Cardano is one of the most popular blockchains out there. It claims to be the third generation of cryptocurrencies. If you’re wondering, Bitcoin and Ethereum hold the first and second places.

Cardano has managed to gain significant traction since its launch in 2015 for all the right reasons. The fast-growing network is touted as a potential Ethereum killer. In addition, Cardano’s native cryptocurrency ADA is the 8th largest cryptocurrency in the world.

Let’s take a look at what Cardano is and how it stands apart. 

1

The Cardano Network

Cardano is a Proof-of-Stake (PoS) blockchain with a unique multilayer architecture. Similar to Ethereum, Cardano blockchain can run smart contracts. This means it can run different types of transactions, apart from payments. A wide range of crypto protocols, projects, and dApps are currently building on Cardano.

Although Ethereum brought smart contract functionalities to blockchains, it was not foolproof. The lack of scalability, interoperability and sustainability stands in the way of its growth.

Cardano tries to solve these plaguing problems with a unique approach. The blockchain has come up with two distinct accounting and computational layers. The Cardano Settlement Layer (CSL) facilitates payments with low transaction fees. On the other hand, Cardano Computational Layer (CCL) hosts smart contracts.

A secure programming language called Haskell makes up the code.

2

Maintaining the Blockchain

Ouroboros is Cardano’s custom-made Proof-of-Stake protocol. It was launched in 2017 after two years of development. It’s the first provably secure Proof-of-Stake protocol.

Ouroboros is widely acclaimed as one of the few protocols based on peer-reviewed research. The team makes sure that industry experts from around the world read and validate the project documents.

Mining is notorious for consuming a lot of energy. The inefficient proof-of-work consensus mechanism is also to blame for the delays on Bitcoin and Ethereum networks. It makes the transaction fees on these blockchains unfeasible for everyday use.

Ouroboros proposes a different mechanism to process transaction blocks.

When miners compete against each other to complete a transaction on PoW blockchains on Ouroboros, it is a different process. The network selects a few nodes called slot leaders to mine the next blocks.

Zooming out, we’ll see that chains are divided into epochs on Cardano. They are again divided into time slots. Each time slot will have a leader who is in charge of adding a block to the chain.

As you can imagine, this method saves time and energy.

3

Mining Cardano

Unlike BTC, you can’t mine ADA.

However, you can earn staking rewards on Cardano. Staking is a process on PoS blockchains where users lock away their cryptocurrencies to participate in block validation. Staking plays a key role in running these networks.

The network chooses validators at random. The more cryptocurrencies you stake, the higher your chance of getting in. Since an epoch can be divided infinitely, all participants who help validate an epoch receive rewards.

You can stake Cardano in two ways. You can either run your own Cardano staking pool or outsource the job to stake-pool operators. Stake pools work under the leadership of stake-pool operators, who are usually technically adept. Participants can add their coins to pools of their choice. This process of handing over staking is called delegation.

You can unstake and restake your coins in different pools as many times as you like. However, you need to wait for the next epoch to pass before relocating your assets. Each epoch is approximately five days long.

A ‘snapshot’ is created after the completion of each epoch. It is used to calculate each pool participant’s share of rewards.

4

Cardano’s Value

ADA sells for $0.81 at the moment of writing this article. The coin hit an all-time high of $3.10 in September 2021. That is 73.85% higher than what it is worth now.

With the project development moving ahead quickly, ADA should surge when the broader crypto market picks up. In addition, Cardano implemented the Alonzo hard fork successfully last year.

It marked a major milestone for the project as it brought smart contract functionality to the network. Currently, an array of DApps is building on the blockchain. In essence, Cardano is on the path to becoming a full-fledged blockchain. This leaves the coin plenty of room for utility and growth.

FAQ

What consensus mechanism does Cardano use?

Cardano uses the Proof-of-Stake consensus mechanism.

What is Ouroboros?

Ouroboros is Cardano’s custom-made Proof-of-Stake protocol built based on peer-reviewed research.

How to mine Cardano?

Since Cardano is a Proof-of-Stake blockchain, you can’t mine ADA. Instead, you can participate in block validation by locking away your coins. In return, you earn staking rewards.

How to stake Cardano?

You can either run your own Cardano staking pool or join a staking pool to stake Cardano. 

Is it worth buying ADA?

Multiple DApps are gearing up for launch on the blockchain after implementing the Alonzo hard fork. They are expected to bring more utility and value to ADA. 

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