What is Cardano (ADA)?

Cardano is a Layer 1 blockchain designed for the secure development of decentralized applications (dApps).

Cardano serves a range of use cases, including decentralized finance (DeFi), non-fungible tokens (NFTs), payments and gaming.

Cardano places an emphasis on peer-reviewed research, ensuring that changes to the blockchain go through careful review before being committed to the network.

Cardano's main innovation is its two-layer architecture that enhances the scalability of its network. This unique Proof of Stake (PoS) protocol called Ouroboros helps Cardano balance scalability, security, and sustainability. 

Cardano’s native token, ADA, is classified as an infrastructure token. These types of projects focus on enhancing the functionality, efficiency, and security of blockchains (in this case, Cardano) and their dApps. 

More specifically, Cardano falls under the Layer 1 token category and seeks to cover network transaction fees associated with using the various services that exist on the Cardano blockchain. ADA can also be staked to help ensure information is recorded to the blockchain network accurately. 

Additionally, ADA serves as a governance token that allows holders to vote on strategic decisions that will shape the future of the Cardano network.

Kraken allows users to buy and trade ADA, as well as 250+ other types of cryptocurrencies.

Cardano’s blockchain utilizes a unique design that allows it to process information and transactions efficiently, while still remaining decentralized and secure. In this way, it attempts to solve the blockchain trilemma of balancing security, scalability and decentralization. 

Cardano also integrates smart contract functionality, enabling the use of decentralized applications (dApps). 

The main components of Cardano are:

• Two-layer architecture: Cardano separates its blockchain into two layers: the Cardano Settlement Layer (CSL) for handling transactions involving ADA, and the Cardano Computation Layer (CCL) for hosting smart contracts and dApps. This separation allows for more flexible and efficient processing of transactions and information on the Cadano network.

• Ouroboros PoS protocol: Ouroboros is a key feature of the Cardano blockchain that allows transactions and information to be accurately processed without relying on a centralized authority. Ouroboros, which is a specialized Proof of Stake consensus mechanism, offers a secure and efficient way of ensuring network consensus on information that is committed to the Cardano blockchain.

• Staking and delegation: ADA holders can participate in network governance and earn rewards by staking their tokens. Staker can either run their own staking pools or delegate their ADA to other validators. Like most PoS blockchains, Cardano selects validators to produce new blocks of transaction based on the amount of ADA they stake. This helps Cardano deliver faster transaction processing with minimal energy consumption.

• Daedalus wallet: Cardano’s official crypto wallet offers a secure, multi-platform wallet for the ADA cryptocurrency and other tokens on the Cardano network. It allows users to manage their ADA holdings, run a full node and participate in the network's staking.

• Plutus: A smart contract platform that enables the development of decentralized applications. Plutus provides tools and a secure environment for developers to create sophisticated, efficient and secure dApps.

• Governance: Cardano employs a decentralized governance model where ADA holders can vote on protocol upgrades and changes that shape the future of the platform. This ensures that the development and future direction of the platform are community-driven.

• Interoperability and sidechains: Cardano aims to enable cross-chain interoperability through sidechains, which are separate blockchains that are connected to the main Cardano blockchain. This allows for the transfer of assets between Cardano and other blockchains seamlessly.

Cardano's main innovations are its two-layer architecture and the Ouroboros consensus mechanism that help enhance the scalability of its network.

Further, Cardano relies on a research-based approach to develop its network from scratch and assure its progression. Top cryptographers from around the world are involved to help with its development.

Network Development

Cardano aims to move through five different eras, each focusing  on delivering specific functionalities through a series of code releases:

• Byron – Mainnet release of the blockchain that introduced Ouroboros.

• Shelley – Opened up the node operation from a select few to any community members.

• Goguen – Added smart contract functionality and allowed developers to build dApps.

• Basho – Adding sidechains to focus on the scalability and interoperability of the blockchain.

• Voltaire – Introduce voting to allow network participants to affect the development of the blockchain. This final era will make Cardano a self-sustaining blockchain ecosystem, independent of any single entity.

Cardano aims to address scalability, interoperability and sustainability issues prevalent in legacy blockchain systems. 

Early in their development, blockchains like Bitcoin and Ethereum faced challenges with high transaction fees, slow transaction times and significant energy consumption due to their Proof of Work (PoW) consensus mechanisms. Moreover, some of these platforms have limitations in terms of upgradeability and cross-chain communication, hindering widespread blockchain adoption and the development of more sophisticated decentralized applications (dApps).

Cardano was created with the aim to solve these problems through its Ouroboros PoS consensus mechanism. This unique adaptation of PoS significantly reduces energy consumption compared to traditional PoW systems. It also introduced a layered architecture, separating the settlement layer from the computational layer, to enhance scalability and enable easier upgrades and maintenance. 

Further, Cardano’s focus on interoperability aims to facilitate seamless communication and transactions between different blockchains. By addressing these issues, Cardano seeks to provide a more sustainable, scalable and interoperable platform for developing dApps and smart contracts. Cardano’s goal is to make blockchain technology more accessible and usable for a variety of  industries and use cases.

ADA is Cardano’s native cryptocurrency that can be used on the Cardano network to pay for transaction fees and earn rewards for helping to secure the blockchain network via staking.

Someone may wish to purchase ADA for the following reasons:

• Participate in protocol governance: ADA is used to empower the community to actively participate in the decision-making process of its protocols, ensuring a more democratic and inclusive approach to project management. 

• Stake ADA: Staking allows ADA owners to earn potential rewards by actively participating in the transaction validation process. 

• Pay for transaction fees: These fees compensate validators for their work in processing and verifying transactions.

• ADA can be sent to other users as a medium of exchange or to transfer value across the Cardano network.

Charles Hoskinson and Jeremy Wood launched Cardano on September 29, 2017.

Key Founders: 

Charles Hoskinson

• Title: Co-founder of Cardano, CEO of IOG

• Professional Background/Qualifications: Before founding Cardano, Hoskinson was involved in the early development of Ethereum, serving as its initial CEO. His background in mathematics, cryptography and computer science has been pivotal to Cardano's vision of creating a secure and scalable blockchain. 

• Key Contributions: Hoskinson's focus with Cardano has been on ensuring a strong foundation of peer-reviewed research and high-assurance development to support the creation of decentralized applications and smart contracts.

Jeremy Wood 

• Title: Co-founder of Cardano, Chief Strategy Officer of IOG

• Professional Background/Qualifications: Wood previously worked at the Ethereum Foundation as an executive assistant, where he met Hoskinson. Together, they left Ethereum to start IOHK (now IOG) with the vision of building a blockchain that could overcome the limitations of earlier networks.

• Key Contributions: Jeremy Wood has played an essential role in shaping Cardano’s direction and strategy. Wood's contributions have been instrumental in establishing Cardano's research-driven approach and its commitment to sustainability and scalability.

Cardano is supported by several organizations:

• Cardano Foundation: An independent organization dedicated to supporting the Cardano ecosystem and its community. The foundation focuses on driving adoption, shaping legislation and commercial standards, growing the global Cardano community, ensuring stakeholder accountability and facilitating partnerships.

• IOG (Input Output Global): The research and development company contracted to design, build, and maintain the Cardano platform until 2020. IOG focuses on the scientific research and technical development of Cardano.

• Emurgo: The venture arm of Cardano, responsible for fostering commercial applications built upon the Cardano ecosystem. Emurgo works to integrate businesses into the Cardano blockchain and develop projects that can utilize the unique features of Cardano.

Cardano's development has been primarily funded by IOG and its partners, rather than through public funding rounds. Specific details about funding rounds are not publicly available as they would be for projects funded through ICOs or venture capital.

The funds for Cardano's development have been used extensively for research and development, focusing on creating a blockchain platform that is academically peer-reviewed and built on evidence-based methods. This includes funding for academic research, development of the Cardano protocol, and investment in community building and marketing to increase adoption of the ADA cryptocurrency and Cardano platform.

Cardano has a maximum supply limit of 45,000,000,000 ADA.

Cardano's ADA token distribution of 25.927 billion tokens took place during its initial sale period from September 2015 to January 2017, and was distributed as follows:

• Public Sale: A portion of ADA tokens was sold to the public through a prolonged initial sale.

• IOHK, Emurgo, and Cardano Foundation: A portion of ADA tokens was allocated to the three entities behind Cardano's development and promotion. IOHK received 2.46 billion ADA, Emurgo received 2.07 billion ADA, and the Cardano Foundation received 648 million ADA.

ADA enters circulation through the staking process using the Ouroboros PoS system. Here’s a simplified overview of the issuance process:

• Staking rewards: Staking rewards are generated every epoch (approximately every 5 days) and are distributed to stakers and pool operators. This process incentivizes network participation and security.

• Treasury and Voltaire phase: A portion of transaction fees and unused staking rewards are redirected to the Cardano treasury. Future protocol upgrades may introduce a more formalized inflation schedule to fund network development sustainably.

The ADA supply expands through staking rewards, with the total supply capped at 45 billion ADA. This system ensures that the distribution of ADA rewards supports network security and participation.

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