What is Cardano?

Cardano is a public, open-source blockchain platform. Its native cryptocurrency tokens are called ADA, taking its name from the mathematician Ada Lovelace. It is based around a framework named Ouroboros.

Now, you might be wondering what an ancient symbol is doing in cryptocurrency, but here the term Ouroboros refers to the proof-of-stake consensus protocol that is unique to Cardano. It is what immediately distinguished Cardano apart from other cryptocurrencies.

Cardano has often been compared to Ethereum, another cryptocurrency. It is worth noting that the founder, Charles Hoskinson, was also a co-founder of Ethereum. He had clashing views with Ethereum’s co-founder and now CEO, Vitalik Buterin. Hoskinson has a more commercial vision for Ethereum, while others did not like the business-centred approach.

Hoskinson then had the idea to improve on Ethereum, prompting him to launch his own cryptocurrency project. His resulting invention was meant to keep the attractive key features of Ethereum while simultaneously covering up some of its weaknesses.

From the get go, Cardano was designed to support smart contracts and fast transactions with minimal transaction fees. It was also made to be energy efficient. It has a market cap of 45 billion coins, in contrast to Ethereum, which has no limits to the total amount of tokens in its eventual supply.

Cardano is currently the fifth-largest cryptocurrency and has been very successful in terms of market capitalisation.

One of the factors that give Cardano leverage over other cryptocurrencies is energy efficiency.  According to analysts, the Ouroboros algorithm is nearly 20,000 times more efficient than Bitcoin. With regards to energy consumption, Cardano is head to head with Ethereum.

The majority of cryptocurrencies follow a proof-of-work protocol. This refers to the process where crypto miners make use of highly specialised computing rigs and powerful graphics cards to solve complex mathematical puzzles. The higher your computing power, the more puzzles you solve and the more tokens that you mine.

How is proof-of-stake different? For starters, proof-of-stake completely skips the computing-intensive mining. This protocol turns cryptocurrency into a scarce asset. Similar to stock investments, stakers make a promise not to spend their money in return for opportunities to create and earn blocks.

Proof-of-stake protocols keep a miner’s token as a collateral  that makes the system function. This eliminates the heavy computing power costs and ecological resources needed to keep the blockchain functioning. Cardano’s Ouroboros was the first successful proof-of-stake protocol that replaced proof-of-work tokens.

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But why aren’t all cryptocurrencies switching over to proof-of-stake? Well, one of the issues is ownership. In proof-of-stake, the user with the most stakes in a cryptocurrency builds the most blocks and receives the most rewards. If they continue to reinvest these winnings, their percentage of the stake will continue to grow until they have control over the entire stake.

Having a protocol that can make a situation like that possible goes against the cryptocurrency community’s ideology of distributed authority. It also creates a “nothing at stake” problem, making it easier for users to flood the blockchain system with misleading information since there are fewer penalties for doing so compared to a proof-of-work model.

But with public figures like Tesla CEO Elon Musk pushing energy consumption concerns forward, a lot of talks are being made about proof-of-stake. Ouroboros is currently a captivating option for proof-of-stake.

But how does one invest in Cardano? If you believe in the technological advantages that Cardano brings to the table, it’s not hard to invest in.

ADA tokens have high liquidity, trading volume and are available on many crypto exchanges, including this site. It’s a beginner-friendly trading platform that you can visit to help you get started.

Cardano is not an overnight success, but it is definitely a tough competitor in the cryptocurrency world. It would make sense in an investment sense because it has a chance to take business away from Ethereum. Cardano has also had its share of price fluctuation, this year and historically. Potential investors should keep that in mind and consider Cardano as a high-risk investment.