What Is Cardano (ADA)? – Guide About Everything You Need To Know


Carlos Terenzi


Reading time

13 mins
Last update


Carlos Terenzi


Reading time

13 mins
Last update


Carlos Terenzi


Reading time

13 mins
Last update

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What Is Cardano?

Cardano (ADA) is one of the most recognized blockchains and crypto projects in the space. Co-founded by Charles Hoskinson, Cardano can be considered a smart contract platform that offers a scalable and secure architecture for developers and users. 

According to the official site of Input Output Hong Kong (IOHK), the development company working on Cardano, the project is a blockchain platform with more advanced features than any other protocol in the market. Cardano’s team has been working in order to create a PoS system that would allow the digital currency and network to become one of the fastest and most scalable blockchain projects in the market. 

It is worth pointing out that Cardano has a different approach compared to other crypto projects in the space since it has been developed taking into account philosophy and peer-reviewed academic research. 

Cardano is considered to be a third-generation cryptocurrency that aims at solving and addressing problems of scalability, interoperability and security. 

Charles Hoskinson

Charles Hoskinson is the co-founder, not only of Cardano but also of Ethereum (ETH) and the CEO of IOHK. Mr. Hoskinson has been working in the space for a long period of time. For example, he started by investing in several crypto startups that were just growing in 2013 and 2014. 

He has been working on Cardano since he launched the project in September 2017, when the bull market in the space was helping Bitcoin reach new all-time highs. Hoskinson wrote Cardano using the Haskell programming language that is used in financial institutions and defense software. 

Hoskinson is a very respected figure in the cryptocurrency market that has been working in different projects, talked at events and helped Cardano as well as Ethereum expand in the market. 

How Does Cardano Work?

Cardano is based on three different organizations that help it evolve and move forward: The Cardano Foundation, IOHK and Emurgo. These three companies are known as the basic pillars of the whole Cardano project.

The Cardano Foundation works by standardizing, protecting and promoting the Cardano project as a whole. They have been working in different countries to be able to promote the use of the Cardano network.

IOHK works as a research and development company that aims at building accessible financial services for individuals and companies. At the moment, the company will be working with Cardano until 2020, and they would have to decide whether they will keep working or not. 

Emurgo works in a different area in order to improve Cardano. Indeed, the firm works as the commercial and venture arm of the whole project. Located in Japan and Singapore, the firm has very close contact with IOHK since they work together as an ecosystem to promote the adoption around the world of the Cardano blockchain. 

Why Is Cardano Considered A Third-Generation Cryptocurrency?

Cardano works in a different way than other digital assets and it offers solutions to many challenges that other digital assets are currently facing. This is the reason why Cardano is considered to be a third-generation cryptocurrency. In this section of the article, we will explain the difference between first, second and third-generation digital assets.


Cardano is considered to be a third-generation cryptocurrency project. This is related to how blockchain networks evolved over time. Bitcoin (BTC), the first virtual currency in the market, was created as a way to send money around the world without having to rely on a centralized authority to confirm and process the transaction. 

However, Bitcoin can almost be only used to send and receive payments. Despite the fact that Bitcoin’s blockchain can also be used to run some smart contracts, this generally requires the use of side-chains. 

Bitcoin is currently handling 7 transactions per second. This is a very important thing to remember about this digital asset. We will talk about it later in the article. 


This is why Ethereum (ETH) appeared trying to solve many of these issues that Bitcoin could not deal with. Vitalik Buterin co-founded Ethereum not only with Charles Hoskinson but also with other important and recognized figures in the space, including Joseph Lubin. Ethereum was not just a simple payment system but also a platform in which companies and individuals could deploy smart contracts. 

Although second-generation cryptocurrency projects such as Ethereum were very useful to provide solutions to individuals and firms, they did have some issues as well. For example, Ethereum was completely congested at the end of 2017 when CryptoKitties were traded through Ethereum’s blockchain. 

Ethereum is processing between 15 and 20 transactions per second, which is far from ideal for a smart contract platform such as this one. 


Cardano wants to solve the issues that affect Ethereum and these kinds of networks through improving scalability, interoperability and sustainability. Through the engineering applied by developers and the scientific philosophy they have, the project is built achieving High Assurance Code. 

One important thing to mention is that Ethereum experienced a hard fork a few years ago in which the network got divided between Ethereum and Ethereum Classic (ETC). 

Hoskinson and the team behind Cardano want to avoid these issues. This is why they pay close attention to quality code, to avoid having a split from the main Cardano network. 

The official site of Cardano explains that they embraced a collection of design principles, engineering and best practices that allowed Cardano to become the network it is today. Some of these principles include the separation of accounting and computation into different layers, the development of a decentralized funding mechanism for future work, the process of learning from the nearly 1,000 altcoins by embracing features that make sense and the exploration the social elements of commerce, among many others. 

Cardano’s page reads as follows:

“From this unstructured set of ideas, the principals working on Cardano began both to explore cryptocurrency literature and to build a toolset of abstractions. The output of this research is IOHK’s extensive library of papers, numerous survey results such as this recent scripting language overview as well as an Ontology of Smart Contracts, and the Scorex project.”

Why Is Important To Properly Scale and How Could Cardano Help?

Hoskinson considers that scaling is more than just the transactions per second experienced by a blockchain network. He believes that it is important for Cardano to also take into account network and data scaling. 

Cardano works with the Ouroboros, a Proof-of-Stake (PoS) consensus algorithm, that is much faster than the traditional Proof-of-Work (PoW) consensus algorithm that Bitcoin is based on. Litecoin (LTC), Ethereum and other cryptocurrencies such as Bitcoin SV (BSV) or Bitcoin Cash (BCH) are also using it. 

PoW is highly inefficient due to the amount of energy consumed by miners. Considering that it is not easy to acquire ASIC miners and specialized equipment to mine these digital assets, decentralization is something difficult to achieve. There are some large miners that are the owners of a large portion of the hash power of the whole Bitcoin network. 

There are five different mining pools on the Bitcoin network that account for 10 percent of the whole hash rate of the Bitcoin network. This is clearly not positive for the oldest and most popular cryptocurrency. 

With PoS algorithms, things work in a different way. Rather than miners, there are validators in the network that will be staking some coins (in this case ADA coins) and bet on the next block that would be validated by the network. If the block gets appended, the stakers get a reward for the work performed. 

The main difference with Bitcoin’s PoW is that PoS consensus algorithms do not need to spend large amounts of energy to validate transactions and the entry barriers are lower (no ASIC or specialized mining equipment is required). 


Now that we know how PoS systems work, Ouroboros will be checking the distribution of the tokens in the ecosystem dividing the world into different epochs that will be then divided into slots. Each of these epochs has a very short lifespan that is equal to 20 seconds. 

This may sound somewhat technical, but it is very easy to understand. The aforementioned slots will then have a leader that is randomly selected. These leaders will then select the new blocks that will get added to the network, in a similar way to what miners in PoW systems do. 

Slot leaders should have at least 2% stake in Cardano. Stakeholders have the possibility to elect the leaders for the next epoch. 

In order to provide better scaling solutions, Cardano is working with a technology called RINA, or Recursive Inter-Network Architecture. The main goal is to create a heterogeneous network providing privacy, transparency and also scalability. 

Ouroboros is being developed by the team behind Cardano to release it to the market as soon as possible. This is one of the most awaited features that Cardano investors and users are waiting for. 

Improving Scalability and Interoperability

As crypto networks expand around the world, they need to deal with scaling issues, which may not be so easy to solve. There are three different ways that Cardano is taking into account in order to help the network scale: Pruning, Subscriptions and Compression. 

In addition to it, developers are thinking about partitioning the blockchain and reduce the amount of data that is needed to be stored. This is expected to reduce the data that users need to deal with. 

Interoperability is also a very important thing for Cardano. At the moment, there are different cryptocurrencies operating in the space. All of them have their features and operate in different ways. However, it is very difficult to connect and use these virtual currencies at the same time. Their networks cannot be connected in an easy way. 

Cryptocurrency exchanges allow users to exchange digital assets and connect the crypto world with the traditional financial environment. Thus, Cardano aims at offering an easier way to connect these cryptocurrencies one with another and the whole blockchain ecosystem to have closer contact with the legacy financial world. 

The way to do that is through sidechains. There are many sidechains in many crypto networks that offer different solutions to digital assets. Through these sidechains, networks would be interconnected and would be communicated allowing for a faster way to have different features from different networks. 

To be connected with banks and other financial institutions, the crypto space must focus on metadata, attribution and compliance. All these things are very important if the whole market wants to be interoperable with traditional financial institutions. Metadata helps these companies and organizations how data is moved among parties, how to make electronic data organization more effective and many other things. 

This is something very dangerous for the cryptocurrency world. Why? Because of blockchain technology. Although distributed ledger technology (DLT) is useful for many different things, it can also be harmful if it is used incorrectly. If private information must be stored on an immutable blockchain network, this data could be accessed by other parties, which is something not good for privacy. 

Cardano wants to solve this issue by analyzing metadata and selecting specific information to be shared on the blockchain. This would provide better information to the traditional financial industry and it would also protect users’ privacy. 

Moreover, as banks need the names of those dealing with digital assets and processing financial transactions, Cardano developers are working so as to provide users with the possibility to decide how to share their data. 

Know Your Customer (KYC), Anti Money Laundering (AML) and Anti Terrorist Financing (ATF) are also important things to take into account. Financial institutions require this information to understand how users are dealing with transactions. By leveraging metadata and providing individuals with the freedom to decide what to do with their data, users can be sure they would be able to have a faster interaction with banks and other institutions. 

Developing And Improving The Cardano Network

Although Cardano continues to grow, it is important to have a sustainable business model that would allow all these projects to be released to the market, sooner or later. Charles Hoskinson and those involved in the Cardano project decided not to conduct an Initial Coin Offering (ICO) when it was launched. 

This is why Cardano decided to create a treasury that is funded with a small part of the block reward. If there is a company that wants to change some things to the ecosystem, it can request a grant from the Treasury. Stakeholders in the Cardano network would later decide whether the grant is given or not. 

As the network gets bigger and larger, more funds will be able to be used by developers. The fees in the network are calculated by this equation:

Transfer Fee = a + b * size of the transaction. 

The “a” letter is equal to 0.155381 ADA, “b” is another constant equal to 0.000043946 ADA/byte and the size of the transaction should be added at the end in bytes. 

ADA Price Prediction

ADA is currently one of the top cryptocurrencies in the market. The virtual currency has a market capitalization of $1.47 billion and a price per coin of $0.056, making it the 12th largest digital currency. 

We have written at UseTheBitcoin an article about ADA price prediction. Many experts consider that the long, mid and short-term is bullish for ADA. However, we need to take into account general market performance, for example, if there is a bear or a bull market. 


Cardano (ADA) is considered to be unique in the way that the digital asset was created, launched and how it is currently managed. However, the Libra cryptocurrency that Facebook is working on could have an impact on countries in which ADA is currently operating. Libra aims at helping users, specifically those in developing economies, to process transactions and have access to financial services. 

During a conversation with Finance Magnates, Charles Hoskinson mentioned that they are working on a payments network for six million people in Addis Ababa, Ethiopia. 

Regarding the possibility of Facebook competing with Cardano, he commented:

“I live this market. And I can tell you, the US government, by definition the most powerful entity in the world, finds it difficult to make payments into Ethiopia. If they’re struggling, how is a private company going to do it.”

How To Buy And Where To Store ADA?

There are many cryptocurrency exchanges in the market that allow investors and users to buy ADA. It is generally hard for beginners to properly know where to purchase the ADA cryptocurrency. This is why we have written a guide for people and investors interested to buy Cardano

One of the exchanges that allows users to acquire this digital asset is Binance, one of the most popular crypto platforms in the world. Binance is also one of the exchanges with the largest trading volume in the market. 

It is possible to purchase ADA with different currencies, including Binance Coin (BNB), Bitcoin (BTC), Ethereum (ETH), Paxos Standard (PAX), TrueUSD (TUSD), USD Coin (USDC) and Tether (USDT). 

There are other cryptocurrency exchanges that would allow users to purchase ADA as well through different pairs. 

Investors that want to hold ADA can do so by sending the funds to a cryptocurrency wallet supporting this digital asset. Exchanges are not good for individuals to store virtual currencies because they can be hacked and affected by attacks. 

Storing digital assets, including Cardano (ADA), properly is very important. This is why we have created a list of the best Cardano wallets in the market. Investors can check them and understand which is the one that suits better to their needs. 

Latest Developments

According to the Cardano Foundation, they have just launched the Shelley testnet website. This is one of the most important developments related to the Cardano network that is expected to help the cryptocurrency expand even further. 

Moreover, the project has also introduced a new roadmap in which they will explain how they are going to be moving from Byron and Shelley. This would allow the networks to become the community-governed network that Charles Hoskinson was thinking about. 

The Cardano official roadmap that was requested by the community reads as follows:

“Cardano is a groundbreaking proof-of-stake blockchain network, being developed into a decentralized application (dApp) development platform with a multi-asset ledger and verifiable smart contracts.”

Cardano wants to be a hundred times more decentralized than Bitcoin, and this is what Charles Hoskinson and Cardano’s development teams are currently trying to do. 

Finally, Weiss Ratings considers that Cardano is an effective and profitable blockchain platform. In a recent Tweet written by the independent rating agency, Cardano is one of the best projects in the space and also one of the cheapest cryptos out there. 


Cardano is one of the most promising and planned cryptocurrency projects in the cryptocurrency market. The network is being developed by experts in different areas that are focused on offering the best services and products they are able to provide. 

The ADA digital asset is one of the most popular in the market and also one of the most valuable, according to CoinMarketCap. 2019 and 2020 are very important years for the whole crypto market and Cardano is certainly going to be among the most revolutionary projects.