What is Cardano (ADA) and How Does it Work?

Cardano is a decentralized Proof-of-Stake (PoS) blockchain, aiming to be a more efficient alternative to Proof-of-Work (PoW) networks. It uses its own cryptocurrency, ADA, to process transactions.

While Cardano supports many types of transactions, its ultimate goal is to become the “Internet of Blockchains,” It seeks to create an ecosystem where different blockchains can interact seamlessly.

Cardano describes itself as a platform for innovators, changemakers, and visionaries, positioning itself as an upgrade from Ethereum. Another major goal of Cardano is to provide banking services to those without access to traditional banking.

Cardano’s development process stands out because it’s based on peer-reviewed research and follows an evidence-based approach. This is a key difference from many other cryptocurrencies, which often develop quickly. In contrast, Cardano’s development is slower and more deliberate, allowing developers more time to identify and address potential threats.

What is Proof-of-Work?

In decentralized cryptocurrency networks, it’s essential to prevent double-spending of funds without relying on a central authority like Visa or PayPal. Cryptocurrencies achieve this through “consensus mechanisms.” The first such mechanism is Proof-of-Work (PoW), which became popular with Bitcoin mining.

• Proof-of-Work requires significant computing power provided by miners worldwide who compete to solve complex mathematical problems.
• The first to solve the problem will update the blockchain with the latest verified transactions and be rewarded with cryptocurrency.

What is Proof-of-Stake?

In Proof-of-Stake (PoS), instead of competing through computational power, network participants known as validators stake their investments. Validators don’t validate transactions with their computing power but by staking ADA tokens.

• The network selects a winner based on the amount of ADA each validator holds in the staking pool and how long they’ve held it. The validator with the most stake is rewarded.
• Once the winner validates the latest block of transactions, other validators verify its accuracy. When enough validators agree, the blockchain is updated.
• All participating validators receive ADA token rewards, which are distributed based on the amount of ADA staked for each one.
• Becoming a validator is a significant responsibility. If you don’t want to run a stake pool, you can still earn ADA rewards by delegating your tokens to someone else’s pool.

Cardano was created in 2015 by Charles Hoskinson, one of Ethereum’s co-founders, and officially launched in 2017. It positions itself as an alternative to Ethereum because both platforms, such as smart contracts, are used for similar purposes, and both aim to build decentralized systems.

Cardano aims to be a platform for developing decentralized applications (DApps) with multi-asset ledgers and verifiable smart contracts. It also supports cross-chain asset transfers through sidechains (off-chain transactions). Cardano is also exploring ways for institutions and individuals to selectively provide transaction and identity metadata to make cryptocurrencies more practical for everyday transactions.

Cardano’s main use case is as a cryptocurrency, with ADA serving as its native token within the Cardano settlement layer. Cardano is sometimes referred to as the “Japanese Ethereum.” Last year, reports indicated that ADA could be accessed through ATMs and debit cards in Japan.

Cardano’s Features: High Energy Efficiency and Scalability

• Hoskinson claims that Cardano is 1.6 million times more energy-efficient than Bitcoin.
• Cardano was designed to be highly scalable, processing transactions much faster than Bitcoin or Ethereum 1.0 (Ethereum Classic). Currently, Cardano can handle over 250 transactions per second.
• The PoS model allows Cardano to charge only small transaction fees on its network.
• Cardano is also eco-friendly. Compared to energy-hungry PoW blockchains like Bitcoin and Ethereum, Cardano’s PoS model cuts energy use by 99%.
• Every Cardano holder can earn passive income by staking ADA tokens, which is a straightforward process—simply lock your tokens in a wallet.
• Cardano’s two-layer core structure makes it more efficient to mine compared to other cryptocurrencies.
• Although Cardano is much smaller than Ethereum and competes for the same market, it’s also facing stiff competition from Solana, which is larger and growing faster.
• While low prices might seem advantageous, they also suggest lower demand for network space. However, this could change with smart contracts, which require more storage space rather than more payments.
• If a stake pool’s server goes down when it is supposed to generate a block, the reward will be lost.

Cardano NFT

Cardano NFTs, or CNFTs, can be bought and sold on NFT marketplaces like JPG Store, CNFT.IO, Cardano Cube, Tokhun, and AdaNFT.

What makes Cardano NFTs unique:

• No need for smart contracts to create NFTs: The Cardano blockchain uses the extended UTxO (eUTXO) model, making NFT creation easy. These NFTs share the same security features as other Cardano-based tokens;
• Cost-effective batch transactions: The eUTXO model supports batch transactions, allowing creators and users to buy and sell multiple NFTs in one go while paying just one transaction fee;
• Permanent connection between NFTs and metadata: Metadata is a core part of transactions, making NFTs unique;
• Low fees and fast transactions: The basic transaction fee is fixed, and all transactions, including those with NFTs, follow the same fee structure.

Source: CoinCuNews

Cardano Staking

According to Cardano’s official website, ADA cannot be mined like other cryptocurrencies. Instead, it can only be purchased from exchanges like Gate.io. In Cardano’s PoS system, staking determines a node’s ability to create blocks. A node’s stake is equal to the amount of ADA it holds over time. Staked ADA cannot be used or spent, as it’s held as collateral for validation activities. Users who stake ADA earn rewards in the form of transaction fees, which are distributed based on how much ADA they’ve staked.

The ADA held in the Cardano network represents each holder’s stake, which is proportional to the amount of ADA they own. The ability to delegate or stake ADA is essential to Cardano’s operation.

ADA holders can earn rewards in two ways: by delegating their stake to a pool operated by others, or by running their own pool. The amount of stake delegated to a pool determines which node the Ouroboros protocol selects to add the next block. The chosen node receives token rewards.

The more stake a pool has (up to a certain limit), the higher its chances of being selected to add the next block. All participants in the pool share the rewards.

What is Stake Delegation?

Delegation allows ADA holders to assign their stake to a pool, enabling them to participate in the network and earn rewards even if they don’t have the resources or ability to run their own node. Rewards are based on the amount of stake delegated.

Tokenomics

ADA is the native token of the Cardano blockchain, using a Proof-of-Stake (PoS) consensus mechanism, which gives it advantages in energy efficiency and transaction speed compared to many other blockchains. The total supply of ADA is capped at 45 billion tokens. ADA’s main uses include paying transaction fees, participating in network governance, and staking to earn rewards. As the Cardano ecosystem grows, ADA’s use cases are also expanding, especially in the areas of decentralized finance (DeFi) and non-fungible tokens (NFTs).

• Public sale: 25.9 billion ADA (57.6%)
• Reserve: 13.9 billion ADA (30.9%)
• IOHK: 2.46 billion ADA (5.5%)
• EMURGO: 2.07 billion ADA (4.6%)
• Cardano Foundation: 640 million ADA (1.4%)

Snapshot of the Cardano Ecosystem

Minswap

Minswap is a multi-pool decentralized exchange (DEX) built on the Cardano blockchain, offering a secure and low-cost platform for trading tokens. Here are some key stats about Minswap within the Cardano ecosystem:

1. Total Value Locked (TVL): Close to $51.39 million
2. Market Cap: Around $17.93 million
3. Tokens Staked: About $6.47 million

Liquidity Mining

Minswap offers liquidity pools for several tokens, allowing users to deposit tokens and earn fees when others trade them. Some of the main liquidity pools include:

1. MIN-ADA
2. SNEK-ADA
3. WMT-ADA
4. AGIX-ADA

Token Staking

Minswap’s native token, MIN, can be staked for an annual return of approximately 7.36%. As of now, about 4.0398 million MIN tokens have been staked across around 3,338 wallets.

Stablecoin Pairs

Minswap provides trading pairs for native Cardano stablecoins like iUSD, giving users a way to trade stablecoins within the Cardano ecosystem.

Overall, Minswap is the largest DEX on Cardano, leading the way in terms of trading volume, liquidity, and user engagement. It plays a crucial role in driving the growth of DeFi on Cardano. As the Cardano ecosystem continues to mature, Minswap is set to play an even bigger role in the future.

Astarter

Astarter is a DeFi protocol within the Cardano ecosystem, incubated and supported by EMURGO & ADAVERSE, two official commercial incubators. In addition to offering standard DEX, Launchpad, and money market services, Astarter allows any DeFi project on Cardano to create products and services tailored to their needs and raise funds.

Astarter acts as a hub for DeFi infrastructure and is one of the first DeFi protocols and decentralized applications (dApps) in the ecosystem. It currently offers four main services: Launchpad, DEX, money market, and technical service platforms. As a DeFi-focused decentralized protocol, Astarter provides services such as DEX, lending, and Launchpad to regular users, while also offering on-chain data, oracles, and modular microservice architecture support to other DeFi projects. Cardano’s scalability, usability, and innovative features like EUTXO enable Astarter to offer low-cost on-chain transactions and data services. Its goal is to provide fair, secure, and accessible open financial services to expand the possibilities of the Cardano ecosystem and meet the growing demand for DeFi applications.

Launchpad

A Launchpad typically serves as a financing hub within a blockchain ecosystem, connecting project developers with investors. Although the two sides use the Launchpad for different purposes, their needs align perfectly. Astarter’s Launchpad supports various fundraising formats like IDOs and ISPOs for Cardano projects:

• Launchpool: An innovative ISPO fundraising method that eliminates the risk of capital loss for investors.
• IDO: A decentralized and fair way to raise funds and promote IDO projects on Cardano.

Astarter’s diversified fundraising model offers critical support for the development of early-stage projects within the Cardano ecosystem, complementing traditional incubators and investment institutions.

ADEX

ADEX takes advantage of the high performance and low transaction fees offered by Cardano’s underlying blockchain, using a dual trading model of “AMM + order book.” This allows users to trade using an AMM or place limit orders, all while leveraging the EUTXO model for advanced smart contract functionality.

ADEX V1 & V2

ADEX V1 Features:

1. Basic Functions: ADEX V1 offered simple decentralized trading functions, allowing users to swap assets and manage liquidity.
2. User Interface: The UI in V1 was basic and suited for beginners, but its functionality was limited.
3. Liquidity Pools: Users could participate by adding liquidity to pools and earning rewards.
4. Trading Efficiency: V1’s transaction throughput and efficiency were low and couldn’t meet the growing user demand.

ADEX V2 Features:

1. Two-Step Trading Process: ADEX V2 introduced a more advanced two-step trading process, greatly improving transaction throughput and security.
2. Automated Market Maker (AMM): V2 integrated AMM functionality, allowing users to swap assets and participate in liquidity mining across different pools.
3. Core Functions: Key functions in V2 include swapping, adding liquidity, and withdrawing liquidity, giving users more flexibility to manage their assets.
4. Liquidity Mining Rewards: Users can earn governance tokens through liquidity mining, contributing to the platform’s ecosystem development.
5. Enhanced Security: V2 focuses on security, implementing multiple layers of protection to safeguard user assets and transactions.

The transition from ADEX V1 to V2 marked a significant upgrade for the platform. After the closed testing of V1, the development team made numerous improvements based on user feedback, eventually launching ADEX V2. This version not only expanded the platform’s functionality but also improved the overall user experience and transaction efficiency, making ADEX more competitive in the decentralized exchange space.

Cardano Connect（CNS）

Cardano Connect is a social networking platform built on the Cardano network. Users can create and manage social profiles on the blockchain and use a .ada domain as their social identity gateway, participate in events, and expand their networks. CNS also issues achievement certificates, which are securely stored on-chain in a decentralized manner, improving data storage efficiency. The CNS platform includes three built-in applications:

1. CNS Domain Registration: The registration process is fully decentralized, with all CNS domain records stored on the blockchain. Every CNS domain is a unique NFT guaranteed by Plutus (a type-functional language based on Haskell, often used for secure, complex transactions on Cardano’s settlement layer). A new data architecture allows each UTXO to exceed 4,000 minting records, supporting further Cardano ecosystem growth through additional domain registration methods.
2. CNS Auctions: Rare and special CNS domains are reserved for auction, with the entire registration process handled on-chain and secured by Plutus scripts. The auction process is fully decentralized, meaning that even the CNS team cannot access the funds locked in auctions, ensuring that bidders face no asset security risks.
3. CNS User Records: All user records, including virtual domains and social profiles, are protected by a token gating system to ensure data security. Only the record owner (i.e., the CNS NFT holder) can edit these records.

The launch of CNS is seen as a major milestone for the Cardano ecosystem, aiming to promote social interaction and Web3 experiences. It allows users to build secure social profiles, connect with others, and expand their networks. CNS is expected to attract more developers and users into the ecosystem, further accelerating Cardano’s growth and innovation.

Is Cardano (ADA) a Good Investment?

Experts and investors consider ADA a solid option for both short-term and long-term investments. Predictions suggest that Cardano’s price could reach $3.1 within a year and $10.46 within five years.

DigitalCoinPrice expects Cardano to hit $0.97 by 2025, while Price Prediction forecasts a higher price of $1.95 by then. GovCapital is even more optimistic, predicting a price of $5.72.

According to Cryptopolitan, ADA’s average price could surge to $21.35 by 2030, with the lowest estimated price at $20.55. Changelly also expects ADA to increase in value but estimates a maximum price of $15.69 and an average of $13.92, which aligns closely with Price Prediction’s forecast. Changelly’s analysts project ADA’s highest price at $15.69, with a minimum of $13.55.

How to Buy ADA?

You can purchase Cardano (ADA) on cryptocurrency exchanges like Gate.io.

1. First, log in to your Gate.io account, then go to the [Trade] section and select [Spot Trading].
2. Type “ADA” in the [Search] bar to see available trading pairs.
3. Gate.io offers various order types. For example, if you want to place a limit order, enter the price and amount you wish to buy, then click [Buy ADA]. Once the order is filled, the ADA tokens will be deposited in your spot wallet.

In addition to buying ADA through trades with other users, Gate.io also allows you to purchase ADA using credit/debit cards or bank transfers.

After acquiring ADA, you can either transfer it to a non-custodial wallet or keep it in your Gate.io account. If you choose to leave it in your account, you can earn passive income through services like staking and lending offered by Gate.io. Currently, these are two ways to generate income with ADA tokens.

Cardano (ADA) News

On August 28, 2024, Charles Hoskinson, one of the co-founders of Ethereum, announced that the Cardano blockchain is set to undergo the Chang Hard Fork on September 1, introducing significant changes to the mainnet structure. This update will bring in mechanisms for users to participate in on-chain governance.

Chang Hard Fork (Part One):

• Objective: Transition to a fully community-managed blockchain and begin a phase of technical guidance.
• The interim constitution for Cardano, released by the governance body Intersect, will guide the network during this transition.
• The hash of the interim constitution will be embedded in the new node version, Cardano Node 9.0.0, to ensure the text’s integrity.
• A provisional Constitution Committee (ICC) has been formed as a temporary governance body, with veto powers.

Chang Hard Fork (Part Two):

• Expected in Q4 2024, introducing the final upgrades for full community governance.
• Introduction of Delegated Representatives (DReps): These governance representatives will be able to register, generate credentials, request ADA delegations, and vote on governance proposals.
• Stake pool operators (SPOs) will vote on governance actions using their delegated ADA as voting power.
• A constitutional committee will be established with full veto power over any governance actions that violate the Constitution.
• The community will control treasury withdrawals, with users able to propose debits via governance actions. These proposals will be voted on by three separate entities.

This upgrade represents a historic step for both Cardano and the blockchain industry as a whole, as Cardano will become the first fully decentralized, community-driven blockchain network.

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References

For the latest updates on Cardano, visit:

• Official Website
• Twitter
• Telegram
• Reddit