Cardano Stakeholders.
These rewards also auto compound and grow the stake exponentially over time.
You can also stake Cardano on exchanges and other DeFi platforms.
In this next section of our Cardano guide, we will discuss how to Stake Cardano.
Yoroi Wallet is an open-source software wallet for Cardano.
It is available only as a PC (Microsoft Windows/Linux) and Apple Mac application.
That means there is currently no mobile application available.
There is another wallet called Daedalus which is a full node wallet.
It downloads the full copy of the blockchain in your system and can be used to create Stake Pools.
Yoroi is a lighter version of Daedalus and hence we are going to explore how we can easily delegate ADA to Stake Pools using Yoroi wallet:
Step 1:
Download Yoroi's browser extension from the Chrome Web Store, install and open.
Once you are done with the initial setup, you will see the below screen:
Step 2:
Click on "Create Wallet" and set up your spending password.
In the next screen you will see your seed phrase.
This will be used to recover your wallet account.
Don't lose it ever!
Once you are done, the first screen you are going to see is your Dashboard which gives you the information about the Total ADA you hold in your wallet or delegated to StakePools.
It also shows your total rewards.
Step 3:
Go to the "Recieve" tab to access your wallet address where you can send your ADA from exchanges like Binance and Coinbase.
Or even have someone send you ADA.
Step 4:
Once you have ADA in your wallet, go to the “Delegation List” tab to see the available stake pools where you can delegate to earn rewards.
Please note that some stake pools charge fees to receive delegations.
These fees vary from pool to pool.
Private keys associated with users wallets are stored only on a users computer and are encrypted with the wallet password.
They are not stored on centrally hosted servers.
ADA staking is pretty simple and straightforward.
The only risk is that you might lose your keys but that is the case with all cryptocurrencies.
Remember, not your keys, not your crypto!
I hope this section of our guide to Cardano has helped you understand how the Cardano Blockchain works and how to stake Cardano.
Although Cardano has been around for years, it appears that this coin is poised to emerge from its developmental slumber.
In this section of our Cardano guide, we take a look at what use-cases presently exist, as well as what uses can reasonably be expected to be available in the near future.
Pursuant to the Cardano Official Website, this coin has quite lofty goals and aspirations.
It states:
"Cardano is a blockchain platform for changemakers, innovators, and visionaries, with the tools and technologies required to create the possibility for the many, as well as the few, and bring about positive global change".
With these aspirations in mind, let's turn back to reality and find out what Cardano can be used for today:
For a project that has been in existence since 2015 (launching in 2017) there is a dearth of real use cases for the Cardano protocol.
However, this in actuality can be put down to the slow and deliberate peer-reviewed development style of the Cardano ecosystem.
The Goguen Era for Cardano has arrived (Goguen is the third development stage for Cardano, named after James Goguen, a noted American Computer Scientist).
On August 9, 2021, Cardano’s Alonzo Purple testnet began onboarding users to its system.
Alonzo Purple is the third and final upgrade to the Cardano system for the Alonozo Project (Alonzo Purple follows prior implementation of Alonzo Blue and White which permitted 500 testnet users free minting of NFT's for a limited time).
Once the Alonzo upgrade has been fully implemented, it will be the first offering by Cardano of a testnet capable of supporting smart contracts.
Full network support for smart contracts is expected by late August or early September of 2021 (if all goes well).
Once Alonzo is complete and operational, it is expected that the network will support an ERC-20 conversion tool allowing for compatibility of ERC-20 tokens to be used in Cardano smart contracts.
These developments open Cardano to the potential of infinite use cases (DeFi, decentralised banking services, NFT's, etc) limited only by human ingenuity in the same fashion as Ethereum.
The future of Cardano is being forged now, and it is close.
Very close.
The question as to whether Cardano's slow and deliberate peer-reviewed development is a smart move, is about to be answered.
With the implementation of the most recent upgrades to the Cardano platform, Cardano finally leaps forward and allows for the use of smart contracts system wide.
This actually permits an infinite use potential for the system.
Add the inclusion of ERC-20 token usage on the platform and you have an extra benefit for the Cardano ecosystem.
If all Hoskinson’s lofty goals are met by virtue of these immediate system upgrades, Cardano will be a force to be reckoned with in the future.
It is a very distinct possibility that Cardano will cement itself as the number three cryptocurrency spot once these upgrades are fully integrated into the Cardano ecosystem.
Will Hoskinson’s goals become reality?
It’s certainly a possibility.
As we’ve already discovered, Cardano (ADA) is an open-source, proof of stake blockchain.
It has been designed to run smart contracts and other decentralised protocols.
The platform started developing as a third-generation blockchain in 2015 and was launched in 2017 by Charles Hoskinson, who is also the co-founder of Ethereum.
As a result, Cardano will always be compared to Ethereum.
It was also the first blockchain to be thoroughly peer-reviewed by academic experts from the field.
In contrast to Ethereum, Cardano addresses the issue of scalability, interoperability, and sustainability just like Polkadot, Cosmos and Polygon.
In this section of our Cardano guide, we are going to look at some of the key differences between Cardano and Ethereum to ultimately try and judge which one is better.
Let's get started!
1. Technology: Ethereum was the first blockchain platform to introduce & process smart contracts, while Cardano can do that with governance and compliance. Cardano could operate with metadata and also with automated regulation. On top of this, it can bring identity to the blockchain system. Ethereum is currently winning the smart contract race since there are thousands of DApps running successfully on the network. Cardano's smart contracts will get released during the end of August 2021 or early September.
2. Consensus: Ethereum is currently going through multiple year-long upgrade called Ethereum 2.0 which will transition the consensus algorithm from Proof of Work (POW) to Proof of Stake (POS). Cardano already uses Proof of Stake (POS) algorithm called Ouroboros.
3. Speed: Cardano claims to process about 1 million transactions per second. Ethereum 2.0 is estimated to process about 100k transactions per second.
4. Supply: Cardano (ADA) has a fixed supply of 45 billion coins, with 32.9 billion already in circulation. Ethereum has an unlimited supply but an annual maximum supply of 18 million ETH.
5. Foundational Support: Ethereum is backed by Ethereum Foundation which is a non-profit organization dedicated to supporting Ethereum and related technologies. It is led by Vitalik Buterin and his team and it's based in Switzerland. It also accepts contributions from other community developers which are building on Ethereum. Cardano Foundation is also a Swiss-based non-profit organization that legally owns the Cardano brand and supervises its progress. It works with IOHK and EMURGO to ensure that Cardano is being developed and promoted as an efficient blockchain platform for anyone to use. Cardano technology is battle-tested by academic research and development. It follows a peer-review process at every stage done by industry experts.
6. Community & Adoption: Ethereum's community is huge since there are so many people involved in its ecosystem all over the world building DApps and Technologies to expand its ecosystem. Cardano's community is yet to be established but it's growing as we nearing the launch of smart contracts functionality on their mainnet. Once it's fully functional, we might see a shift of market sentiment towards Cardano.
7. Social Impact: Cardano Network has collaborated with the governments of Ethiopia, Tanzania, and Georgia to benefit their citizens and give them access to blockchain-based services. For example, Ethiopian schools will use Cardano to track student performance while the Ministry of Education will run a Cardano Full Node. Apart from developing a strong ecosystem, Ethereum has built a close-knit community of developers and innovators who are benefiting from the current crypto boom directly or indirectly. For example, Vitalik recently donated $1 billion in crypto to India Covid Relief Fund and various other charities.
The table below shows you the main comparison points between Cardano and Ethereum.
| Cardano (ADA) | Ethereum (ETH) | |
|---|---|---|
| Cardano was launched on September 27th, 2017. | Ethereum was launched on 30th July 2015. ETH whitepaper was published in late 2013. | |
| Cardano has max supply of 45 billion ADA, while 32 billion already in circulation while rest being minted in the process. | Ethereum currently has $365,186,415,050 of market cap. There are around 117,046,619 coins in circulation. | |
| Ouroboros is the consensus mechanism, similar to proof of stake is being used by the Cardano. | Ethereum started with the Proof of Work (mining consensus), however ETH 2.0 follows the Proof of Stake consensus behind it's new network upgrade. | |
| Cardano launched it's smart contract on testnet in May 2021. | Ethereum has smart contracts since it's inception and since then it has evolved to thousands of tokens, dApps, NFTs existing on it's ecosystem. Around 80% of the worlds dApps run on ETH ecosystem. | |
| Cardano makes use of the Plutus as it's primary language for smart contract. This language is based on Haskell. | Ethereum makes use of Solidity as it's primary language for making smart contracts. The language is influenced by Javascript, Python and even C++. | |
| Typical transaction fees for Cardano are around 0.16-0.20 ADA. Staking reward transaction fees are varied based on market. | Ethereum is the most expensive blockchain as far as the transaction fees are concerned. Depending on the network load, it ranges from few cents to dollars that can consume entire transaction. | |
| Cardano has been staked 73% in the staking pools with the staking rewards at the percent of 4.5% per year. | Ethereum staking earns 5% per year with around 5.46% being staked of total ETH supply. | |
| Cardano Layer 2 hydra paper estimates it to support upto 1 million transaction per second. For layer 1, Cardano has around 40 transactions per second which slightly more than ETH. | Ethereum as of it's current state handles 30 transactions per second. It's layer 2 implementations through projects like Polygon MATIC are expected to increase the transactions and also do it at cheaper transaction fees. | |
| Cardano use cases involves the aim to solve financial scaling and stability specific issues. It also aims to get into the digital signature and smart contract spaces after it's launch of smart contract and dApps features. | Ethereum has already been used in variety of sectors including finance and banking, scientific data, analytics, smart contracts, dApps and NFTs. | |
| Cardano has yet to reveal it's smart contract token standards. | Ethereum currently has ERC-20, ERC-721 and ERC-1155 standards. In near future ETH 2.0 may add additional token standards. |
From day 1, Cardano was all about scalability, interoperability, and sustainability which Ethereum is trying to accomplish with Eth 2.0. The on-chain governance system on Ethereum is missing which Cardano already has. Developers propose changes through code updates and each node votes on whether to accept or reject the proposed change. This is important for the security of the network and solves the centralization problem to a great extent over time. As per data from Staking Rewards, $40 billion worth of ADA coins (70.31%) are currently staked, making it one of the most decentralized blockchains in the world.
Both Cardano and Ethereum have seen a series of upgrades and several adoption events worldwide. This year is important for both ecosystems to move ahead in the smart contracts race. Even though Ethereum has a first-mover advantage and it will most likely become the gateway to web 3.0 we cannot ignore Cardano's scientific and structured approach. Both blockchain platforms can co-exist and change the financial industry in the next few years.
But contrary to the market assumption, Cardano is not actually designed to kill Ethereum but is expected to address variety of different use cases which requires scientific and peer reviewed approach in it's execution.
Whether Cardano can actually win the smart contract race and become bigger than Ethereum is yet to be seen.
Smart contract integration is now functional on Cardano which yes, technology makes it a DeFi coin.
The Alonzo white hard fork was a huge leap forward for the Cardano (ADA) network, bringing it in line with the functionality of Ethereum.
To compete with its big brother Ethereum in today’s market, Cardano was always going to need the ability to host defi platforms.
This section of our Cardano guide takes a look at the Alonzo white hard fork and what this means for the future of DeFi on Cardano.
The Cardano development team at Input Output HK announced that they had successfully forked Cardano on Twitter:
https://twitter.com/InputOutputHK/status/1415399456841863177?s=20
- InputOutputHK
So that’s 6 years after the project’s inception, Alonzo finally brings the network in line with Ethereum’s smart contract capabilities.
As mentioned above, the upgrade has technically allowed Cardano to support smart contracts and therefore to be a DeFi coin.
With Cardano now able to automatically execute contracts based on a series of set conditions, DeFi applications moving to the platform surely won’t be far away.
As a high speed, low fee alternative to Ethereum, Cardano is poised to steal projects who are are craving the right decentralised alternative.
Input Output HK have since also announced that the next Alonzo phase has been now been launched:
https://twitter.com/InputOutputHK/status/1423704792724037634
- InputOutputHK
This means Cardano will now feature full smart contract compatibility.
following the initial onboarding phase, IOHK will hard fork the network and open the Alonzo Purple testnet to any developer who wishes to join.
Even though Cardano’s newfound smart contract capabilities mean that technically it’s able to host DeFi platforms, whether anyone will actually build on Cardano is another story.
We certainly haven’t seen a DeFi rush from Ethereum toward Cardano at this time.
Yes, Ethereum sucks…
It’s slow, expensive and a rich man’s playground.
However, when it comes to Ethereum’s DeFi adoption, the numbers simply don’t lie.
It’s the biggest and still the best decentralised network to build dApps on.
The keyword here being decentralised.
Those of us here on LeoFinance have an affinity for Binance Smart Chain because of Cub, but there’s no denying the fact that BSC is extremely centralised.
When it comes to decentralisation, Ethereum wins hands down, shown by Uniswap removing tokens from their main front-end.
When it comes to being a DeFi coin, Cardano may be in the game.
But they’re still miles behind the competition.
In this subsection of the Cardano Coin Guide we will look at the pros and cons surrounding the Cardano cryptocurrency project. This information is intended for you to use in guiding your ultimate decision concerning any action you might consider with respect to Cardano.
A quick review of the above shows that with respect to Cardano, the 'pros' appear to outweigh the 'cons'. Just because the sheer number of 'pros' outweigh the number of 'cons' in no way implies the 'cons' should be ignored.
As with any investment decision, you must first assess your present financial condition, your overall investment strategy, as well as your tolerance for risk. Armed with this information you should then follow a path of doing your own diligent research into the asset being considered. With all of this information assembled you are finally ready to make your ultimate investment decision.
And finally, please remember, never invest more than you can afford to lose.
This subsection of the Cardano Coin Guide should be considered one of many you read on your way to deciding whether or not to invest in Cardano. But your research should not stop here. Any investment decision requires diligent research to give each potential investor sufficient information to make an informed decision. Let's now get you on your way to making an investment decision with respect to Cardano (ADA).
This conversation would not be complete for a prospective investor without an investigation of Cardano's past price/return history from it's inception.
As of the time of writing this article (August 6, 2021 @ 16:29 EDT) on CoinMarketCap, Cardano (ADA) is priced at $1.41 per token. It has a circulating supply of 32.100,000,000 ADA which translates into a market capitalization of $45,150,224,822. Cardano has a relatively low total supply of 45,000,000,000 tokens giving it a fully diluted market capitalization of $63,323,441,393.
In conclusion, this subsection has provided you as a potential investor in Cardano (ADA) with the key elements to consider in reaching a final decision on this token. It is a given that every individual investor possesses a different present financial circumstance, tolerance for risk, and investment strategy. These must be weighed in light of the factors and information above provided in finalizing any investment decision.
LeoFinance Crypto Guides.
Why not leave a comment below and share your thoughts on our guide to Cardano coin (ADA)? All comments that add something to the discussion will be upvoted.
This Cardano coin guide is exclusive to leofinance.io.
