Cardano, the blockchain created back in 2015, aimed to address the challenges of scalability
and energy efficiency in Bitcoin and Ethereum.
The chain itself launched in 2017 and has become one of the biggest layer 1 players
out there.
Let’s answer the question what is Cardano starting with ADA!
Cardano’s native token is ADA, and it’s used to pay for transactions on the network.
It’s actually named after Ada Lovelace, who’s a 19th-century mathematician and the
first computer programmer.
The total supply of the token is 45 billion, and around 35 billion of those are in circulation
right now.
Any native token needs a good chain to run on, so what exactly does the tech behind the
Cardano network look like?
Cardano is split into two layers.
The first is called the Settlement Layer.
It keeps track of all account balances and how many tokens they have, including ADA.
Basically, this layer is Cardano’s decentralized ledger.
The second layer is called the Computation Layer, and it’s where all the computation
and calculations behind transfers happen.
It’s also where smart contracts run on the Cardano network.
By splitting its network into two parts, Cardano allows people to continue transferring tokens
and settling payments even as the Computation Layer is being upgraded.
We’ve already seen several of these upgrades, like the Alonzo hard fork that brought smart
contract functionality to Cardano back in September 2021.
Smart contracts on Cardano use a programming language called Plutus.
It’s a functional programming language, which means it’s fully based on functions
that always stay the same and provide the same output given a certain input.
So why is that important?
Well, if you’re writing a smart contract in Plutus, it’s easier to test because it
will always run the same.
You’re not writing code that can change state, and because of that, Plutus smart contracts
are generally more bug-free and less prone to weird hacks that happen because of loopholes
in the code.
That sounds like exactly what you need if you’re writing dApps that handle billions
of dollars!
Cardano achieves consensus with its own proof-of-stake consensus mechanism called Ouroboros.
It allows people to earn rewards in two ways by helping secure Cardano, either by running
their own stake pool or by delegating their stake to an existing stake pool.
It essentially works the same way as other proof-of-stake chains.
If you don’t have the resources to run your own validator, you can just delegate your
stake to another validator to help secure the network and still earn rewards.
Pro tip: you can easily stake Cardano with Exodus.
There’s a few things about staking with Cardano that make it different than other
chains.
First there’s no lock out period.
When you stake, you are actually staking your Cardano address.
All the ADA tokens located at your address are considered staked.
And with no lockout period, you’re free to continue transacting with your tokens.
When it’s time to distribute your rewards, a snapshot will be taken and your ADA balance
at that time will be used to calculate your rewards.
There’s also no risk of slashing.
Normal proof-of-stake chains discourage malicious validators from messing with the chain by
punishment through something called slashing.
If a malicious validator tries to publish a fake block, part of their stake is slashed
and lost forever.
Cardano’s consensus mechanism works without any punishment, so there’s no risk of your
stake being slashed.
Instead of discouraging bad behavior through punishments, Cardano uses game theory and
math-based models to ensure honest actors are rewarded properly while dishonest ones
gain nothing.
That’s pretty much a general overview of the tech behind Cardano.
The thriving ecosystem that makes use of this tech began to form after Cardano added support
for smart contracts.
Since then, we’ve seen NFT projects launch on Cardano, and the platform now has its fair
share of DEXs, lending protocols, and other DeFi apps.
The smart contract scene on Cardano is still new, and the chain is under heavy development.
Its future is mainly focused on two things: governance and scaling.
The Cardano team is working on making the chain self-sustaining by introducing a decentralized
voting and treasury system, which will leave control of Cardano in the hands of the community.