Cardano (ADA): What is it and how it works

Cardano ADA

Cardano is trending, and the cryptocurrency has registered a 20% rise in recent days.

The native currency of the ADA network, has experienced a high price increase in recent days. The cryptocurrency market registered an uptrend after the fall that it suffered due to the controversy over market regulations.

The ADA price increase has occurred simultaneously with the rise of Bitcoin, which has broken the $ 46,000 barrier in which it was stuck for three months.

In this post, we are going to learn about the Cardano project and why interest in its token in the market is increasing so rapidly.

What is Cardano?

Cardano is a smart contracts platform, similar to Ethereum, with a focus on security through a layered architecture. The so-called ‘third-generation blockchain’ is the first of its kind created from scientific philosophy and built on peer-reviewed academic research.

The team behind Cardano is creating it with the end-user and regulators alike in mind. They are trying to find a middle ground that balances the need for regulation with the principles of privacy and decentralization that are at the core of blockchain technology.

The platform also exclusively uses Haskell, a programming language with a high degree of fault tolerance. With the relatively unknown future and the complexity of blockchain-based systems, it is important to build flexibility into projects. It is almost impossible to know what a system can have in months or even years, so it is important to have a robust language like Haskell that allows a certain margin of error.

Unlike other cryptocurrency projects, the Cardano team’s goal is not to reform the entire financial system. His goal is to use blockchain technology to bring banking systems to places where they have been too expensive to implement until now – specifically the developing world.

How does Cardano work?

Cardano is being developed in two layers that separate the account’s book of securities from the reason why securities move from one account to another. This separation allows the platform’s smart contracts to be more flexible. It also provides companies with the opportunity to tailor the design, privacy, and performance of each contract to better fit their specific use cases.

Cardano Clearance Layer (CSL)

The Cardano Settlement Layer (CSL) acts as the ledger and is the first layer of the platform. Created as an enhancement to Bitcoin, this layer acts as a cryptocurrency built from Aggelos Kiayias’ Ouroboros: A Provably Secure Proof of Stake Blockchain Protocol white paper.

The CSL uses a proof-of-stake consensus algorithm to generate new blocks and confirm transactions. In addition, it includes

  • Two sets of scripting languages
  • A set to move the value
  • A set to enhance the support of overlay protection
  • Sidechains to link to other ledgers
  • Multiple types of signatures, including quantum resistant signatures
  • Multiple User Issued Assets
  • Scalability where system capabilities increase as more users join

Cardano Compute Layer (CCL)

The Cardano Computing Layer (CCL) is the second layer of the Cardano platform and contains the information of why transactions occur. It is within this layer that Cardano’s smart contracts are executed.

Because the computing layer is separate from the CSL, different users of the CCL can create different rules when evaluating transactions.

For example, a permissioned ledger can be created that leaves out any transactions that do not include AML/ KYC data – something that will become more important as blockchain regulation continues to increase.

The Cardano team is creating a new programming language for developing smart contracts in the CCL: Plutus. The CCL also supports Solidity, the language behind Ethereum’s smart contracts, for low-security applications on the platform.

To assist developers, Cardano also includes a Plutus code reference library that is available for use in dapps. In addition, the team is creating a set of tools to verify the code and improve its security.

KMZ Sidechains

Cardano supports sidechains based on a new Kiayias, Miller and Zindros (KMZ) protocol that involves proof of work. The KMZ sidechain protocol allows funds to be moved securely from the CSL to any CCL or any blockchain that also uses the protocol

With this protocol, ledgers with certain regulatory compliance are able to interact with the CSL without having to share the data that needs to remain private.

Daedalus wallet

Daedalus is an open-source wallet created by the Cardano team. It is a multi-currency wallet in which you can freely exchange between supported currencies. The wallet is starting the expansion of support with Bitcoin and Ethereum Classic.

The wallet also includes an app store containing apps created by the Daedalus community. Currently, the wallet can be downloaded on Windows and MacOS operating systems.

ADA and Ouroboros Proof-of-Stake

The Cardano team has established that there will be a maximum of 45 billion ADA coins to be created. New coins enter the ecosystem and nodes validate transactions through a unique consensus algorithm, Ouroboros Proof-of-Stake (PoS).

In this protocol, slot bosses generate new blocks on the blockchain and verify transactions. Anyone with a Cardano ADA coin can become a slot leader. When the “Follow the Satoshi” algorithm selects a coin that you own, it becomes the slot leader and publishes new blocks on the network.

Your node performs this process automatically, so you don’t have to worry about manually verifying each transaction.

Cardano fees

The fees to transfer ADA vary and are determined by the following equation

transfer rate = a + b * size.

a = a constant currently equal to 0.155381 ADA

b = a constant that currently equals 0.000043946 ADA / byte

size = size of the transaction in bytes

This effectively means that the minimum transaction fee you will pay is 0.155381 ADA and it will increase by 0.000043946 ADA with each byte increase in your transaction size.

The transaction fees for each era are collected in a pool and distributed among the leaders of the corresponding slots. An epoch is simply a period of time in which the slot leaders validate transactions. When one epoch ends, the next begins immediately.

History of Cardano

Cardano shares many of its roots with Ethereum. The two founders of the project, Charles Hoskinson and Jeremy Wood were instrumental in Ethereum’s early days in 2013. After leaving Ethereum, they joined forces in 2015 to create Input Output Hong Kong (IOHK), one of the companies behind Cardano.

In fact, three organizations are working together to develop Cardano:

  • The foundation
  • Input Output Hong Kong (IOHK)
  • Emurgo

The Cardano Foundation is a non-profit organization that acts as the custodian agent of the project. Their goal is to support and grow the Cardano ecosystem. IOHK is a blockchain engineering company focused on building the actual project. And, Emurgo is a blockchain project incubator that provides much of the funding.

The team raised around $ 63 million during its nearly two-year ICO.


The project has an ever-evolving roadmap, but follows a five-phase plan. The phases are as follows:

  • Byron – This is the phase Cardano is currently in. It includes the initial development of the main network and complementary functionalities, such as the Daedalus wallet. Everything scheduled for this phase has been built, and the team is in the process of making improvements.
  • Shelley – In this phase, the network becomes fully decentralized. Characteristics of this phase include delegation and stake fund testing networks.
  • Goguen – The team is planning this phase. At this point on the roadmap, Cardano will have a virtual machine, called IELE, similar to the Ethereum virtual machine (EVM). The platform will also feature a universal language framework for future blockchain technology.
  • Basho – The team plans to improve scalability, security and performance in this phase. They will also implement Ouroboros Praos, an enhancement to the original Ouroboros protocol.
  • Voltaire – In the final phase, Cardano will implement the Treasury model, providing a self-sustaining ecosystem for the network.


As a smart contract platform, Cardano competes with several similar cryptocurrency projects, most notably Ethereum. The project is also in competition with several newer projects focused on smart contract development, such as EOS, Lisk, NEO, and NEM. Of these additional competitors, Cardano is the second-largest behind EOS.

As mentioned above, the team is trying to separate itself by focusing on scalability through peer-reviewed research and high-security coding practices. Although this strategy leads to slower product development, it greatly reduces the risk of critical bugs and errors that impede development.


Cardano had a long ICO from September 2015 to January 2017, and the ADA token began trading on the open market in October 2017

The ADA price was relatively stable until the end of November 2017, when it jumped from ~ $ 0.03 (0.00000345 BTC) to ~ $0.14 (0.0000142 BTC) in 3 days. That is an increase of more than 360%.

ADA hit an all-time high of $ 1.15 (~ 0.000077 BTC) in early January 2018, but has since followed the rest of the cryptocurrency market to the bottom. It peaked in April 2018, apparently caused by the increasing number of exchanges listing ADA, as well as the release of the roadmap.

Unfortunately, those types of ads most likely will not have an effect on the price of the coin in the future. The biggest positive price influencers from now on will likely be partnership announcements, roadmap achievements, and increased network usage.

Where to buy Cardano (ADA)?

You can buy ADA on several major exchange platforms. has the highest ADA trading volume of the exchanges and offers the coin as a trading pair with Bitcoin and Ethereum

To buy ADA on most platforms, you will first have to buy Bitcoin or Ethereum on another platform and transfer it. GDAX and Gemini are good options to start this process.

ADA will also be available for purchase through an ATM network in Japan soon. However, no ATMs are available yet and no deadline has been given.

Where to keep Cardano (ADA) ?

To be rewarded for gambling, you will most likely have to store your ADA in an exchange wallet.

Right now, there is only one wallet in which you can store your ADA: the official Daedalus wallet. The wallet is currently only available on Mac and Windows (sorry Linux users), but a mobile wallet is expected to launch soon on Android and iOS.

Ledger is working with a third party to build ADA support into their products. You should be ready with the Shelley phase implementation.


Cardano is an ambitious project that addresses a large number of problems in the cryptocurrency industry. After seeing potential Ethereum security flaws through the DAO hack and the recent Parity wallet fiasco, it’s nice to see Cardano focus on scrutiny of code and peer-reviewed security measures.

However, this comes at a cost. With such an emphasis on security, don’t expect quick product updates. Instead, you should see this as a long-term project with a lot of potentials.

Knowing the characteristics of financial markets, and their components is the most valuable asset we can have. In this way, we will know better where to place our investments and avoid scams and deceptions within the system.

If you are interested in the world of cryptocurrencies, access our cryptocurrency and blockchain course where we teach you everything you need to be able to handle information with solvency and take advantage of crypto assets.

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