what is cardano-07

Crypto 101: What is Cardano?

What is Cardano? Cardano is a decentralized platform founded by Charles Hoskinson. The platform is the first peer-reviewed Blockchain. This means that instead of writing a white paper for the platform, the team made sure that experts read their papers and improved upon it. This includes a network of academics and scientists coming from various universities like University of Edinburgh, Tokyo Institute of Technology and more to review their work. Hoskinson considers the platform as a part of a revolutionary third-generation cryptocurrency and smart-contract platform. It hopes to improve upon the issues of scalability symptomatic of first and second generation cryptocurrencies like Bitcoin and Ethereum. 

What is Cardano?

Before diving into how the Cardano system works, let’s first talk about how Charles Hoskinson and his team founded this system. Charles Hoskinson is actually a co-founder of the Ethereum network, however, with the new Cardano system, he hopes to create a third generation of the Blockchain. The team behind the Cardano system is the Cardano Foundation, IOHK, and Emurgo.

Cardano Foundation is a non-profit entity that acts as the custodial organization of Cardano. IOHK is a research and development company founded in 2015; the company focuses on bringing peer-to-peer innovations to the wide public. The company has been in contract with Cardano and is in charge of building, designing, and maintaining Cardano until 2020. Lastly, we have Emurgo, an Japanese company, that is in charge of developing, supporting and incubating commercial companies wanting to revolutionize their current industry by utilizing Blockchain technology. 

Hoskinson understood the continual need for development for Blockchain technology. Hence, he took the successful elements from the first two generations of Blockchain, being Bitcoin and Ethereum, and adding elements that he deems necessary in the third generation of Blockchain. There were three major elements that Cardano wants to solve, these include: scalability, interoperability, and sustainability. 

Cardano’s Underlying Philosophy:

Unlike other cryptocurrencies that start with a white paper or even a road map. The Cardano team embraced a set of beliefs that included the best practices for the company’s future. These beliefs include the following: (Note: we took this directly from the Cardano website)

  • Separation of accounting and computation into different layers
  • Implementation of core components in highly modular functional code
  • Small groups of academics and developers competing with peer review research
  • Heavy use of interdisciplinary teams including early use of InfoSec experts
  • Fast iteration between white papers, implementation and new research that requires the correction of issues they discover during review
  • Building in the ability to upgrade post-deployed systems without destroying the network
  • Development of a decentralized funding mechanism for future work
  • A long-term view on improving the design of cryptocurrencies so they can work on mobile devices with a reasonable and secure user experience
  • Bringing stakeholders closer to the operations and maintenance of their cryptocurrency
  • Acknowledging the need to account for multiple assets in the same ledger
  • Abstracting transactions to include optional metadata in order to better conform to the needs of legacy systems
  • Learning from the nearly 1,000 altcoins by embracing features that make sense
  • Adopt a standards-driven process inspired by the Internet Engineering Task Force using a dedicated foundation to lock down the final protocol design
  • Explore the social elements of commerce
  • Find a healthy middle ground for regulators to interact with commerce without compromising some core principles inherited from Bitcoin


From these fundamental ideas, Cardano has begun its exploration in the cryptocurrency space. They want to build a platform for a sustainable future where people can better work together, better trust one another, and better solve global problems. 

How does Cardano work?

The primary use of the Cardano platform is to allow transactions to occur and allowing developers to build secure and scalable applications on top of the platform. The Cardano Blockchain divides into two layers: 

  • The Cardano Settlement Layer (CSL) is used to send and record the flow of tokens on the Cardano platform. The CSL uses the consensus algorithm known as proof-of-stake which is known as “Ouroboros” by Cardano. This algorithm has also been widely adopted in other Blockchain systems like EOS.IO. Check out our article on EOS if you want to learn more about it! 
  • The Cardano Computation Layer (CCL) is used to contain all the smart contract logic that developers use to move funds through programming. The good thing about the CCL is that they can make small changes for different users. You can think of this the same as how different nations have their own regulations, so Cardano allows different nations to change how they want to store their data depending on the domestic laws. 

Let’s dive into an example to make sure that you actually understand how both layers work!

  1. Peter wants to hire a doorman to fix his door
  2. Peter will then enter into a smart contract agreement which they store in the computation layer
  3. The agreement will then state that as soon as the doorman fixes the door, the agreed upon funds will be released
  4. When the door fixes, they transfer the smart contract into the settlement layer, which will then pay the doorman in ADA 
  5. This process takes out the middleman making everything fully automated


Both of these systems cannot leave behind Ouroboros. The Ouroboros system is a Proof of Stake method not requiring miners to solve complex mathematical sums. The Ouroboros process divides the transaction Blockchains into different epochs. This is then further divides into time slots. Within each time slot, a slot leader will be chosen and they will be responsible for adding blocks to the chain. If a leader fails to create a transaction block in the epoch, then the next slot leader will get a shot during the next epoch. Within a given epoch, at least 50 percent or more blocks must be produced. The transactions that are produced by slot leaders are then approved by input endorsers. They act as the second set of stakeholders who are responsible for running the protocol. Based on the election results through staking, there can be multiple endorsers in a given epoch.

In order to ensure unbiased results, the election system has two inputs. One being the multiparty computation system, where a set of stakeholders in the network will perform a computation. This can be thought of as a  “coin toss” where they chose users randomly through a cryptographic algorithm. The other method is by the distribution of ADA wealth or stake. Nodes that contain a greater stake (more coins), will often have a greater chance at being elected as slot leaders.

Proof of Stake

The underlying concept is that with more coins that are staked, you will be more motivated to ensure that the system is secure. If a user attempts to hack the network and attempts to process a fraudulent transaction, the user will lose all of their stakes as a form of punishment. Unlike other Proof of Stake Blockchains, the Ouroboros model allows users to stake as much as they want with no minimum. The rewards given by the Ouroboros system will then also split between three stakeholders: input endorsers, multiparty computation stakeholders, and slot leaders. The goal of Ouroboros is quite simple, it hopes to be a transaction ledger with immutable history. These include 4 basic features: submitting transactions, including transactions to ledger, public access to ledger, verification of transactions, and immutability of the ledger. 

If you would like a more in-depth look at the Cardano Ouroboros system, be sure to check out this paper written by the Cardano team. 

What is ADA?

ADA is the native cryptocurrency to Cardano’s Blockchain platform. You can think of ADA being most similar to Ether in Ethereum’s platform. However, ADA has quite different functionalities than ETH. The ADA currency helps the Cardano network operate and also votes on changes to software rules. Users of Cardano need to buy ADA in order to facilitate transactions and participate in the governance of the network. The ownership of the tokens helps to determine who gets to be a slot leader, who adds in new blocks, and who earns shares of the fees paid for transactions in blocks. 

With the recent Shelley upgrade, the Cardano platform allows users to allocate votes to other users through delegated staking or staking a pool. This allows them to earn ADA rewards on its live Blockchain. 

How do you get ADA?

The ability to purchase ADA at any crypto exchange that supports digital currency. You can also contact us if you would like to know more about the currency or even purchase it! Once you get the currency, be sure to store it in a cold or hard wallet to ensure the safety of your digital assets! If you would learn how to store digital assets, check out our article here!

Cardano vs Ethereum

Ethereum is the de facto standard for Blockchain platforms. It is a part of the second generation of the Blockchain platform and has been the fundamental building block for many tokens and the majority of initial coin offerings (ICO) in the crypto space. Moreover, with the introduction of more and more dApps, the platform’s coin, Ether, is starting to gain real-world value. Unlike Ethereum, Cardano can be seen as the “Ethereum Killer” as they are creating one of the most advanced smart contract protocols in the industry. Cardano is still far from its goal of reaching unlimited, instant and free transactions. However, with the extensive network behind the Cardano platform, it will not be a surprise to see it achieve what it claims.  

The Cardano Roadmap:

The Cardano development organizes into five eras known as: Byron, Shelley, Goguen, Basho, and Voltaire. Each of these eras have a specific set of functionalities that delivers across multiple code releases. While the eras will be sent out sequentially, the work for each of the eras will happen all in parallel. This work will include research, prototyping, and development occurring all at once for these different eras. 

Byron (Foundation):

serves as the foundation for the Cardano roadmap. The first era of the Cardano roadmap allowed users to buy/sell the ADA currency. During the Byron era, the Daedalus wallet was also delivered. This wallet is IOHK’s official desktop wallet for ADA. Yoroi, a lighter wallet for faster transactions and day-to-day use was also designed by IOHK’s sister company, Emurgo. ADA is currently hosting on more than 30 exchanges and is one of the leading cryptocurrencies in the world. 


Shelley (Decentralization):

is the era following the Byron era. The Shelley era is a period of growth and development for the network. The Shelley acts as a critical step for the Cardano network. The network was federated during the Byron era, but during the Shelley era. The nodes on the network will mainly be run by the Cardano community. Once a majority of the nodes are run by participants of the Cardano network, Cardano will be able to achieve decentralization allowing greater security and robustness. At the end of this era, the expectation for Cardano is to be 50-100 times more decentralized than other large Blockchain networks.


Goguen (Smart Contracts):

is the era where Cardano will take a big step forward in its capabilities of the network. During this era, Cardano will add the ability to build decentralized applications (Dapps) on the Cardano foundation. The work of the Goguen has already been underway with the Shelley era. Once the process is complete, users with and without technical backgrounds will be able to create and execute smart contracts on the Cardano network. One of hte many purposes of the Goguen era is to create the Plutus, a purpose-built smart contract development language and execution program that uses the programming language Haskell.

To make the Cardano network more accessible to a wider audience, the company will also introduce Marlowe, a high level, domain-specific language used for financial contracts. This process will simplify the process of creating smart contracts for financial applications and allow those with no programming skills to get a hand on smart contracts. With Plutus and Marlowe, the Blockchain industry will be completely revolutionized with a new class of enterprise-level smart contracts. 


Basho (Scaling):

is the era of optimization, improving on existing scalability and interoperability of the Cardona network. The era of Basho is all about improving the underlying performances of the network. So by improving the underlying technology, Cardano hopes to achieve growth and adoption for applications with high transaction volume. With the Basho network, one of the core developmental steps will be the sidechains: new Blockchains, interoperable with the main Cardano chain, and holding potential to extend the network capabilities. Sidechains will also use as a sharding mechanism by taking off some work on the existing main chain and help increase the overall capacity of the entire network. The Basho era will allow Cardano to develop into one of the most high performance, resilient, and flexible Blockchain platforms in the industry. 


Voltaire (Governance):

acts as the final piece of the Cardano network. During this era, CCardano will introduce the voting and treasury system. The network participants will be able to use their stake in the network and vote to influence the future development of the network. This process will truly allow Cardano to become decentralized and create equality among users. Additionally, a fraction of all transaction fees will also pool to help provide for future development activities chosen by the voting process. 


Cardano still has a long way to go to become the acclaimed top performant Blockchain platform in the crypto space. However, with the team and the grand scheme behind the platform, it will be interesting to see how the platform revolutionizes the crypto space and possibly the world, one day. 

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