Cardano is a blockchain network that enables the development of decentralized applications and smart contracts. Powering the Cardano network is its native cryptocurrency, ADA.
Cardano, often known as ADA, is a digital currency that positions itself as Ethereum’s modern rival. Cardano has gained a lot of value since its inception in 2017, and as of December 2022, it ranked ninth in terms of market capitalization with roughly $8.7 billion.
History of Cardano
Charles Hoskinson, who was also a founding member of Ethereum, founded Cardano. Scalability, interoperability, and sustainability were Hoskinson’s three top priorities for addressing in any blockchain network.
After a disagreement with his Ethereum co-founders, Hoskinson stepped down from the company. Hoskinson formed the for-profit company Input Output Hong Kong (IOHK) in 2014. He led the development of Cardano from 2015 as head of IOHK. The network and its accompanying cryptocurrency, ADA, went live in 2017.
The following three companies have assumed primary responsibility for the continued development of the Cardano protocol and ecosystem:
- IOHK, a for-profit organization with a primary focus on developing the Cardano platform.
- The Cardano Foundation, a non-profit organization responsible for promoting, protecting and standardizing Cardano’s protocol.
- Emurgo, a global technology company that deals with the commercial adoption of Cardano’s protocol and which facilitates integrations with various companies.
Cardano is founded on research. The project is composed of peer-reviewed documentation created by academics and industry professionals from all over the world and is written in the programming language Haskell.
What is Cardano (ADA) and how does it work?
In 2017, the third generation, decentralized proof-of-stake blockchain platform known as Cardano was developed. The platform’s cryptocurrency is called ADA. ADA is a digital token that, like other cryptocurrencies, may be used to transmit and receive money as well as store value. The Cardano blockchain powers the ADA coin.
Cardano runs on the proof-of-stake Ouroboros consensus protocol. Ouroboros was designed by experts in the fields of cryptography and engineering and is an algorithm that uses proof-of-stake (PoS) protocol to mine blocks. Ouroboros is based on scientific and mathematical principles to increase the efficiency and security of the platform.
Cardano’s blockchain contains two core components; The Cardano Settlement Layer (CSL) and The Cardano Computational Layer (CCL).
The accounting layer of the Cardano platform is called the Cardano Settlement Layer. On this platform, token holders can instantly send and receive ADA with low transaction costs. The distinction between the accounting and computational layers is one of Cardano’s advantages. The platform is being created with the regulation in mind in this way.
The proof-of-stake Ouroboros consensus mechanism is a component of the Cardano Computational Layer. The protocol makes it possible to operate smart contracts, assure security and compliance, and provide access to additional high-end features. Cardano uses mathematics to create a provably secure blockchain, making it less vulnerable to attacks. Furthermore, ADA may always be transmitted and received quickly and securely thanks to the Ouroboros consensus mechanism. Ouroboros rewards token owners who stake their ADA to the network as a PoS consensus mechanism. Token holders must stake their ADA to the network for Cardano to achieve network consensus.
Due to the fact that it was based on rigorous academic research, Cardano’s evolution is distinctive. Peer-reviewed ideas and evidence-based techniques are combined in a framework that is supported by research for each stage of Cardano’s development. Thus, both the blockchain network and the ADA coin have a solid base from which to move forward.
Cardano is developed in five key eras – Byron, Shelley, Goguen, Basho and Voltaire. Each of the different eras is centered around a set of functionality.
The Byron era focuses on scalability, interoperability, and long-term viability in which these three concepts are major concerns that are currently being faced by all blockchain networks. Byron was the first period of Cardano’s concept to handle these issues.
The Shelley era is about Cardano’s expansion and advancement. Cardano focuses on how to maximize decentralization. Compared to other significant blockchain networks, Cardano is anticipated to be 50–100 times more decentralized.
In the Gougen era, Cardano’s capabilities have been vastly enhanced with the introduction of smart contracts and the building of decentralized applications (DApps).
In the Basho era, it aims to increase the network’s scalability and interoperability in order to better accommodate applications with increasing transaction volumes.
The last components needed for the Cardano network to become an autonomous and a sustainable system will be made available during the Voltaire era. With the most recent period, network users will have the ability to use their ADA tokens as means of voting rights to affect how Cardano develops in the future. Users will also have the chance to recommend software updates as well as technical and financial enhancements to the project.
The ADA token on Cardano’s network is primarily used for three things:
- Staking – ADA token holders can stake to validators operating on Cardano.
- Fees – dApps will use ADA tokens to pay for transactions on Cardano’s network.
- Governance – ADA token holders who stake their ADA tokens will be able to participate in on-chain governance and vote on development proposals.
On the Cardano Network, incentives are distributed every epoch (5 days) to Cardano validators (stake pool operators) and their respective delegators. Rewards come from a combination of transaction fees and financial growth.
Cardano’s native token is called ADA and the token has a maximum supply of 45,000,000,000. The current circulating supply is 34.4 billion as of December 2022. In total, 25,927,070,538 ADA were sold to investors during the genesis block distribution (initial coin offering). Of that sum, 5,185,414,108 ADA were distributed to the three major corporations (IOHK, EMURGO and Cardano Foundation). With a total of 13,887,515,354 ADA set aside as the reserve for staking incentivization, a total of 31,112,484,646 ADA were thus accessible upon Cardano’s formal launch.
Developments and achievements
At the moment, Cardano has between 100 and 150 developers working on the project regularly, and they push out about 700 contributions per week. These elements place the coin among the most active blockchain projects under development, indicating that they will be able to carry out their ambitious vision.
A large portion of Cardano’s development work can be attributed to Input Output Global (IOG). The business has planned numerous significant enhancements to the Cardano network so far in 2022. These include the Vasil Hardfork and a number of network parameter updates that came before it.
Recent data from the Cardano Foundation reveals that crucial network activity has surged in 2022 despite the global market slowdown. Smart contracts increased at a pace of 394% to reach the milestone of 4,445, and had the largest growth rate compared to 2021. The native tokens of the platform saw the second-highest growth rate, at 192%, and reached the 7.3 million milestone. In 2022, there were 56.9 million ADA transactions, a 139% rise from the previous year, and there were 3.8 million wallets, a 47% increase from the previous year. Delegated wallets on the platform also rose by 27% to 1.27 million, and 66,950 new policies were added to the network. Data shows that Cardano smart contracts continue to have the fastest pace of market expansion, preparing Cardano to compete with Ethereum in the future.
Cardano is also the newest player to join the NFT ecosystem. Due to its scalability and a number of other factors, the emergence of the NFT market on Cardano is generally hailed by artists and entrepreneurs.
IOG has also introduced a privacy-centric blockchain, Midnight, and an associated token, Dust. Midnight, one of many side chains now being deployed around Cardano, will surpass past privacy-coin efforts by delivering zero-knowledge proof smart contracts due to its reliance on zero-knowledge proof technology.
Although there have been many positive changes in the Cardano ecosystem recently, IOG is not resting on its feet and is instead announcing new enhancements. Some have predicted that 2023 will be the year when Cardano completely installs its governance system, ushering in the Voltaire era. Meanwhile, IOG has maintained its publication schedule of research and educational resources for the Cardano community.
Analysis of prices shows a decreasing trend as bears continue to fight for the lead, despite Cardano’s progress and integrated use cases. The ADA/USD pair is attempting to hold near the $0.2523 level, as indicated by the short-term moving line. Currently, $0.2615 is acting as resistance for the ADA coin, while $0.2492 is acting as support. The price can fall if bears keep driving the market lower.
A bottom may yet be to be found in the market. If this is true and bitcoin falls to $12,000, or perhaps as low as $10,000 as anticipated by some in the cryptocurrency space, ADA holders may see further loss in the value of their holdings. A further 30% collapse in the market might send the price of ADA down to as low as $0.17 before the next bull run begins.
However, according to Hoskinson in June 2022, “bear markets are actually quite comfortable. Those are building parts.” He further added: “Bull markets are really frustrating because nobody wants to cooperate. You have a lot of poaching, unrealistic wages, and unrealistic expectations.”
Is ADA a good investment?
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Now to the question: Is Cardano a good investment?
From its all time high in 2021, the price of ADA has decreased by more than 90%. From almost $90 billion to about $8.7 billion, Cardano’s market valuation has dropped dramatically. Despite this, Cardano has established itself as one of the most active and busiest digital assets in the cryptocurrency space. In light of this, it makes sense to say that ADA is a viable investment choice. However, like other cryptocurrencies, ADA is volatile and regarded as high risk by conventional standards; also, 2022 is a bear market year.
As narratives about the crypto markets bottoming out are starting to emerge (as long as Bitcoin is holding its ground), this would be the ideal time for investors to begin dollar cost averaging into the crypto markets as we transition to Q1 of 2023. However, proceed with extreme caution and the proper use of risk management.
Rickie Sanchez is a seasoned expert in the field of blockchain and cryptocurrency with a wealth of experience dating back to late 2017. With a primary focus on crypto investing and a foundation in technical analysis, he’s committed to sharing knowledge and insights globally, empowering individuals to excel in the ever-evolving crypto landscape.