As of October 6, 2023, Cardano, represented as ADA, stands as the eighth most significant cryptocurrency with a market capitalization of slightly over $9 billion. This figure accounts for 0.817% of the global cryptocurrency industry valued at $1.08 trillion. ADA has asserted itself as a critical player in this evolving digital currency landscape. This blog will deeply examine the roots of Cardano, the ADA cryptocurrency, its evolution, and operation.
Understanding Cardano: Founding and Creators
Cardano is a decentralized and peer-to-peer blockchain platform that is open-source, introducing transactions via its proprietary cryptocurrency, ADA. The Cardano project was unveiled in 2015 by Charles Hoskinson, a co-founder of Ethereum. The motive behind Cardano was to address the issues of earlier blockchain systems.
The journey of Cardano began in 2015 when Charles Hoskinson and Jeremy Wood instituted IOHK (Input Output Hong Kong), a firm specialized in research and development. The mission was to leverage academic research that has undergone peer-review to build a blockchain that is secure and capable of scaling. After rigorous R&D, the Cardano blockchain made its debut in September 2017.
Technical Foundation: Ouroboros, Plutus, and the Cryptocurrency ADA
One feature of Cardano setting it apart is its consensus protocol, Ouroboros – a proof-of-stake (PoS) algorithm. In contrast to Bitcoin’s proof-of-work (PoW) consensus, users get to validate transactions and earn rewards through the PoS Ouroboros feature. The creators of Cardano argue that Ouroboros boasts of being the first PoS protocol with security based on peer-reviewed research.
The network uses Haskell for its native smart contract language Plutus. ADA serves as the native cryptocurrency in the Cardano platform, easing value transfer, staking, governance, and transaction fees. A common figure of 45 billion is set as the maximum supply of ADA, with the currently circulating amount being 35 billion. Since launching, ADA has processed over 76,098,522 transactions.
Riding the Crypto Market: Cardano’s Position in the Blockchain Network
Data available on October 6 shows that 3,577,963 unique addresses hold ADA. Ten of the most prominent holders hold 8.73% of the total ADA, the top 20 control 10.37%, the top 50 have 15.09%, and around 20.74% is held by the top 100 ADA addresses. The largest address, titled “Ae2td,” possesses 1.65 billion ADA, equating to 3.67% of the total supply.
At present, every ADA trades at $0.26, a 91% dip from its all-time peaks of $3.09 in September 2021. The U.S. Securities and Exchange Commission (SEC) has categorized ADA along with a few other digital currencies as possible securities or investment contracts. In response, IOHK dismissed these recent SEC claims which alleged ADA as an unregistered security, highlighted various inaccuracies in the claims, and proclaimed that ADA is not a security under U.S. law.
Despite the hurdles, Cardano has held its ground among primary blockchain platforms like Ethereum and other first-layer (L1) networks. In the realm of decentralized finance (defi), Cardano ranks as the 15th most prominent chain in terms of total value locked (TVL). On October 6, the network’s TVL is $163.26 million, and the chain has a total of 27 unique defi protocols. When all non-fungible token sales are accounted for, Cardano is the sixth largest chain with $611,361,634 in NFT sales.
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Frequently asked Questions
1. What is ADA and how does it relate to Cardano’s Proof-of-Stake blockchain network?
ADA is the native cryptocurrency of the Cardano blockchain network. It is used as a utility token to power various functionalities within the network, such as transaction settlements and decentralized applications. Cardano’s Proof-of-Stake consensus mechanism, on the other hand, is the underlying protocol that ensures the security and integrity of the network by allowing ADA holders to participate in the block validation process.
2. How does Cardano’s Proof-of-Stake differ from other blockchain consensus mechanisms?
Unlike traditional Proof-of-Work mechanisms utilized by networks like Bitcoin, Cardano’s Proof-of-Stake consensus mechanism eliminates the need for energy-intensive mining. Instead, it allows ADA holders to participate in the block validation process based on the amount of ADA they hold, thus reducing the environmental impact while maintaining network security.
3. What are the advantages of Cardano’s Proof-of-Stake approach?
Cardano’s Proof-of-Stake approach offers several advantages. Firstly, it significantly reduces the energy consumption associated with mining, making it a more sustainable alternative. Additionally, it allows for faster transaction confirmations and improved scalability compared to Proof-of-Work systems. Furthermore, Proof-of-Stake encourages active participation from ADA holders, making the network more decentralized and secure.
4. How does Cardano’s Proof-of-Stake ensure network security?
In Cardano’s Proof-of-Stake, ADA holders can participate in the block validation process by staking their tokens. The likelihood of being chosen to validate a block is proportional to the amount of ADA staked, incentivizing users to hold and secure their tokens. Furthermore, the protocol incorporates a system of penalties for malicious behavior, discouraging any attempts to compromise the network’s security.
5. How does Cardano’s Proof-of-Stake address the issue of scalability?
Cardano’s Proof-of-Stake tackles scalability by utilizing a layered architecture. The main chain, called the settlement layer, handles ADA transactions and provides security via the Proof-of-Stake consensus. On top of this, the network employs a separate computational layer where smart contracts and decentralized applications can be built, allowing for greater flexibility and scalability without congesting the settlement layer.
6. Is Cardano’s Proof-of-Stake environmentally friendly?
Yes, Cardano’s Proof-of-Stake is considered to be environmentally friendly. By eliminating energy-intensive mining, the network consumes far less energy compared to Proof-of-Work systems. This makes Cardano a sustainable and eco-friendly blockchain alternative, minimizing its carbon footprint.
7. What are the future plans for Cardano’s Proof-of-Stake network?
Cardano has ambitious plans for its Proof-of-Stake network. The team aims to enhance the functionality and security of the network through various upgrades and protocol updates. Additionally, ongoing research and development efforts are focused on integrating smart contract capabilities, interoperability with other blockchains, and increasing scalability to accommodate a wide range of use cases on the Cardano platform.