Cardano is a decentralized proof of stake (PoS) blockchain designed to be a more efficient alternative to proof of work (PoW) networks. Cardano's coin ADA is used in the blockchain's PoS consensus mechanism. It is given as a reward for work done for the blockchain by users participating in a stake pool.^[1][2][3]

In February 2022, the number of Cardano wallets broke the three million milestone. It has increased by 1,200%, from 190,000 to over 3,000,000, since December 2020. Following the Alonzo Upgrade, there was a surge in smart contracts at the same time, and on January 27, 2022, Cardano crossed the milestone of 1,000 smart contracts.^[4]

Overview

In 2017, Cardano was founded and named after the 16th-century Italian polymath Gerolamo Cardano. The 19th-century mathematician Ada Lovelace, widely considered the first computer programmer, is the inspiration behind the naming of the native ADA token. The ADA token is designed to ensure that owners can participate in the operation of the network. As a result, those who hold the cryptocurrency have the right to vote on any proposed changes to the software. According to the team behind the layered blockchain, there have already been some compelling use cases for its technology, which intends to enable the modular development of decentralized apps and smart contracts.^[5]

In August 2021, Charles Hoskinson announced the launch of the Alonzo hard fork, which caused a surge in the price of Cardano, gaining 116% in September 2021. On September 12, 2021, the Cardano ‘Alonzo’ hard fork officially launched, bringing the smart contract functionality to the blockchain. Over 100 smart contracts were deployed 24 hours after its launch.^[5]

History

In 2015, Charles Hoskinson, the co-founder of Ethereum, began the development of Cardano. The platform was later launched in 2017. Cardano has positioned itself as an alternative to Ethereum. Both platforms are used for similar applications, such as smart contracts, and have the goal of building a connected and decentralized system.^[4][6]

In 2011, Hoskinson started mining and trading cryptocurrencies for the first time. Later, in 2013, he created an educational course about Bitcoin that was enrolled in by over 80,000 people, marking his first professional foray into the realm of cryptocurrencies.^[4]

Hoskinson resigned to explore his own idea for a "third-generation" blockchain after assisting with the early development of Ethereum and the founding of the Ethereum Foundation. The Cardano project was established in 2015 as a way to herald in a new era of blockchain because its founders foresaw the scalability difficulties that traditional blockchains would surely experience.^[6]

On October 6th, 2022, Charles Hoskinson changed the Ethereum Classic Twitter account, which had over 600,000 followers, to ‘Ergo’. This act was highly criticized by the Ethereum community especially as members requested for the Twitter account to be given back. However, Charles Hoskinson replied with:^[35][36]

“Return? It's my account. As for return, I can't get back the millions of dollars of development we spent nor the years of time supporting a blockchain that didn't seem to want to do anything other than preserve a status quo. We'll call it even”

It is said that this was to promote the Ergo Platform, a proof-of-work blockchain that is closely affiliated with Cardano, but came with heavy backlash from the crypto community which can be seen when Bob Summerwill, the executive director of a public charity supporting Ethereum Classic, stated on twitter that:^[37]

"6 years of community work has been erasing."

Blockchain Infrastructure

In a transaction, there are two components: the mechanism for sending and recording the flow of tokens and the reasons and conditions for moving the tokens. The latter can range from simple to complex and may involve a large amount of data, multiple signatures, and special events. Modeling the reasons and conditions for the flow of value can be difficult because they can be highly personal and unpredictable for the entities involved. The use of cryptocurrencies can also raise legal and security concerns, such as the potential for enabling illegal or frowned upon activities online with the same level of censorship resistance as legal transactions. Cardano addresses these issues by creating two separate layers to differentiate problems that occur.^[38][39][40]

Cardano Settlement Layer (CSL)

The Cardano Settlement Layer (CSL) is a value ledger that is used to settle digital asset transactions on the Cardano platform. The CSL is where the ADA cryptocurrency resides, and it will also be the home of other digital tokens issued on Cardano after the implementation of smart contracts. The settlement layer is designed to separate the value of transactions from their computational data in order to increase scalability and focus on the movement of value. It uses the proof of stake consensus algorithm Ouroboros and two dedicated scripting languages, Plutus and Marlowe, to manage the movement of value and support overlay network protocols. Ultimately, the CSL is the routing layer for all control layers and systems on the Cardano platform.^[38][39][40]

Cardano Computational Layer (CLL)

The Cardano Computation Layer (CCL) is a key component of the platform, serving as the "brain" of the network. It is designed to replicate the Rootstock (RSK) smart contract platform of the Bitcoin ecosystem and is intended to be scalable. The CCL is also able to support specialized protocols over time by adding hardware security modules as technology advances. This layer enables special features within the Cardano blockchain, such as programmable tokens with unique rules for private organizations and decentralized autonomous organizations (DAOs). It also allows the specification of conditions for the flow of value in transactions, which is particularly important in a regulated blockchain environment.^[38][39][40]

ADA Token

ADA is the Cardano network’s native token, named after 19th-century mathematician Ada Lovelace. 57.6% of the total ADA supply was distributed to investors in an Initial Coin Offering (ICO), in which Cardano raised $62.2 million. The ADA token is both a digital currency and is used to perform transactions on the Cardano network.^[7]

ADA holders also have a literal stake in the Cardano network. The ADA tokens can be used in stake pools to earn staking rewards, and in the future the direction of the network will be entirely governed by ADA holders, using their stakes to vote on developmental decisions.^[7]

Tokenomics

The maximum supply of ADA is 45 billion. As of November 2022, the circulating supply of ADA is 34.4 billion. Five distinct rounds of public sales were held by IOHK between September 2015 and January 2017, giving interested buyers the chance to purchase ADA tokens and assist in early development.^[8]

After the network went live, an estimated 2.5 billion ADA were handed to IOHK, and a further 2.1 billion ADA were awarded to EMURGO, a global blockchain development business, for their work on the Cardano protocol's early foundation. The Cardano Foundation also received 648 million ADA to help spread awareness of the platform and encourage adoption.^[8]

Staking

The ability of a node in Cardano's PoS system to open blocks on the blockchain is determined by staking. The total quantity of ADA that a node possesses over the long term is its stake. A stake is an ownership interest that a pool participant holds and that is pledged and secured with ADA. Due to the fact that it is being kept as security for authentic validation behavior, pledged Ada cannot be used or spent by the holder.^[9]

Users who have pledged ADA are rewarded with transaction fees. The awards are given out based on how much Ada a user has bet. Joining staking pools, which are collections of ADA owners who have pledged their coins, allows users to collaborate on updating the ledger, opening new blocks, and gaining rewards.^[9]

Cardano Staking Pools

Cardano employs the Proof-of-Stake (PoS) consensus algorithm, in which users stake a coin in exchange for the chance to become a validator. There are two methods by which users can take part in the staking and validation process. The option of operating or owning a stake pool. Trusted server nodes called stake pools do the task of validating transactions.^[10]

An individual who has assigned ADA to a pool is a stake pool owner. The user can either make his own private stake pool or invite other people to join it. By committing ADA to another pool, users can also acquire ownership of a pool.
A stake pool operator is a trusted person tasked with maintaining the stake pool by renting servers, monitoring the node, holding the pool key, and other pool administration tasks.^[10]

Tech

The Ouroboros consensus protocol powers the Cardano platform. Ouroboros is the first proof of stake (PoS) protocol developed to lessen the energy consumption associated with proof of work (PoW) mining. It was developed by Cardano during its foundation period. It removes the proof of work algorithm's heavy reliance on processing power.^[11]

Alonzo Upgrade

On September 12, 2021, Cardano released the Alonzo upgrade, named after American mathematician Alonzo Church, who is considered to be one of the founding fathers of computer science. As a result of the upgrade, the blockchain network now supports a wide range of decentralized apps including non-fungible tokens and smart contracts. According to the project’s founder Charles Hoskinson:^[12]

Alonzo aims to introduce “programmability” to the network.

He likened the upgrade to when JavaScript was introduced to web browsers and the transition from static web pages to the likes of Facebook and YouTube.^[12]

Cardano now also supports decentralized exchanges in addition to NFTs and smart contracts.^[13]

Vasil Hard Fork

After many delays and the testnet going live on July 4th, 2022, the Vasil hard fork was officially launched on the mainnet on September 22nd, 2022. The upgrade is designed to improve scalability and transaction throughput for the ecosystem, as well as advance the development of decentralized applications on the platform. The Vasil hard fork includes the implementation of a technique called diffusion pipelining, which aims to improve block propagation times and increase the network's transaction processing capabilities. It will also introduce three key Cardano Improvement Proposals (CIPs), which focus on improvements to the platform's governance model, network protocol, and smart contracts. By improving the efficiency of its smart contracts and addressing scalability issues, Cardano aims to overcome one of the main challenges faced by blockchain networks as they become more popular: network congestion and rising fees. Thus this upgrade is said to be one of Cardano’s biggest milestones which can be seen in Shahaf Bar-Geffen, CEO of COTI’s tweet that read:^[32][33][34]

"The Vasil Upgrade heralds the dawn of a new era for the Cardano ecosystem and the decentralized finance space at large. The upgrade aims to improve the network’s scalability and enhance Cardano’s smart contract capabilities."

Cardano DEX projects

Some of Cardano DEX projects include:

• CSWAP DEX^[14
• WingRiders^[15]
• Spectrum Finance^[16]
• Axo^[17]
• Minswap^[18]
• Ray Network^[19]
• SundaeSwap^[20]
• Cardax^[21]

The Cardano Foundation

The Cardano Foundation is an independent standards body that monitors and supervises the development of Cardano and the Cardano ecosystem. The Foundation works to drive adoption and partnerships, grow the Cardano community globally, shape legislation and commercial standards, and ensure stakeholder accountability at every level.^[22]

Partnerships

Cardano has established some major partnerships over the years. Here are a few notable partnerships:

• The Ethiopian government has partnered with Cardano to give students in the country's schools blockchain-based IDs. This will allow their academic performance to be recorded and tracked on Cardano's blockchain.
• Global reforestation company Veritree is using the Cardano blockchain to store records of the trees it plants.
• DISH Network (NASDAQ:DISH) is integrating the Cardano blockchain as a way to provide digital identity services for its customers.
• Cardano is working with esports company Rival to help it mint and distribute non-fungible tokens (NFTs).

Team

Foundation board members

• Theo Kocken - Chairman^[23]
• Arjan Erkel - Vice Chairman^[24]
• Carolijn Gommans - Supervisory Board Member^[30]
• Tamara Monzon - Supervisory Board Member

Cardano Development Team

• Frank Gosselink - CEO^[25]
• Joost Zuidberg - CEO^[26]
• Joris van Oppenraij - Senior Project Manager^[27]
• Fleur Henderson - Senior Project Director^[28]
• Jan van der Beek - Financial Controller^[29]

Roadmap

Cardano aims to achieve the scalability, interoperability, and sustainability needed for real-world applications. Cardano is designed to be the platform of choice for the large-scale, mission-critical DApps that will underpin the economy of the future.^[31]

The Cardano project has an in-depth development roadmap consisting of five primary stages called "eras":

• Phase 1 – Byron: The network goes live with basic functionality (transferring ADA).
• Phase 2 – Shelley: Steps are taken towards decentralization with community-run nodes.
• Phase 3 – Goguen: Smart Contracts are enabled on the network.
• Phase 4 – Basho: Sidechains are introduced, enhancing scalability and interoperability.
• Phase 5 – Voltaire: Governance and self-funding make ADA fully decentralized.

Each era in the Cardano roadmap enables an integral piece of the final network, and when complete, the network will be fully decentralized – governed by ADA holders and funded by a portion of its own small transaction fees.

At the time of writing this update, on the 9th of November 2023, Cardano is in Phase 4 - Basho.^[43]

Byron: Foundation

The Byron era of Cardano refers to the first two years of development (2015-2017) in which the first version of the Cardano blockchain was launched, along with the ADA cryptocurrency.

During this time, Cardano also introduced the Ouroboros proof-of-stake consensus protocol, which is the core mechanism of the network and defines how nodes reach consensus. In addition to building a technical foundation, Cardano focused on building a community and getting people involved in the development of the future blockchain, resulting in the first major technological advancements. Official ADA-supported wallets, Daedalus desktop wallet, and Yoroi light wallet were also released by IOHK and Emurgo, respectively.^{[31][40][41][42]}

Shelly: Decentralization

The Shelly era focuses on the growth and development of the existing Cardano ecosystem, with the goal of decentralizing the network by involving more community members in running nodes. Cardano implemented an incentivization and delegation scheme to encourage node operation in order to increase the amount of ADA staked in various pools. The Shelley era has also seen the release of two upgrades to the Ouroboros proof-of-stake consensus protocol, which provide security against adaptive attackers and enhance network efficiency.^{[31][40][41][42]}

Goguen: Smart contracts

The Goguen era focuses on the integration of smart contracts and decentralized applications (DApps) into the Cardano blockchain. It includes the development of a purpose-built smart contract development language and execution platform called Plutus. Plutus will allow users to create and execute functional smart contracts on the Cardano network without needing prior technical knowledge. This era also introduces Marlowe, a domain-specific language for financial contracts built on Plutus. It also includes support for a multi-currency ledger that will enable the creation of natively-supported fungible and nonfungible tokens. The Goguen era marks the beginning of Cardano's decentralized finance (DeFi) capabilities and allows developers to build DApps on the Cardano platform.^{[31][40][41][42]}

Basho: Scaling

The Basho era intends on improving the underlying performance of the network in terms of operability, scalability, and optimization. Key developments include the implementation of sidechains, which can be used to increase the network's capacity and can also be used to test new features without compromising the main blockchain's security. Basho is also working on enhancing the scalability and interoperability of the Cardano network through the development of Hydra, a scalability upgrade that is designed to address throughput issues as network usage increases. Overall, the Basho era aims to enhance the performance, resilience, and flexibility of the Cardano network.^{[31][40][41][42]}

Voltaire: Governance

The Voltaire era of Cardano aims to transform the network into a self-sustaining system by introducing governance with voting and a treasury system. This will allow network participants to use their voting rights to determine the future development of the network through the submission and voting on Cardano improvement proposals (CIPs). A portion of all transaction costs will also be pooled in a treasury to fund development activities.^{[31][40][41][42]}

The completion of the Voltaire era will be Cardano’s final step to full decentralization, with management transferring from IOHK to the Cardano community. The community will be responsible for the future development of the network, using IOHK's decentralized foundation to expand and evolve the network. This is the final stage on Cardano’s roadmap as of now.^{[31][40][41][42]}