Cardano – Explanation, Pros and Cons, History, Buying Guide, Wallets, Price Prediction, Faucets

Published by Jonas April 9, 2021

Cardano is a decentralized public blockchain and cryptocurrency project developed by Input Output Hong Kong (IOHK) and backed by the Cardano Foundation. It’s based on peer-reviewed academic research: it was designed to address issues such as scalability, security, sustainability and provable fairness. The goal of the project is to create a blockchain that will balance the needs of those in finance who require regulatory oversight while allowing for privacy of transactions and protecting users’ personal data.

“Cardano, launched in September 2017, is a project with a global vision that will be developed and maintained by a world-leading team of experts. Their aim is to create a new generation cryptocurrency that is available to all. Cardano will be developed openly and in the spirit of open source software, as a gift to the community.”

-Cardano Foundation

The founder and CEO of Cardano is Charles Hoskinson, Ethereum co-founder. The IOHK (Input Output Hong Kong) team behind Cardano consists of over 100 people in five global locations.

When comparing code commits per month and lines of code in the Cardano white paper, it is apparent that Cardano was written by a larger company. The white paper is very detailed and explains how each component works on a technical level. It has been reviewed extensively by academics and experienced practitioners to ensure its correctness.

Cardano Explanation

What is Cardano?

Cardano is a blockchain platform with a strong focus on security, compliance and privacy. From a technical perspective, it’s made of three layers – the Cardano Settlement Layer (CSL), which handles finality of transactions; the Cardano Computation Layer (DAC), which handles computation; and finally the Cardano Control Layer (DCA), which manages the flow of information between these two layers.

Cardano was created by Charles Hoskinson and Jeremy Wood, who left Ethereum to work on this project. While working on Ethereum, they decided to come up with a solution to the problems they saw in the cryptocurrency community. They had written a paper (Ouroboros: A Provably Secure Proof of Stake Blockchain Protocol), which became the foundation of Cardano’s Ouroboros blockchain protocol that functions as Cardano’s consensus mechanism. The whitepaper can be found here.

What makes Cardano special?

• Decentralized Approach: It’s more efficient to have a single point of control for key infrastructure, instead of having many separate startups developing these solutions. It’s more scalable: Because it’s designed to be resistant to quantum computing and requires only polynomial resources like CPU and RAM, there are no theoretical limits to the number of users that Cardano can support.
• Scalability: As of January 2018, the Cardano network has a maximum capacity of 40 transactions per second and is capable of hosting hundreds of DApps. The team at IOHK is working on ways to make the protocol scale better by using layer-two protocols such as Lightning Network and sidechain solutions.
• Another thing that makes Cardano special is that it is not just a cryptocurrency; it’s an entire blockchain ecosystem. It will allow more advanced features like smart contracts, sidechains, and programmable rules in order to facilitate more complicated transactions.

“Cardano is being built in layers, which gives us the flexibility to release improvements as soon as they are ready. This means that users will benefit from the best of breed in each layer without having to wait for other features to be completed.”

The Cardano Foundation

Cardano is headed by the Cardano Foundation. The Cardano Foundation is registered in Zug, Switzerland and its mission is to standardize, protect and promote the Cardano Protocol technology. The Foundation will also focus on giving aid to under-resourced countries or communities.

The Cardano Foundation is a non-profit organization independent of IOHK and Emurgo: it’s attempting to address a number of issues seen in the cryptocurrency space, such as governance, and lack of regulation. The board includes members from various parts of the world including Japan, USA and Singapore. It’s headed by a Japanese woman named Emi Yoshikawa as Chief Executive Officer (CEO).

IOHK

IOHK (Input Output Hong Kong) was founded by Charles Hoskinson, who is the founder and CEO of Cardano. The advisory board includes heavyweights in the fintech space including John Evans of TechCrunch.

It’s also behind IOTA, one of the first cryptos to use a Directed Acyclic Graph (DAG) instead of an elliptic curve like Bitcoin and Ethereum. IOHK is working on Cardano’s layers 1 and 2 protocols, which will make it suitable for running large-scale applications including financial services.

Emurgo

Emurgo is the Japanese partner of IOHK. Emurgo is a non-profit organization, which acts as an incubator for Cardano. The goal of Emurgo is to create a platform that helps startups and companies bring new blockchain applications to market faster. It has a development team of 60 people and 20 full-time staff based in Tokyo.

Advantages

Although Cardano is still in its early stage, it still has a lot of advantages over other cryptocurrencies.

• Switch to Proof of Stake: This will make the network more secure and fast.GPU Mining : Unlike bitcoin, there are no blocks or rewards tied to how many coins are mined. The system works by having users validate transactions on a blockchain that has been pre-generated which means that there’s no wasteful time spent looking for blocks. It also means that it takes less power and computing power to mine for Cardano compared to other blockchains like Bitcoin
• Security: Being a pure proof of stake system. Cardano is more secure than Bitcoin in terms of double spending attacks.
• Consensus Protocol: Ouroboros is an innovative consensus protocol created by IOHK that determines how nodes reach consensus about the network and order transactions. It uses a fundamentally new approach to cryptocurrency design and is based on peer-reviewed academic research.
• Sharding: This will make the network more scalable and allow it to increase transaction volume significantly, without affecting security or decentralization.

Disadvantages

Although Cardano has a lot of advantages, there are still some disadvantages.

• Slow progress: Cardano is still at the early stages of development and has been criticized for its slow progress and long roadmap. The team behind the project have to come up with a way to make it faster while not affecting the quality of the product.
• Founder = Project Leader: This might be a problem for investors because Charles Hoskinson is also the founder and CEO of IOHK. This gives him too much power in decision making. For example, he could decide to work on other projects while leaving Cardano unattended for several days (he creates other blockchain projects). Investors might want a more neutral and diverse leader.
• Another disadvantage, which is the most important in my opinion, is that even though Cardano has been rebranded, the team behind Cardano still faces problems with trying to implement it in existing blockchain systems.

How to invest in Cardano and buy ADA

1. Create a suitable wallet (e.g. a Daedalus wallet)
2. Choose a trusted crypto exchange with low trading fees (I personally use Binance.com to buy Cardano (ADA))
3. If you are not signed up there yet, verify your account
4. Make a transfer of a suitable currency to the crypto exchange
5. If transferring in dollars or euros, first buy Bitcoin or Ethereum
6. Then exchange it for Cardano (ADA)
7. Finally, transfer Cardano (ADA) to your chosen wallet.

The main way to get your hands on Cardano is to first buy some Bitcoin or Ethereum and then exchange that for ADA tokens using an exchange like Binance.

If you don’t have Bitcoin or Ethereum, you can buy it from a place like Coinbase. Another option is to buy it from cryptocurrency ATMs which are located in certain locations, but they aren’t as popular as the first two options.

Wallet

Got some coins? We recommend you get a hardware wallet like the Ledger Nano S. It’s one of the safest options out there and it’s really easy to use.

If you don’t have an official Ledger wallet yet, you can also download the official Cardano wallet here: https://daedaluswallet.io/. The Daedaluswallet is currently available for Mac, Windows and Linux PCs.

Make sure to backup your seed phrase after you install the software, because if you lose that, you’ll lose access to your coins forever.

The Future of Cardano

After having a look at the project, some things can be said for sure:

Cardano is one of the most innovative projects in the cryptocurrency space. IOHK has spent a lot of time and resources into researching different aspects of blockchain technology, and their research has helped them to create a unique system where they have been able to combine aspects from several other blockchains into one. You can count on Cardano to be around for quite some time as they’ve put in the necessary effort required to give it longevity.

The Cardano code is based on the Haskell programming language and has a strong focus on improving the security of the system. The team has long been working to adapt their blockchain for use across industry verticals, particularly financial services as it’s their core focus.

On top of that, these guys are working hard to make sure that their platform will scale and allow for fast adoption. They’ve already done a good job with implementing layer 2 solutions like Daedalus (their wallet) which allows users to send and receive ADA without having to download the entire network.

Comparison to Ethereum

Cardano is an ambitious project and at first glance, it seems to be trying to compete with Ethereum, the second-largest cryptocurrency in the world.

This is not the case. There are many differences between Cardano and Ethereum, both in terms of the philosophy of the projects and the technology they use.

Cardano is a far more ambitious project. It’s trying to do things that no other project has been able to accomplish thus far. Cardano wants to be more than just a cryptocurrency platform; it wants to represent a convergence of several technologies. There are many key differences between Cardano and Ethereum, but here are the most important ones:

Cardano is a Proof of Stake platform, whereas Ethereum is Proof of Work. This means that Cardano is more energy efficient and secure since it doesn’t use mining (which has been known to be bad for the environment).

Cardano will eventually have a layered system in which one layer deals with governance, while other layers will deal with computation. Meanwhile, Ethereum only has one layer (which is where they run into problems). And although Ethereum plans to switch from PoW to PoS in the future, it will still be limited by its own single-layer design.

Comparison to Bitcoin

Cardano could be compared to Bitcoin as it is trying to deal with similar issues of how cryptocurrencies should work. There are some major differences between the two, but here’s what the Cardano project has in common with bitcoin:

• Cardano wants to make a cryptocurrency that could be used by people in real life. The problem with many cryptocurrencies today is that they have no integration into real life. It’s not easy for normal people to use them and they aren’t accepted widely enough (most places don’t accept cryptos). It’s also difficult for regular folks to understand how they work and what their benefits are. Cardano is trying to solve for these issues.
• Like Bitcoin, Cardano is also trying to make a digital currency for normal people. It’s just like the Bitcoin whitepaper says: “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.” Cardano is doing something similar with their native token, ADA.
• Cardano’s approach offers some interesting possibilities, but it’s important to remember that bitcoin has already been battle tested over the last 9 years and it has proven itself as a good store of value and medium of exchange.

https://www.youtube.com/watch?v=D-1ZTq4FQuU

History of Cardano

Even though Cardano has been around for quite some time, it’s still mostly unknown to the general public. In terms of when the project was first announced, it happened on October 24th, 2015. The team behind the project came together and created a group called the Cardano Foundation to help promote and push the Cardano platform forward.

After that, there were many updates about how things are progressing in terms of development over the years. In March of 2017, Charles Hoskinson had a blog post in which he stated that they were going to make Cardano ready for release in Q1 2018 (more than one year later). They also made a few announcements about what they’re planning on improving with their platform.

Note: Cardano is still in the early stages of development, and things will continue to change in the future. The roadmap, specifications and features are not final and they might be changed over time.

In February 2018, a new roadmap was released which outlined details about how Cardano would work to bring it to its next stage of growth. In this new roadmap, it was announced that there are three major updates or stages that Cardano needs to go through before it’ll be ready for mainstream use.

Because there’s a lot of work ahead of them, the developers decided that they would break down their progress into stages so that users know what they should expect over time.

Staking

The first part of their upcoming stage is staking. In order to fully support staking, Cardano will need to do a lot of work in the wallet. Right now, the underlying blockchain technology for ADA is called Ouroboros.

Ouroboros is an autonomous peer-to-peer network that can run without any rules or regulations and acts as a consensus protocol to help Cardano become more decentralized over time. The code will be released into the open source over time and other blockchain platforms can use it as well. Cardano’s native token, ADA, will be used to pay for computation fees on the network too.

Ouroboros Genesis

After they roll out staking and mining, they plan on rolling out Ouroboros Genesis, which is a major milestone in their project. After Ouroboros Genesis is implemented into the network, it will mark the beginning of Cardano moving from being one cryptocurrency to becoming a large ecosystem that other applications can be built upon.

In order for this to happen, Cardano will need additional features like sidechains and smart contracts in order to allow other developers to create different applications for their platform.

Is it possible to mine Cardano?

You can’t mine Cardano. It’s a pure proof of stake platform that doesn’t use mining to verify transactions and create new blocks.

The final product will be proof of stake based, and there will be no mining involved (this is not the case anymore, see this section below for more info).

Cardano Faucets

According to my information there are no Cardano Faucets available yet. Current information about possible future faucets can be found at the following links:

• https://developers.cardano.org/en/testnets/cardano/tools/faucet/
• https://github.com/input-output-hk/cardano-faucet
• https://www.reddit.com/r/cardano/comments/ljq7v6/cardano_faucet/

Conclusion – Does the project have a chance in the future? Is it worth investing in?

Cardano is a very ambitious project with a lot of potential due to its team, technology, and roadmap. It has what it takes to solve the major problems blockchains are facing today, such as scalability and interoperability. Take the “treasury model,” for example: It depends on a fair electoral system to prevent people from taking control on their own. With that said, its success will depend on IOHK’s ability to deliver results quickly while keeping Cardano’s code free from bugs or errors.

If you want to invest in Cardano, it’s always important to consider factors like the team behind the project, their reputation in the crypto space and their past records (accomplishments). I currently have about 10 percent of my crypto portfolio invested in Cardano (No investment advice!) and will closely follow the developments in the future. Investing in the project is currently very risky, but could also be very rewarding.

The Cardano platform is making some big moves. The proof-of-stake (PoS) algorithm is doing well, and it could be able to give Ethereum a run for its money in the future. While it has been early days, the team has set up some great relationships and partnerships with companies such as R&D labs at Tokyo Institute of Technology. The project might also guarantee that millions of people across the globe can use its blockchain technology in a number of different ways.

However, the Cardano project is still very young and has a long way to go. It’s not clear if it will actually work in practice.

The way it works is very different from other cryptocurrencies. So Cardano could become a project that solves some long-standing and fundamental problems in the crypto world.

References:

1.  “Cardano Glossary”. Retrieved 23 October 2020.
2. “Releases – input-output-hk/cardano-sl”. Retrieved 28 October 2020 – via GitHub.
3. “Releases – input-output-hk/cardano-node”. Retrieved 12 March 2021 – via GitHub.
4. Arslanian, Henri; Fischer, Fabrice (15 July 2019). The Future of Finance: The Impact of FinTech, AI, and Crypto on Financial Services. Springer. ISBN 978-3-030-14533-0.
5.  “The Blockchain Galaxy A comprehensive research on distributed ledger technologies” (PDF). Deloitte. 6 May 2020. Retrieved 29 October 2020. The distinctive feature of Cardano is its “research-first” approach to design.
6. “Cryptocurrencies and blockchain” (PDF). European Parliament. July 2018. Retrieved 29 October 2020. What distinguishes Cardano from Ethereum, and from many other cryptocurrencies, is that it is (one of the first) blockchain projects to be developed and designed from a scientific philosophy by a team of leading academics and engineer
7. “Bitcoin’s wild ride renews worries about its massive carbon footprint”. CNBC. 9 February 2021. Retrieved 13 February2021. Bitcoin has a carbon footprint comparable to that of New Zealand
8. https://www.independent.co.uk/climate-change/news/bitcoin-environment-mining-energy-cryptocurrency-b1819545.html
9. https://cardano.org/what-is-ada/
10. https://cardano.org/
11. https://cardanofoundation.org/
12. https://steemit.com/cryptocurrency/@ramsteem/cardano-ada-3rd-generation-of-cryptocurrency
13. https://www.youtube.com/watch?v=Ja9D0kpksxw