Peer-reviewed research - Cardano takes a scientific and research-driven approach to development. The platform's underlying technology is built on rigorous academic research and is subject to peer review. This approach enhances the quality and security of the protocol, making Cardano a more robust platform
Proof of Stake (PoS) consensus - Cardano uses a mechanism called Ouroboros, which aims to be more energy-efficient and environmentally friendly than Proof of work (PoW) systems like Bitcoin
Well known developers and a strong background - Cardano was developed by Charles Hoskinson, who was part of the Ethereum founding team. The project also has a strong background regarding the founders’ collaboration with universities and governments all around the globe, and a strong community

Weaknesses

Limited adoption and ecosystem - As of now (June, 2023), Cardano's ecosystem is still evolving, and it can be considered relatively less mature than other established platforms like Ethereum
Still centralized – Despite its plans to become fully decentralized, the Cardano blockchain has not yet achieved this. This is less attractive in DeFi community

Basic Information

Cardano is a third-generation blockchain platform that runs on the Proof of Stake (PoS) consensus mechanism. Back in 2015, the team behind the project had the idea of creating a blockchain based on peer-reviewed research and evidence-based methods.

Founded by Charles Hoskinson, one of the co-founders of Ethereum, Cardano sets itself apart through its scientific approach, rigorous research, and commitment to peer-reviewed protocols. It tries to address the issues of scalability, interoperability, and sustainability with its unique solutions.

Written in the Haskell language, it uses its own digital currency called ADA.

The goal of the Cardano blockchain is to create a decentralized, principled system that will become transparent and provide quality to all.

Cardano’s mission

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Functioning of the Chain

Cardano architecture

The whole blockchain is based on multiple components, each of which is vital to the proper functioning of Cardano:

Node
Command Line Interface (CLI)
Daedalus wallet
Cardano db-sync
GraphQL API server
SMASH Server

The nodes take care of communications within the blockchain and the successful achievement of consensus, while the command line interface deals with submitting, building, and signing transactions, while also querying the nodes for information and managing cryptographic keys. The Daedalus wallet is used for storing the ADA currency. Cardano db-sync provides an efficient way to find and query historical information within the blockchain thanks to the use of the Structured Query Language (SQL) database, and the GraphQL API server provides an interface to all the blockchain data, with the SMASH server acting as a metadata aggregation server that manages metadata for stake pools.

The Ouroboros protocol

As mentioned above, the system runs on the Proof of Stake (PoS) consensus mechanism, called Ouroboros. It is the first consensus developed through peer-reviewed research led by Prof. Aggelos Kiayias of the University of Edinburgh. It is important to mention that the consensus itself has developed over time, so if you are conducting research, do check that you are reading about the latest version.

The first version of Ouroboros is called “classic,” and it provided Cardano with the basics of the PoS consensus that ultimately went on to become the main competition to the Proof of Work (PoW) consensus mechanism. The mechanism works by dividing time in Cardano into certain periods called epochs, which are then further divided into slots. A slot is the period of time in which a block is created, and slots are put into groups, which further serve to elect leaders for each slot, who are responsible for adding newly-made blocks to the blockchain and passing the leadership onto another leader (randomly selected by an algorithm).

The system is secure as long as a 51% total stake is held by honest participants. Each newly chosen leader must consider the last few blocks as transient in a system known as the “settlement delay,” which allows stakeholders to be offline as long as they sync with the blockchain within the delay period.

Another implementation, Ouroboros BFT (Byzantine Fault Tolerance), improved network communication, allowing the possibility of all nodes not being online all the time. Praos built upon the classic version, providing more security and scalability by improving protection against DDoS attacks or participant corruption. The security aspect was then further developed by the next version, called Ouroboros Genesis, which presented a novel chain selection rule, allowing parties to bootstrap from a genesis block without any further “checkpoints.” The latest version, Ouroboros Chronos, aims to synchronize time within the blockchain more securely, thereby improving the overall security of the blockchain and providing independence to third parties.

EVM side chains and native tokens

In order to help with issues with interoperability, scalability and compatibility, Cardano is working to introduce its own Proof of Concept EVM sidechain, which will be EVM Compatible. The sidechain allows the transfer of data back and forth between Cardano and all side chains, but it is still being developed and the team behind Cardano claims no responsibility for it.

To improve the interoperability and compatibility with other chains, Cardano allows the creation of ERC20-compatible native tokens that have almost the same functions as ADA. The difference between these and Cardano’s ADA is that ADA cannot be mined or burned, and it is the only currency that can be used to pay Cardano’s fees. Cardano´s developers have worked hard to create an environment in which issues with ERC20 tokens can be erased, especially regarding safety. For example, native tokens in Cardano don’t need smart contracts to be transferred, which minimizes the risk of human error when coding.

Plutus smart contracts

Cardano uses its native smart contract language, called Plutus, a Turing-complete language written in Haskell. The smart contracts written in Plutus consist of a part that runs on the blockchain, and a part that runs on the user’s machine. The way Plutus works can be best described in the picture below but suffice it to say that thanks to Plutus, the existence of native tokens without accompanying smart contracts is possible, leading to a greater level of security.

‍The Cardano network and the issues it is trying to solve:
According to the founder of Cardano, Charles Hoskinson, blockchains have three main problems: scalability, interoperability, and sustainability.

In order to solve the issue of scalability, which is an issue that all blockchains are currently trying to deal with, Cardano uses data compression and Hydra, an isomorphic multi-party state channel that simplifies off-chain protocols and smart contract development by directly adopting the layer-1 smart contract system, and which also works on EVM sidechains.

The Cardano blockchain also aims to deal with the lack of interoperability by trying to support cross-chain transfers and multiple token types. It also addresses sustainability by using the Proof of Stake consensus, which is less energy consuming.

The best way to find out more about how Cardano works to solve these issues is by watching this video, made by the author of Cardano itself.

Development History

2014

After leaving Ethereum, Charles Hoskinson and Jeremy Wood began outlining their vision for Cardano. Hoskinson's departure from Ethereum was due to a disagreement with co-founder Vitalik Buterin. He then aimed to secure venture capital and establish a company, while Buterin wanted to maintain a non-profit approach. Consequently, Hoskinson and Wood co-founded IOHK, a company focused on developing blockchain solutions for corporations, governments, and educational institutions

2017

First introduction of Cardano to the public
IOHK collaborated with the University of Edinburgh to establish the Blockchain Technology Laboratory. Led by Aggelos Kiayias, the laboratory employed six post-doctoral and professorial positions, generating a total of 35 jobs. Aggelos Kiayias, who is known for his work on the Ouroboros protocol, played a key role in leading the lab's initiatives. Since then, the blockchains have been developed under the supervision of IOHK, the Cardano foundation and Emergo

2018

Cardano entered into a partnership with the Ethiopian government
The smart contracts testnet, IELE, was launched

2019

A partnership with the Free University of Tbilisi was announced, along with a partnership with the company New Balance

2020

The second phase of Cardano´s development started - known as “Shelley”
Cardano Virtual Summit 2020 – An online conference with almost 10 thousand registered attendees

2021

The Alonzo fork brought smart contracts into the blockchain
Cardano hit its all-time high (3.09 USD)
The Plutus Playground was released, allowing developers to test their smart contract tools
Stake pool operator took over the production of blocks
A partnership with World Mobile was announced

2022

The Vasil hard fork introduced the Basho era
The first Cardano EVM sidechain was introduced
IOHK funded a 4,500,000 USD research hub at the University of Edinburgh

2023

Marlove, a domain-specific language and a set of tools for building smart contracts, was added to the blockchain
The price of ADA fell to 0.24 USD after the SEC sued Binance

One of the strongest benefits of Cardano is its academic orientation, which you can use to your advantage when conducting your own research into the project. As the development of Cardano has continued, the authors have shared all related academic texts to help you get to know the blockchain and how it works, as well as improving your knowledge of blockchains in general. You can find most of the papers here.

Team

There are three main organizations behind the project:

The Cardano Foundation is a non-profit organization based in Switzerland, which aims to promote and standardize the whole ecosystem. You can find the list of people behind the foundation here
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IOHK (Input Output Hong Kong) is a technology and engineering company founded by Charles Hoskinson and Jeremy Wood. It is responsible for developing and maintaining the Cardano blockchain before the governance is passed on to the chain’s users
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EMURGO is a company that takes care of the financial side, bringing commercial opportunities and helping to integrate businesses into the blockchain

One of the main people behind the project is co-founder Charles Hoskinson, a Colorado-based entrepreneur and mathematician. He has founded multiple cryptocurrency start-ups and played a prominent role in the Bitcoin Foundation, as well as being one of the co-founding members of Ethereum.

Another very important person who has given a lot to Cardano is Aggelos Kiayias, a Greek cryptographer and computer scientist who is currently a professor at the University of Edinburgh. He played an important role in creating the Ouroboros protocol, which has had a massive influence on Cardano.

Charles Hoskinson

Governance

As mentioned above, the blockchain is controlled by three main entities, whose aim is to support the development and mission of Cardano. Currently, these companies are in control of most of the blockchain, but they are gradually transferring the control to its users. In 2020, blocks were created by only 8 nodes, and from 2021, 100% of block production lies in the hands of stake pool operators.

In the future, there will be two kinds of proposals that the members will be able to propose and through which the future of the blockchain will be chosen. The first one is a Funding Proposal (FP). The second one is the Cardano Improvement Proposal (CIP).

Funding Proposal (FP)

Proposals are made by the members of the community in order to promote new concepts to the ecosystem, e.g., new integrations or future platform development. All ADA holders can vote on a posted proposal, with voting taking place through a mobile app. To participate, voters must temporarily deposit a certain amount of ADA. Successful proposals will receive funds from the treasury.

Cardano Improvement Proposal (CIP)

The Cardano Foundation utilizes Cardano Improvement Proposals (CIPs) as the main method for proposing new features, gathering community feedback, and documenting design choices in the Cardano ecosystem. CIPs, which are text files in a versioned repository, preserve the history of revisions, acting as a record of significant changes impacting Cardano. At present, the public cannot vote on CIPs, but this function will be implemented in the future.

CIPs undergo a semi-formal processing procedure, and CIP Editors from IOHK, Cardano Foundation, Emergo, and the community hold fortnightly meetings to discuss and evaluate proposals. The meeting notes are publicly available, and authors are encouraged to join and offer their feedback, while discussions frequently take place asynchronously in the CIPs section of the Cardano forum, and/or within Github pull requests.

Use of ADA

ADA, the native currency of Cardano, is used as a payment for all transaction fees and to make deposits. You must hold an amount of ADA to be able to vote, and it is also the only currency in which rewards are distributed.

Revenue & Tokenomics

The maximum supply of ADA is 45 billion. The Initial Coin Offering (ICO) took place from 2015 to 2017. During that time, ADA was sold for approximately 0.0024 USD and the amount available at launch was approximately 31 billion.

The tokenomics of Cardano is based on solving two issues: the necessity to offer rewards for people who participate in the network and funding the treasury. Staking rewards for delegators and stake pool operators come from transaction fees and monetary expansion.

Each transaction fee goes into a virtual pot, with a fixed percentage of the remaining ADA reserves also being added. A percentage of the pot is then sent to the treasury, and the rest is used as an epoch reward.

Treasury funds are reserved for supporting the future development and maintenance of the network, with the treasury system ensuring a self-sustaining financial model for the project.

The organizations behind the project received the following amounts of ADA:

Cardano Foundation, Switzerland: 648,176,76
EMURGO: 2,074,165,644
IOHK: 2,463,071,701

This means that during the public sales that occurred between 2015 and 2017, 25,927,070,538 ADA were sold to the public.

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As of June 2023, 35,921,478,501 ADA have already been created. According to cardanoscan.io in June 2023, a total amount of 22,79 billion ADA were staked.

The supply schedule for ADA

The Uniqueness of the Chain

Cardano is proud to be a protocol that adopting a scientific approach to its development. The use of mathematical specifications, property-based tests, and proofs ensure functional correctness while instilling confidence in the users that their digital funds are being safely managed. Cardano's development activities and technical specifications are also publicly available, promoting transparency.

Another great aspect of Cardano is its Proof of Stake consensus called Ouroboros, which was developed with a strong academic focus. It establishes rigorous security guarantees because it was delivered with several peer-reviewed papers presented at top-tier conferences, and in multiple cybersecurity and cryptography publications.

Unlike traditional blockchains that rely on hard forks for upgrades, Cardano utilizes a unique approach called hard-fork combinator technology. With this method, Cardano achieves smooth transitions to new protocols without erasing the history of previous blocks or causing disruptions for end users. Instead of implementing radical changes, the hard-fork combinator allows for seamless protocol updates while maintaining continuity and preserving the integrity of the blockchain. This innovative approach ensures a streamlined upgrade process for Cardano, enhancing its efficiency and the user experience.

How the Network is Secured

Cardano utilizes a Proof of Stake (PoS) consensus algorithm called Ouroboros. Unlike Proof of Work (PoW) algorithms that require extensive computational power, PoS relies on the stake held by network participants. Ouroboros has been peer reviewed and analyzed extensively by experts, further enhancing its security and reliability.

The blockchain was developed by using Haskell, a secure functional programming language that promotes the creation of systems using pure functions. This approach allows for easy isolation and testing of individual components, enhancing the overall security of the platform. Haskell's advanced features offer a wide array of methods to ensure code correctness, including the ability to base implementations on formal and executable specifications. By leveraging these capabilities, Cardano can employ extensive property-based testing and simulate tests to further the reliability and robustness of its codebase. The use of Haskell in Cardano's development not only prioritizes security but also underscores the platform's commitment to implementing rigorous measures for maintaining code quality and correctness.

Cardano prioritizes rigorous peer review and academic research in its development process. The platform's codebase and protocols undergo extensive scrutiny by a team of experts before implementation, ensuring that vulnerabilities are identified and addressed. This approach to security and scientific rigor provides a solid foundation for the resilience and trustworthiness of the Cardano blockchain.

At present (June,2023), there is a bug bounty program running on Hackerone, and not only are the technologies behind the blockchain reviewed by academics, but the code of the blockchain has also been audited.

Nodes

Multiple stake pools operate within the Cardano network, each controlling the aggregated stake of their owners and other participants, known as delegators. Random selection determines the appointment of slot leaders from these pools, with the probability of being elected as a slot leader and producing a new block that is accepted by the blockchain being proportional to the stake held by a pool. To ensure fairness and prevent an imbalance where a few large pools dominate the majority of stake, Cardano implements an incentive system. This system discourages delegation to pools that already control a significant portion of the total stake.

During the validation process, the slot leader plays a crucial role in verifying a transaction's integrity, verifying that the sender has provided sufficient funds to cover the transaction, and that all specified parameters have been met. Once these requirements have been satisfied, the slot leader proceeds to incorporate the transaction into a new block, which is subsequently linked to other existing blocks in the chain, thereby extending the blockchain and ensuring the transaction's inclusion in the ledger. By performing these essential validation steps, the slot leader contributes to the secure and reliable operation of the blockchain network.

Validator node

In order to become a validator on Cardano, you must meet a few minimum requirements:

Windows, MacOS, or Linux for your operating system
An Intel or AMD x86 processor with two or more cores, at 1.6GHz or faster (2GHz or faster for a stake pool or relay)
24GB of RAM
At least 150GB of free disk space (250GB recommended for future growth)

You also need 500 ADA as a deposit that can be returned to you, and the ability to pay transaction fees. Cardano also offers you the chance to pledge a variable amount of ADA as proof of your dedication to the pool. In reality, you also need to have enough delegators to create a block in an epoch. Roughly speaking, you need approximately 1-2 million ADA (either yours or delegated ADA).

If you wish to become a validator, follow these instructions.

Staking

You can either stake your ADA through CEXs like Binance or Kraken, or through the Yoroi and Daedalus wallets.

In order to calculate the profits you can make from being a delegator or validator, you can use the official calculator.

Road Map

Unlike other blockchains, Cardano has a unique system of 5 themes that are all named after famous historical figures:

Byron - Foundation establishment
Shelley - Decentralization
Goguen - Smart contracts
Basho - Scalability
Voltaire - Governance

2017 - Byron:

The main focus of Byron was to establish the foundation of the project. During this stage, Cardano worked as a federated network on which block production and transactions were provided by Input Output Global (the company behind Cardano) and Emurgo (the company that oversees Cardano´s use in commerce). The Daedalus wallet, the first official desktop wallet for ADA, and Yoroi, a light wallet designed for daily transactions, were also both introduced. The Byron phase also provided users with a Block Explorer; a tool used to browse through the blockchain.

2020 - Shelley:

The Shelley era of Cardano represented a period of growth and development for the network. It focused on optimizing decentralization by gradually shifting towards community-run nodes. Shelley also introduced a delegation and incentives scheme, where users could stake their ADA and be rewarded for participating honestly. By the end of the Shelley era, Cardano aimed to be significantly more decentralized than other blockchain networks.

2021 - Goguen:

The Goguen era of Cardano introduced smart contract functionality, enabling the creation of decentralized applications (DApps). It included Plutus, a purpose-built smart contract development language, and Marlowe, a user-friendly language for financial contracts. Goguen also introduced a multi-currency ledger, allowing the creation of new tokens and facilitating integration with multiple cryptocurrencies.

2022 - Basho:

At the time of writing (June 2023), Cardano is in the Basho era. This era is focused on optimizing the network's scalability and interoperability. It has introduced sidechains to increase capacity and support experimental features. and parallel accounting styles will be implemented to enhance interoperability and accommodate new use cases. The goal is to make Cardano one of the most high-performance and flexible blockchain platforms, ensuring sustainable scalability and reliability.

Date unknown - Voltaire:

The Voltaire era of Cardano will complete the network's transition to a self-sustaining system, introducing a voting and treasury system that will empower stakeholders to influence network development. With decentralized governance and funding, Cardano will be managed by the community, ensuring its growth and evolution.

You can find more detailed information about each era here.

Ecosystem

Cardano ́s philosophy is to create a treasury fund which will support the development of the ecosystem and the creation of new dApps. The IOHK company is also very active in Africa and has already entered into some agreements that will rely on the Cardano network.

Protocols to mention:

Minswap - one of the biggest DEXs
Sundae Swap - DEX
Revuto - subscription management
Meld - asset lending protocol
Project Catalyst - development fund support, run by the IOHK. Developers can propose their ideas to ADA holders, who then vote. If the project gains enough votes, it will receive the funding

Community

Cardano has a very friendly community and there is a huge amount of information available on the internet. Their Discord is active and when you need help, you don’t have to wait long for an answer. Cardano´s X has more than 1.3m followers and is active on a daily basis.

Another great source of information is the IOHK YouTube channel, where explanatory videos are posted regularly with a focus on certain parts of the blockchain. You can also find news regarding the blockchain, and interviews with important people.

The owners of ADA are active on Cardano´s forum, where everything from the functioning of the blockchain to its future development is discussed.

Partners

As mentioned above, Cardano has three strong organizations behind it: IOHK, Cardano foundation and EMURGO. Cardano has also entered into multiple partnerships with governments (Ethiopia), universities (the University of Edinburgh, the Free University of Tbilisi), and non-crypto companies (New Balance, World Mobile).

Where to Buy

ADA can be bought on almost all centralized exchanges (CEXs). The easiest way to buy ADA is through Binance or Coinbase.

If you prefer to buy ADA from a decentralized exchange (DEX), you can use Minswap, Sundae Swap or Wingriders.

Supported Wallets

Ledger Nano X – The most widely used hardware wallet (HW) on the market. When paired with your software wallet (SW), you get more security for your cryptocurrencies
Trezor Model One – Trustworthy hardware wallet
Daedalus – A SW desktop wallet that is supported by the IOHK and recommended by the organization itself
Yoroi wallet – Another wallet that is supported by the companies behind Cardano

You can find the whole list of wallets that can store your ADA here.

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Analyst Opinion

From my point of view, Cardano is a really interesting project with an even more interesting history. It has come a long way since 2015, and thanks to the Ouroboros Proof of Stake consensus, it is a blockchain that is both reliable and trustworthy. What I especially appreciate is the strong background of the blockchain in terms of academic research, which only makes it appear even more reliable. Also, the three companies behind the project add an extra layer of trustworthiness that is all too often missing within crypto space and especially DeFi.

On the other hand, despite the fact the development of the chain began in 2015, it hasn’t moved along as quickly or effectively as other projects, which is a pity. I believe that a large part of this is because the blockchain itself is still very much in the hands of the three founding organizations, which has provided a lot of needed support, but has also damaged it to an extent, as decentralization is still quite a long way off.

The ecosystem itself isn't as good as in other blockchains, though this will hopefully change over time following the introduction of smart contracts back in 2021. I am personally interested to see how successful the development team will be. As of now, Cardano is certainly trustworthy, but it remains a small project with a small ecosystem, which could be perceived negatively by some people.