Cardano Explained: The Genius Chain Behind ADA

Cardano, also known by the market ticker ADA, is a layer 1 blockchain that is designed to be a sustainable, flexible, and scalable blockchain for developers to launch apps and deploy smart contracts.

If that sounds like another blockchain, such as Ethereum, you’re right.

In fact, Cardano is often compared with Ethereum. Though, for good reason.

This is because, originally Ethereum had 8 co-founders. Of these co-founders, Vitalik Buterin is likely the most famous, given it was his whitepaper that founded the project.

However, if you look among the group you’ll see Charles Hoskinson was also one of those founders, who is now the founder of Cardano.

So while they share similarities, what separates the two is the philosophy which guides their decisions and, as a result, has made them niche into different sectors.

But what exactly is Cardano, how does it work, and what makes it unique?

Today we find out.

Cardano is a blockchain that was created to provide a secure and scalable infrastructure for the development of decentralized applications and smart contracts, similar to Ethereum.

Cardano was founded by Charles Hoskinson and Jeremy Wood back in 2015, a year after Hoskinson had left Ethereum due to creative differences.

Cardano was developed by Input Output Hong Kong, or IOHK, and launched in 2017.

To explain why Cardano and Ethereum are often compared to each other, and on the surface appear similar, you must understand that part of the problem with early Ethereum was there were too many competing visions for what Ethereum should become.

At the time, Ethereum had eight co-founders, all with different visions for the platform’s future, which soon led to disputes and disagreements.

Eventually, Hoskinson left or was asked to leave, depending on who you believe, due to these creative differences.

Many people see Cardano as Hoskinson’s vision for Ethereum built onto its own platform, with the biggest difference being the change in philosophy which drives each company.

Ethereum’s mission is to become the “world computer,” from which the apps people use daily are launched.

Due to the nature of being a pioneer and at the front of the pack, Ethereum has always had to keep innovating quickly to stay on top. That has come at the cost of a few imperfections along the way.

By contrast, ever since Cardano’s launch in 2017, it has been guided by academic research and peer review, which has come at the cost of speed.

Although progress may be slower, the system has not yet been broken.

Cardano hopes by moving slower it can make a more robust system that doesn’t fall apart later, as almost happened to Ethereum in 2016.

Back then, the Ethereum DAO was hacked and the project ultimately forked into two new cryptocurrencies; the Ethereum we know today and Ethereum Classic.

Such an event now could be the event of a project entirely with no fork able to save it, such as is happening with Luna and Luna Classic.

So, by moving slowly and scientifically, Cardano hopes to minimize these risks while also providing the best possible blockchain for developers and users alike.

Cardano runs on a modified version of Proof-of-Stake known as the Ouroboros protocol.

Ouroboros claims to be the first provably secure Proof-of-Stake protocol and the first blockchain protocol based on peer-reviewed research.

The Cardano website even publishes all of its peer-reviewed research, so anyone looking to verify their claims can do so.

Though like Proof-of-Stake blockchains we’ve talked about previously, Cardano’s validators are selected to create new blocks and validate transactions based on the number of ADA they hold and are willing to “stake”, meaning deposit, to the network.

The benefit here is the network doesn’t need to wait for 50% of the network to agree before moving forward, such as occurs with Bitcoin‘s Proof-of-Work consensus mechanism, while still ensuring enough checks and balances are in place that bad actors cannot cheat the system.

Proof-of-Stake is far more energy-efficient and scalable compared to Proof-of-Work blockchains like Bitcoin.

One unique feature is Cardano’s two-layer architecture. This includes a settlement layer, which is used to transfer value, such as through the ADA cryptocurrency, and then a control layer which is responsible for smart contracts and decentralized applications.

This allows Cardano to update one without disrupting the other and overall has led to faster development times for the platform.

But, what really separates Cardano from its competitors is its devotion to scientific philosophy, with lots of academic research and published peer-reviewed content to verify its claims.

This has also translated into their target audiences. Ethereum is generally quite self-contained, whereas Cardano hopes to link off-chain and on-chain through blockchain technology.

Cardano’s applications also aim to solve real-world problems, as well as host the next generation of decentralized applications.

For example, Cardano has previously worked with various organizations in Ethiopia on pilots that could be used to validate the authenticity of diplomas and school records.

In total, there will only ever be 45 billion ADA tokens.

Of this 45 billion total, around 58% was allocated to the Initial Coin Offering sale. About 11% was allocated to the team, and the final 31% was allocated to staking rewards which are released slowly over time.

Considering the size of the Initial Coin Offering available, ADA’s largest wallets are pretty well distributed. Only 3 wallets hold more than 1% of ADA’s total supply, and all 3 wallets together only add up to around 6% of the total ADA supply.

As is usual for Proof-of-Stake cryptocurrencies, ADA can be used for staking, governance, and paying for the completion of smart contracts on its network.

While comparisons with Ethereum might be hard for Cardano to escape, Cardano has found its niche within the crypto landscape and doesn’t rely on simply being an Ethereum competitor, created by a former Ethereum co-founder.

If you like slow and steady progress and lots of peer review, with academic links to the likes of Edinburgh University, then Cardano might interest you.

With a founder who has already co-founded one of the most successful blockchains once, it would be hard to argue they have not got the ability to do it again.

Although, nothing is guaranteed in crypto, of course.