What is Cardano? ADA explained

• Updated

What’s driven the ADA coin and the Cardano blockchain to be the eighth-largest crypto?

The Cardano cryptocurrency logo – Photo: Shutterstock


One of the biggest cryptocurrency success stories over the last couple of years is the growth of Cardano and its associated token, the ADA coin. Seemingly from out of nowhere, ADA exploded to become the eighth largest coin by market cap, beaten only by the long-established crypto giants of Bitcoin, Ether, BNB and XRP, and the Tether, Binance and USDC stablecoins.

However, like most of these things, it has taken it quite some time to become an overnight success, and it hasn’t stopped changing. If you are wondering what is Cardano, or what is ADA coin, here are some answers for you. 

What is Cardano?

Cardano is a blockchain, much like Ethereum or Bitcoin. While many new blockchains promise new and exciting features, something that is notable about Cardano is the fact that it does not really do anything too different to what other blockchains do. What has generated such a massive interest in it and the ADA coin recently is not so much what it does, but how it does it. The organisation behind the technology likes to emphasise how much it bases what it does on research. It wants people to notice the academic nature of its work, and issuies its reports in peer reviewed papers, which will, it hopes, encourage them to make use of it themselves. 

Cardano has been around since 2017, when it was founded by Charles Hoskinson, who had previously been a co-founder of Ethereum. This kind of experience would prove useful as he attempted to set up his own blockchain. The chain itself is, in effect, run by three separate companies. These are:

The three companies behind Cardano

Prior to the launch in early 2017, Cardano held an Initial Coin Offering (ICO) that saw it raise $62.24m. Around 31 billion ADA were up for grabs, with 26 billion going to investors and the remaining five billion going to people who worked for the Cardano Foundation, IOHK, and Emurgo. 

DeFi and ADA

The idea behind the Cardano blockchain is linked in with decentralised finance, or DeFi for short. This is designed to allow people who do not have bank accounts access to financial services, as well as enable people to transmit money around the world more cheaply. Many deals on the blockchain are carried out using smart contracts, which are computer programs that execute themselves once certain conditions are met. 

Every blockchain needs a cryptocurrency, and Cardano’s is called ADA. This coin allows people who hold it to vote on proposals concerning the governance of the blockchain. The coin can also be traded on a range of exchanges. People who hold ADA can manage the blockchain, and they can allocate their voting rights in return for more ADA coin rewards.

Cardano itself makes use of two layers. The first, Cardano Settlement Layer (CSL) records transactions and transfers the ADA coin, while the second, Cardano Computational Layer (CCL) employs smart contract technology that developers can make use of to move funds. There are also three sorts of users who can link in on the network. These are mCore nodes, which take part in governing the Cardano blockchain, relay nodes, which transfer data between the mCore nodes and the internet itself, and edge nodes, which create cryptocurrency transactions. 

Mining ADA

One of the interesting aspects of ADA is how to mine ADA. Traditionally, cryptos have been mined using proof-of-work, which means people have to solve increasingly complex computations to gain access to them. This uses a lot of electricity which is very expensive and, in turn, increases carbon emissions, making the process environmentally unfriendly. Proof-of-stake, on the other hand, allows someone to mine based on how many tokens or coins they already hold. This makes it easier, cheaper, and more environmentally friendly. 

The algorithm used for ADA mining is called Ouroboros, named for the mythical “serpent that eats its own tail”.  It works by dividing time into two measurements, epochs and slots. Epochs are overarching periods, up to five days in length, while slots consist of 20-second blocks within those epochs. Every slot has someone in charge of it, selected randomly, and they put blocks into the Cardano blockchain. Every time an epoch ends, the previous epoch’s slot leaders vote on who should be the next one’s slot leaders. There are two sorts of blocks used on the Cardano chain. These are:

Types of blocks on Cardano

Block leaders are rewarded for their efforts, making a share of the fees from the transactions that take place. These are paid in ADA. Only mCore nodes can become slot leaders, with the payment serving as an incentive for people to plug into mCore nodes and to take part in the work on the blocks. 

There are currently 33.75 billion ADA in circulation, out of a total supply of a little more than 34.512 billion. 

Cardano, Alonzo and Vasil

Something that cryptocurrencies do is change. This is because as technology updates and adjust, platforms need to change to keep themselves up to date or else they could face other systems coming along and potentially stealing their customers. One of the most common ways for a crypto network to change things up is to institute something called a hard fork – and Cardano has put in two hard forks in the last 12 months. 

A hard fork is a process where a blockchain makes all the transactions it had previously deemed valid to be invalid and all the transactions it had previously ruled as invalid to be valid. It is, in effect, a permanent, unchangeable modification on the blockchain. 

When a hard fork is set up, people have to download and install a new version of the software. The previous version of the blockchain still exists, which means there is also the potential for a new cryptocurrency. This is what makes it different to a soft fork, which changes the protocol and effectively erases the original version.

Hard forks can be created as a way to counteract bugs, stop hackers stealing crypto, or simply as a way to make the network work more efficiently. They can be rather controversial, though – for instance, crypto miners will have to change the way they work in order to get hold of the coin. Also, people who hold the crypto that is being hard-forked might not want to have the newer version. 

Anyway, in September 2021, Cardano underwent the Alonzo upgrade, which involved a hard fork. The key point of this was that it would lead to full smart contract functionality on the blockchain. Smart contracts are computer programs that automatically execute as soon as certain conditions are met. They are often seen as a crucial part of blockchain technology and transactions – and the Cardano blockchain had not really supported them previously, at least not on the public blockchain. 

The system was not done with its upgrades, though and, in April 2022 it announced that it would be setting up another hard fork, this time called Vasil

Vasil is supposed to let people use the smart contracts that Alonzo gave the system in a way that is quicker, more efficient and, potentially, cheaper. The idea is to slightly alter the programming of Plutus, the smart contract platform that Cardano uses, in order to make it easier for users to do things involving smart contracts off the blockchain. This, in theory, makes things quicker and thus lowers transaction fees.

While the Vasil update was first announced in April, it was set to go live on 29 June. However, a range of events – including, but not limited to, the market turmoil induced by the depegging of the UST stablecoin and the collapse of the associated LUNA cryptocurrency in May – caused the date of the launch to be delayed until late July. 

Why is Cardano called Cardano? Why is ADA called ADA?

Cardano is named after the Renaissance mathematician Gerolamo Cardano, and ADA is named after Ada Lovelace, who was arguably the world’s first computer scientist.

There have also been updates to the system, including one called Byron, after Lord Byron, the romantic poet and father of Ada Lovelace, one called Shelley, after Percy Bysshe Shelley, the contemporary of Lord Byron’s, and another called Voltaire, after the French Enlightenment writer and philosopher.

Alonzo is named after computer science pioneer Alonzo Church, while Vasil's namesake is Vasil Stoyanov Dabov, a mathematician and Cardano ambassador, who died in 2021. 


What is ADA coin used for?

ADA coin is used to make decisions based on the governance of the Cardano blockchain. It can also be traded and staked. It also serves as payment for people who upload Main Blocks and Genesis Blocks on the blockchain.

What is the difference between ADA and Cardano?

ADA is the cryptocurrency, Cardano is the blockchain. While you’ll hear people talk about the Cardano coin or the Cardano cryptocurrency, this is not really accurate. It is ADA that is the coin, which has been driven to new heights recently. 

How to get ADA coin

You can get ADA coin by signing up to be an mNode on the Cardano blockchain and then serving as a slot leader. You can also trade it and buy it on exchanges. While it is not available through Currency.com yet, we will let you know as soon as it is.

Regardless, we do need to tell you that cryptocurrencies, like ADA, can be incredibly volatile. You should always do your research before investing in them, remember that prices can go down as well as up and that past performance is no guarantee or indicator of future results. You should also never invest more money than you can afford to lose. 

Further reading

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