Cardano is one of the most valuable cryptocurrencies in terms of market capitalization. It’s intended to be a versatile, long-lasting, and scalable blockchain platform for smart contracts, allowing for the creation of a variety of decentralized finance apps, new cryptocurrencies, games, and more.
So, What Is Cardano
The brief history
Cardano, founded by Ethereum co-founder Charles Hoskinson in September 2017, intends to be a third-generation blockchain (or blockchain 3.0) project that builds on the technology pioneered by Bitcoin (first-gen) and Ethereum (second-gen). Cardano wants to create a smart contract platform that is both scalable and energy-efficient.
Why is Cardano Different
The Bitcoin and Ethereum networks use the Proof of Work protocol, which requires huge amounts of electricity to verify transactions. In contrast, Cardano relies on Proof of Stake (PoS), which is much more energy-efficient and contributes to lower transaction fees. Under this system, blocks are generated and transactions verified by slot leaders, or validators. Anyone who holds ADA tokens can become a slot leader, with slot leaders randomly chosen using a coin-flipping protocol.
How Does Cardano work
The Cardano blockchain is divided into two separate layers: the Cardano Settlement Layer (CSL) and the Cardano Computing Layer (CCL). The CSL contains the ledger of accounts and balances and is where the transactions are validated using the Ouroboros consensus mechanism. Apps that run on the blockchain execute their computational tasks through the CCL layer – through smart contracts.
The idea of splitting the blockchain into two layers is to help the Cardano network to process as much more transactions, as possible in a second.
What is ADA?
The Cardano blockchain’s native coin is ADA. The coin’s major application is in the network’s proof-of-stake process. Token holders must store (stake) ADA coins in order to validate transactions and secure the network.
ADA tokens fuel the Cardano platform much like ETH tokens fuel the Ethereum platform. They’re used to pay transaction fees and are staked by validators (and delegators) who want to help maintain the security and stability of the network in exchange for earning rewards.
The supply of tokens is capped at a maximum of 45 billion ADA, and as of January 2022, there were about 33.5 billion ADA in circulation, according to CoinMarketCap.
Pros and cons
As we mentioned before, Cardano founder Charles Hoskinson was also a co-founder of Ethereum. The blockchain space has been simmering with ideas for a long time, and his latest venture is just a logical continuation of those ideas.
Cardano has a reputation as an academic product of the highest quality. The platform’s developers say it is the first of its kind “to be founded on peer-reviewed research and developed through evidence-based methods.”
Still in development
The Cardano team is taking a deliberate approach to launching features on the network, and some of the key elements that will define its potential are just beginning.
Though Hoskinson believes Cardano is the best way to realize the vision that began with Ethereum, the older protocol is still favored by many. The space is also being targeted by other well-known developers.
Is Cardano a good investment?
The price of each digital asset depends on many factors. To answer the question of whether it is worth holding an ADA, it is best to know the factors that determine its value.
As the total supply of ADA coins is limited, the coin is resistant to inflation and demand continues to grow. The decentralized nature of the Cardano blockchain makes it secure, and the layered architecture provides scalability. Taken together, these technical characteristics make Cardano a unique coin with good potential.
One of the most significant market capitalization ratios and a huge daily trading volume prove that Cardano is very popular among crypto fans. Its history shows a steady rise in the value of the coin, despite periodic price declines.
Cardano has huge potential but, like other popular cryptocurrency projects, it still has a long way to go before the potential is realized. There are several other smart contract platforms at various stages of development, but Ethereum remains the biggest and most popular of them all. We will have to wait and see whether Cardano can deliver on its promises.
But, I must admit – we have to respect and admire the science-based approach, the remarkable development team, and the architecture that underpins the system. Many believe Cardano has a bright future if it can properly find a balance between the interests of users and regulators.
When you trade Cardano or other cryptocurrencies, you must expect volatility. If you buy an asset that’s not backed by anything, you could potentially lose your entire investment. So don’t put in any money that you can’t afford to lose.