ADA Cardano Explained
We’re going to spend a few minutes looking at Cardano Ada, a project that started in 2015 and gained a lot of attention not only for its ambitious plans to create an internet of blockchains but also for its meteoric rise from around 2 cents in late 2017 to nearly a dollar and 30 cents in early 2018.
Of course, this parabolic price rise was not sustainable, and Ada’s price had subsequently fallen to roughly 3 cents in April 2020. Which price did you buy Cardano Ada at if you’re a Cardano Ada holder? And what do you think the Cardano price will be in the future? Leave your response in the comments section.
So, what is Cardano, exactly? And what exactly is Ada?
The question of “What is Cardano?” does not have a straightforward solution. To begin with, Cardano and Ada are not the same things. Cardano is a blockchain, and Ada is a cryptocurrency that is built on top of it.
Cardano, in other terms, is the home of the Ada cryptocurrency. In addition to sending and receiving ADA, the Cardano blockchain will house smart contracts and applications. Because it performs the same thing, this may remind some of us of Ethereum.
Cardano, in reality, has a lot in common with Ethereum. Cardano’s smart contract technology, while comparable to Ethereum’s, operates in a very different way. Let’s get started. It’s not enough to merely state that Ada is a Cardano user.
Ada powers Cardano. Ada is a proof-of-stake coin. Its goal is to allow users to execute smart contracts and applications while transferring value quickly and securely. The total number of Ada coins that can be generated is limited to 45 billion.
The current circulation supply of Ada coins is 31 billion. New coins are added to the ecosystem, and nodes validate transactions using the Ouroboros Proof-of-Stake consensus process. I’m going to use some technical jargon here, but bear with me; it’s not as difficult as it may appear.
Nodes that win a position as slot leaders in this protocol generate new blocks on the blockchain and verify transactions. In this instance, Cardano slot leaders serve in a similar capacity to Bitcoin miners.
Any ADA holder can become a stakeholder and a slot leader. When Cardano’s consensus process selects a coin that you own, you become a slot leader and publish new blocks to the network. A node with a probability proportional to its coin holdings is chosen to generate or mint a new block.
A “stakeholder” is a node that has staked any amount of Ada. When a node is chosen to mint a new block, it is referred to as a “slot leader.” Simply put, the more Cardano you have, the better your chances of becoming a slot leader and receiving prizes are.
Let’s take a closer look at the Cardano blockchain now that we’ve learned a little more about Ada and its purpose. Cardano has two layers of development. One of the fundamental elements that distinguish Cardano is its layered design.
The first is the Cardano Settlement Layer, which serves as a balanced ledger and manages ADA token transfers. The Cardano Computation Layer is a second layer that contains information on why transactions happen.
Cardano smart contracts are run by this layer. The two layers separate the account ledger from the cause for moving values from one account to the next. In other words, Ada can be transferred from one account to another without bringing along any data from smart contracts. For the simple reason that Cardano smart contracts now have additional flexibility thanks to this separation. Users of the calculation layer can construct rules to filter transactions based on the parameters they set because the computation layer is separate from the settlement layer.
For example, a permissioned ledger that eliminates transactions without identification data – something that will become increasingly vital as blockchain legislation grows. The interoperability of blockchains will be another important element of Cardano.
Consider this the “internet of blockchains” – a system in which Bitcoin can flow into Ethereum and Ripple can flow into Litecoin with ease. Cardano intends to accomplish this in part by using sidechains.
Sidechains would allow for cross-chain transfers without the use of intermediaries. Cardano supports sidechains via the KMZ sidechain protocol, which is a novel technology. The KMZ sidechain protocol secures the transfer of funds from the Computation Layer to any other blockchain that uses the same protocol.
With this protocol, ledgers that meet specific regulatory requirements can interact with the settlement layer without having to share sensitive data. There’s a lot more to cover, but our goal here was to give you a rough idea of how Cardano differs from other blockchains and cryptocurrencies. More information is available at the Cardano website.