What is Cardano (ADA) and How Does It Work?

Feb 1, 2024

Head to any of your favorite cryptocurrency exchanges, and chances are you’ll find Cardano (ADA). It has established itself as one of the most popular cryptocurrencies in the industry — currently the ninth largest by market cap.

But what is Cardano? And why should you invest your hard-earned dollars into this coin?

This article will explain what Cardano is, how it works, its use cases, and whether it’s a wise investment. It will also show you how you can get started investing in ADA the quick and easy way with Bake!

What is Cardano?

Cardano is a decentralized proof-of-stake (PoS) blockchain network. It aims to create a more secure, scalable, and sustainable platform for decentralized applications (dApps), smart contracts, and multiple assets.

Unlike other blockchain networks, Cardano uses an approach that is reminiscent of academia — think science and peer reviews — to run its network. Cardano’s development is led by a team of researchers and engineers, all of whom use cutting-edge technology and academic research to develop and improve the network. 

Cardano is also built on the foundation of a unique two-layer architecture: the Cardano Settlement Layer (CSL) and the Cardano Computation Layer (CCL). While the CSL takes care of transactions and balancing the native crypto ADA, the CCL powers the smart contracts and dApps.

History of Cardano

Founded in 2015 by Charles Hoskinson, one of the co-founders of Ethereum, Cardano was officially launched in 2017. The name ‘Cardano’ originates from Gerolamo Cardano, a 16th-century Italian mathematician and physician. 

As for its native cryptocurrency ADA, the name is derived from 19th-century English mathematician Augusta Ada King, Countess of Lovelace (1815-1852). She is commonly regarded as the world’s first computer programmer.

Ouroboros: Cardano’s Proof-Of-Stake (PoS) Model

Cardano utilizes a proof-of-stake (PoS) consensus protocol, which is creatively named Ouroboros

Fun fact: Ouroboros is a mythical serpent from ancient Egyptian iconography and Greek magical tradition. It is popularly depicted devouring its own tail and being reborn from itself. 

Often associated with unity and immortality, Ouroboros is a fitting name for Cardano’s democratic, energy-efficient, and self-sustaining PoS model.

As Cardano describes on its website,

“At the heart of Ouroboros is the concept of infinity. Global networks must be able to grow sustainably and ethically: to provide greater opportunities to the world while also preserving it.”

As a PoS consensus protocol, Ouroboros ensures that Cardano’s validators are chosen based on the amount of ADA they stake instead of the amount of computing power they have. 

Ouroboros enables greater scalability for Cardano, allowing the network to process thousands of transactions per second. 

Ouroboros is also the first provably secure PoS protocol in the world. This is made possible via the protocol’s use of peer-reviewed research and mathematically verified mechanisms. Even you can verify Cardano’s security measures against malicious attacks and ensure your ADA is well protected.

Why Should You Invest in Cardano?

There are several key reasons why Cardano is a solid investment choice in the cryptocurrency arena. If any of these features of Cardano align with you, then it’s definitely one blockchain you don’t want to leave out of your portfolio!

Cardano is a Social and Economic Mover.

Fairness and inclusivity are at the core of Cardano’s social and economic vision. It provides access to financial services, identity solutions, and even education to millions of people currently excluded or marginalized by existing systems. 

Cardano also supports social causes such as environmental sustainability, human rights, and philanthropy through its network and foundation. For example, EMURGO Africa, a Middle East and Africa-focused entity, leverages Cardano to support blockchain and Web3 ecosystems in the African continent.

Cardano has Recorded Strong Financials.

On the financial side of things, Cardano has proven to be one of the most promising and profitable cryptocurrencies. 

Since its launch in 2017, Cardano has grown exponentially in terms of market capitalization, user base, and community support. As of September 2023, Cardano is among the top ten cryptocurrencies by market cap, ahead of Solana (SOL), Polkadot (DOT), and Polygon (MATIC). 

At one point, Cardano also saw a remarkable increase in its price, reaching an all-time high of USD 3.10 on 2 September 2021. This represents a staggering 6,000% increase from its initial price of USD 0.05 in October 2017. 

Cardano is Supported by its Developers and Community.

Although Cardano has since entered a bearish state, with its price hovering around USD 0.25 (accurate as of 22 September 2023), you can still expect to see it rise again in the future. This is because Cardano is supported by an active development team and community, who work tirelessly to develop new features and upgrades for the blockchain.

One such upgrade was the Alonzo hard fork in 2021, a core part of Cardano’s transition into its smart contract-focused Goguen phase. With this hard fork, the Cardano Mainnet gained smart contract functionality, giving it the ability to support dApps, DeFi (decentralized finance) applications, and NFTs (non-fungible tokens).

Looking ahead to Cardano’s roadmap for 2023, the next major phase of Cardano’s development is “Basho,” described as “an era of optimization, improving the scalability and interoperability of the network.” 

In the Basho phase, Cardano will develop new blockchains that run parallel to and are interoperable with its main chain. They’ll be essential for increasing Cardano’s network capacity and offloading work from the main chain without sacrificing its overall security.

Cardano’s final major phase is dubbed “Voltaire,” which will introduce a governance system to the network. In a nutshell, you’ll be given the power to use your staked ADA and voting rights to shape Cardano’s future development.

Outside of the development space, Cardano also actively partners with entities around the world to implement its technology and solutions. For example, Cardano signed a deal with the Ethiopian government to provide digital identity to 5 million students and teachers using its blockchain. Cardano has also collaborated with IOHK (Input Output Hong Kong), EMURGO, and other organizations to support projects in Africa, Asia, Europe, and America.

Invest in Cardano’s Future Today

If you’re convinced about Cardano’s potential, then it’s time to get your gears running and start investing!

Head over to Bake and check out the Next-Gen blockchain innovators bundle for an optimized share of the most innovative blockchains in the industry.

DISCLAIMER: Please note that the information on this blog and in any articles posted on this blog is for general information only and should not be relied upon as financial advice. Cake Pte. Ltd., Bake, UAB, and its affiliates (the “Cake Group”) are not licensed financial advisers. You may wish to approach your own independent financial advisor before making any decision to buy, sell, or hold any product and/or digital assets mentioned in this blog.

Any views, opinions, references, assertions of fact, and/or other statements are not necessarily the views held by the Cake Group. The Cake Group disclaims any liability whatsoever that may arise out of or in connection with such statements. Always do your own research before investing in any financial assets, and consult a qualified financial advisor if necessary.


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