What is Cardano? The Cardano(ADA) guide for dummies

In simple words, Cardano is a blockchain platform. It aims to build an ecosystem for the development of decentralized apps(dApps) using self-executed smart contracts.

With the tagline “Making the World Work Better for All”, it posits itself as a platform for changemakers and innovators.

Cardano is the first such platform to be founded on peer-reviewed research. It takes a deliberate and methodical approach to function and keeps evidence-based development at the forefront.

This decentralized community of scientists, engineers, and thought leaders strives to bring positive global change and redistribute power from the center to the margins.

History of Cardano

History of Cardano

Cardano was developed by Ethereum’s co-founder Charles Hoskinson and his colleague Jeremy Wood. They started developing plans for the platform in 2015 after Hoskinson left Ethereum in 2014 after a dispute with Vitalik Buterin. Hoskinson had wanted to accept venture capital and turn Ethereum into a for-profit entity while Buterin insisted on preserving it as a non-profit organization.

After the two parted ways, Hoskinson co-founded a blockchain-engineering company called IOHK. Developing Cardano is the primary business of IOHK which was officially launched in 2017.

Cardano is posited as a third-generation blockchain platform that addresses and improves the limitations of Ethereum. It is popularly known as an “Ethereum killer”- a term for blockchain platforms that are supposed to be better versions of Ethereum. Cardano and Solana are some major Ethereum killer platforms.

It has a native cryptocurrency called ADA named after Ada Lovelace, an English mathematician who is often regarded as the first computer programmer.

Cardano was funded through an Initial Coin Offering(ICO) and 25.9 billion ADA tokens were issued following a public sale. ADA’s price hovered at $0.02 after it became publicly tradeable. It hit an all-time high of $3.10 in September 2021. 2022 was a rough year for Cardano and it was trading at $0.26 in December 2022.

How Does Cardano Work?

How Does Cardano Work?

In simple terms, Cardano is similar in its working to Ethereum i.e. it is a blockchain platform with smart contract functionality. This enables it to host decentralized applications(dApps) that run autonomously without the support of a third party.

Cardano is billed as a “green” alternative to energy-intensive platforms like Ethereum and Bitcoin. It does so by adopting a proof-of-stake(PoS) consensus mechanism instead of the conventional proof-of-work(PoW).

Proof of Stake

On a blockchain platform, users called nodes have to validate transactions to add a new block to the existing chain. In PoW, nodes compete to solve complex mathematical puzzles to get a chance to mine cryptocurrency. The downside of PoW is that it consumes humongous amounts of energy.

PoS is supposed to be a greener alternative to PoW. Here, nodes stake their crypto to be able to validate transactions. The algorithm chooses validators based on their stake. After the transactions are verified, the validators are rewarded for their efforts. 

This does away with the competitive mining system of PoW thus, reducing energy demand. Cardano’s PoS mechanism has been given the name Ouroboros.

With Ouroboros, Cardano can easily scale up without compromising security.

Fun Fact: Ouroboros refers to the ancient Egyptian and Greek depiction of a snake swallowing its tail. It symbolizes infinity or an eternal cycle of destruction and re-creation.

The Two Layers

Cardano blockchain has two separate layers for its accounting and computational functions. This helps it to perform different tasks and improve efficiency simultaneously. These are:

1. Cardano Settlement Layer(CSL)- This is the accounting layer. CSL facilitates transactions using the native ADA token with a minimum transfer fee. 

2. Cardano Computational Layer(CCL)- CCL contains the Ouroboros consensus protocol. Thus, this layer is used to execute smart contracts and other advanced functions.

The Five Stages

Cardano has divided the development of its blockchain platform into five stages or eras; each centered on a different functionality.

1. Byron: This “foundational” phase enabled users to buy and sell its native ADA cryptocurrency using the Ouroboros consensus protocol. It also introduced an official wallet for ADA called Daedalus and a lighter wallet Yoroi.

2. Shelley: Shelley is the “decentralization” phase of Cardano. It initiated a delegation and incentives scheme to encourage distributed stake pool operators and community adoption.

3. Goguen: This stage introduced Cardano smart contracts which facilitated the building of decentralized apps(dApps) on the platform. Goguen is also known for introducing custom fungible and non-fungible tokens.

4. Basho: The “scaling” era of Cardano is focused on scalability and interoperability. Its main feature is the introduction of sidechains and parallel accounting styles. 

The main blockchain will continue using the Extended Unspent Transaction Output(eUTXO) model while account-based models will be added using sidechains.

5. Voltaire: The final phase of the Cardano roadmap, the “governance” era will see the establishment of a voting and treasury system. Thenceforth, it will be a truly decentralized community-driven project no longer under IOHK’s management.

Programming Languages

Although it primarily uses Haskell, Cardano has another programming language called Plutus for smart contracts. Marlowe is an additional programming language for modeling smart contracts. It is meant to be used by non-developers to create smart contracts without getting into the nitty-gritty of coding languages.

Management of Cardano/ Cardano Team

Cardano is managed by three separate entities as it moves forward as per its roadmap to become a fully decentralized network. These three organizations are-

1. Input Output Global(IOG): Founded by Charles Hoskinson and Jeremy Wood and formerly known as IOHK, it is responsible for the technological development of Cardano. 

2. Cardano Foundation: It is a non-profit organization that oversees marketing and partnerships and is responsible for growing the global presence of the Cardano community.

3. EMURGO: It financially assists developers and funds projects for integrating new businesses into the Cardano ecosystem. EMURGO is, in essence, the for-profit branch of Cardano.

Why is Cardano Unique?

Why is Cardano Unique?

Unlike many of its peers, Cardano did not release a whitepaper. However, what makes Cardano unique is not just the absence of a white paper. It is an extensively peer-reviewed platform and posits itself as relying exclusively on evidence-based development methods. Therefore, Cardano regularly publishes research papers on its website.

While most blockchain and cryptocurrency platforms move fast to launch new projects, Cardano takes a slower approach. Its technology is subjected to strict academic rigor to identify potential threats before the technology goes live. This makes Cardano a relatively stable platform compared to its contemporaries.

The downside of this approach is that Cardano is often behind its contemporaries in introducing new projects and innovations. For example, it was only in 2021 that Cardano was able to launch smart contracts despite the platform itself being established in 2017. In contrast, Solana, established in 2020, could implement smart contracts earlier than Cardano.

Cardano was also one of the earliest adopters of the proof-of-stake(PoS) consensus mechanism. This helped it differentiate itself from other blockchains like Bitcoin and Ethereum(which shifted to PoS in 2022) that used proof-of-work(PoW) protocol. Cardano was thus, one of the “greener” blockchain platforms when it was launched.

What is Cardano used For?

What is Cardano used For?

Like Ethereum, Cardano is a platform with smart contract functionality. Though it has its cryptocurrency ADA, Cardano has multifaceted use cases in various domains and not just the financial sector.

1. Unit of Exchange

ADA is a cryptocurrency or digital currency similar to Bitcoin or Ether. This means it can be used to buy goods and services from businesses and organizations that accept payment in cryptocurrencies.

2. Investment and Trading

Trading in cryptocurrencies has emerged as a lucrative opportunity for many people due to the possibility of windfall profits. Interested investors can invest in ADA if they believe in the third-generation blockchain that is committed to extensive academic rigor.

3. Non-Fungible Tokens(NFTs)

In its Goguen era, Cardano finally introduced NFT minting. This has applications in various domains including digital art and online gaming.

4. Inventory Tracking

Blockchain-as-a-service(BaaS) has been emerging as a lucrative field. Corporates and governments can leverage blockchain technology for identity verification, inventory tracking, and management, simplifying legal procedures, and ensuring greater transparency and accountability.

5. Decentralized Finance(DeFi)

DeFi refers to financial services offered on a blockchain platform that is well, decentralized in nature. In contrast to the opacity of the traditional financial system, DeFi is open, secure, transparent, and equitable.

Cardano has plans to build a Cardano Decentralized Exchange(DEX) plus Cardano-based Initial DEX Offerings(IDOs). 

6. Decentralized Apps(dApps)

dApps are developed using smart contracts to enable them to function in an autonomous manner. In other words, these are applications that are free from third-party interference. Although Ethereum is the most popular platform for dApps, Cardano is quickly catching up.

7. Voting

This is something that is probably unique to Cardano. In order to become truly decentralized, Cardano in its Voltaire era will empower ADA holders to use their stake to vote on proposals for the development of Cardano. 

Buying Cardano(ADA)

Buying Cardano(ADA)

As Cardano’s ADA coin is one of the most well-known cryptocurrencies, it can be easily bought on any cryptocurrency exchange. Most leading exchanges like Coinbase, Gemini, Binance, and Kraken offer ADA to their customers. The step-by-step off buying ADA is as follows:

1. Setting up an Account

First of all, you need to set up your account with a cryptocurrency exchange. You can do so either by going to the exchange’s website and signing up there or by downloading their app. You can choose between centralized and decentralized exchanges by evaluating your experience with crypto trading, transaction fee, and security features of the exchange.

Centralized Exchanges(CEX)

Centralized Exchanges function in a similar manner as conventional stock exchanges. They act as an intermediary between cryptocurrency buyers and sellers and charge a transaction fee for the same.

CEXs are more suitable for crypto novices due to their resemblance to traditional exchanges and the better investment security offered by them due to being KYC compliant.

Decentralized Exchanges(DEX)

Decentralized Exchanges adhere to the basic cryptocurrency principles of decentralization and privacy. Here, crypto buyers and sellers directly interact with each other and conduct transactions. There are no middlemen. Smart contracts are used for carrying out transactions.

Though DEXs offer more privacy and anonymity, they can often be hard to navigate for newbies.

2. Transferring Funds to Your Account

The next step is to fund your account so you can buy ADA. You can deposit funds in your account by linking your bank account and transferring the required amount. You can also use your debit or credit card to deposit money in your account. However, do remember that certain payments involve a higher transaction fee than others. Make your choice accordingly.

3. Buying ADA

Now you are all ready to buy your ADA tokens. All you have to do is enter the amount of ADA you want, then make the payment and confirm the transaction.

4. Storing ADA

Just like you need a wallet to store your cash, you need a wallet to store your ADA. Crypto wallets are generally of two types- hot and cold. Hot wallets are online wallets. They are connected to the cryptocurrency network 24/7 via the internet. 

Cold wallets are offline wallets. Cryptocurrency is more securely stored here since they are not connected to the internet. However, they can be inconvenient for making regular transactions because cold wallets have to be connected to the internet every time to make a transaction.

Daedalus Wallet

Cardano also has its own wallet for storing ADA known as the Daedalus wallet. It is a desktop wallet that comes with a blockchain node. It is a full-node wallet that stores the entire Cardano blockchain history and independently verifies every transaction in the history. 

Additionally, users need to have a Daedalus wallet if they want to participate in the Cardano staking process.

Yoroi Wallet

Yoroi is a light Cardano wallet for ADA cryptocurrency. An Emurgo product engineered by IOHK, it is a hierarchical deterministic(HD) wallet that runs as a Chrome or Firefox extension. Unlike Daedalus which stores the entire Cardano history, Yoroi’s Cardano node is hosted by Emurgo.

While Daedalus only has a desktop version, Yoroi can also be used on a mobile. It is simple and easy to set up and consumes minimal bandwidth and storage space.

Cardano vs Bitcoin

Cardano vs Bitcoin

If you are looking to invest in cryptocurrency, it is important for you to know the difference between Bitcoin and Cardano. While you may be aware of both of them, the finer differences often elude most people. But it is crucial to know these details to be able to make an informed decision.

Firstly, you should know that Bitcoin is a digital currency meant to be primarily used for monetary purposes. Its functions are similar to cash except that there is no government or central bank guaranteeing its value.

Cardano, on the other hand, is a smart contract platform meant for developing dApps. In other words, Cardano is programmable while Bitcoin is not. It means other applications can be built on Cardano which is not the case with Bitcoin. It has its cryptocurrency called ADA but the Cardano network’s functions are not limited to serving as a unit of exchange.

Also, Bitcoin uses the Proof-of-Work(PoW) consensus mechanism for validating transactions on its blockchain network. The mining process involved in PoW consumes large amounts of electricity and is thus considered unsustainable in the long run. 

The third-generation Cardano platform uses the more environment-friendly Proof-of-Stake(PoS) consensus protocol. Due to this, it can process up to 250 transactions per second as compared to Bitcoin’s processing speed of 7 transactions per second.

Cardano has its native wallet called Daedalus which can be used to store ADA. It is a full-node hierarchical deterministic(HD) wallet. But Bitcoin, on the other hand, has no native wallet but there are a number of third-party wallets available to store it.

Cardano vs. Ethereum

Both Cardano and Ethereum are blockchain platforms with smart contract functionalities. In fact, Cardano founder Charles Hoskinson is also a co-founder of Ethereum. 

As such, Cardano and Ethereum share a lot of similarities. They are both layer-1 blockchain networks and use proof-of-stake consensus protocol(though Ethereum shifted only in 2022).

They also have their native tokens- ADA for Cardano and Ether(ETH) for Ethereum.

Since Cardano was developed with a vision of being a better version of Ethereum, it focuses on improving on areas that Ethereum struggles with.

Cardano, for example, has much more scalability than Ethereum. Ethereum struggles to keep up when network traffic increases though this is expected to change with its newly-implemented Merge upgrade.

Easier scalability allows Cardano to keep its transaction fee low, unlike Ethereum where the gas fee can sometimes even exceed $20.

Cardano can easily process up to 250 transactions per second. Compared to this, Ethereum 1.0 could process only about 30 transactions per second.

Ethereum, however, makes up for it in its overall transaction volume. Being a pioneer of smart contract technology and having a first-mover advantage, Ethereum handles approximately 1 million transactions every day as compared to Cardano’s measly 100,000 daily transactions.

Even more, Cardano is far behind Ethereum in terms of market share and market cap. While ADA has seen its prices rise since its launch, it is no match for ETH which is the second-largest cryptocurrency after Bitcoin.

Also, the supply of ADA is fixed at 45 billion tokens but ETH has no such strict supply cap.

Cardano Vasil Hard Fork Explained

Cardano Vasil Hard Fork Explained

Before talking about Vasil specifically, let us understand the meaning of a hard fork first.

A hard fork is basically an upgrade with new features where the network essentially splits in two. These two versions run simultaneously, with one being the upgraded version of the network and the other version continuing with the existing features and rules.

Cardano’s Vasil upgrade went live on 22 September 2022. It promises new opportunities for consumers and developers by improving the network’s scalability and transaction throughput capacity.

Not just that, Vasil hard fork has also introduced a new concept called Diffusion Pipelining. It provides better and faster data processing by lowering the block time or the time needed to propagate the blocks. 

Along with this, three important Cardano Improvement Proposals(CIPs) were also initiated. CIP-31 introduces a new reference input mechanism that will streamline the DApps development process. CIP-32 with its on-chain storage feature will enhance Cardano’s native decentralization.

Lastly, CIP-33 makes some changes to the network’s programming script to make transactions lighter. In addition, the smart contract programming language Plutus has also been updated to make it more powerful and secure.

With Vasil, Cardano seems ready for some big things in the DApps and decentralized finance space.

Cardano Supply and Price

Cardano price

Cardano(ADA)’s maximum supply is fixed at 45 billion ADA. This means that there will only ever be 45 billion ADA coins. The circulating supply, as of late December 2022, is 33.85 ADA coins. 

Between 2015 and 2017 when Cardano was launched, 25.9 billion ADA tokens were publicly sold. Apart from that, IOHK was issued approximately 2.5 billion tokens, Emurgo 2.06 billion, and Cardano Foundation 648 million. An estimated 16% of ADA’s supply was thus, in the hands of the project’s founders.

Cardano token’s pre-launch sale price was $0.0024 which rose to $0.02 when it became publicly tradeable. Its value rose to $1.31 in 2017 before falling sharply in 2018. In 2021, it achieved an all-time high of $3.10 before facing some tough times during a prolonged crypto winter in 2022. As of December 2022, Cardano(ADA) was trading at an average price of $0.3.


Cardano is a third-generation blockchain platform seeking to develop a truly decentralized community-run network. It has differentiated itself from its contemporaries by adopting a vibrant peer-review system and extensive academic rigor.

This has enabled it to identify potential threats before they become actual problems.

The downside to this approach has been that Cardano is lagging behind its competitors in introducing new projects.

Cardano faces tough competition as it has to compete not just with behemoths like Ethereum but also with newer platforms like Solana(SOL), Polkadot(DOT), and Avalanche(AVAX). However, it still has the potential to be something big that changes the crypto world for the better.

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