The Cardano project was started in 2015 by Input-Output Hong Kong (IOHK), an organization managed by Ethereum Co-Founder Charles Hoskin. The idea behind Cardano is to create a blockchain that performs much better than more established blockchains like Ethereum.
That means being able to process more transactions reliably at lower costs. Its primary use case is for developers to build secure applications powered by Cardano using its native governance token ADA.
A vast ecosystem
Cardano is a massive project with many components, both in a technical and organizational sense.
The blockchain itself consists of the Cardano Settlement Layer (CSL) and the Cardano Computation Layer (CCL). CSL is used to transfer ADA between accounts and CCL contains the smart contract logic that applications use to move funds programmatically.
The Ouroboros is an ancient Egyptian symbol depicting a serpent eating its own tail. It is also the name of the Proof-of-Stake (PoS) consensus algorithm used by nodes running the Cardano software. Time is divided into epochs and slots, the former representing the overarching timeframes and the latter 20 second intervals. Within each slot, a leader is randomly picked to add the next block to the blockchain, after which the coin is tossed again to pick the next slot leader.
Keeping the Cardano blockchain operational is done via a distributed network of nodes. There are three types of nodes:
- Edge: for creating cryptocurrency transactions.
- mCore: Stake ADA and participate in distributed governance.
- Relay: Send data between mCore and the public internet.
Cardano is maintained by a collection of separate organizations. The Cardano Foundation is based in Switzerland and is in charge of overseeing the development of the Cardano blockchain. Emurgo is the business development unit that socializes the product in the institutional space. IOHK built Cardano and Ouroboros.
Cardano development takes a different approach
Cardano has many familiar features like running smart contracts to build decentralized applications (dApps). What makes it different is its research-based approach to building the fundamentals. Optimizations are based on scientific research and formal peer-reviewed verification. For example, Ouroboros has been deemed provably secure through formal review.
The purpose is to create a robust protocol that meets the standards of enterprises. In support of that goal, Cardano’s code is written in the Haskell programming language, which is used in the banking and defense sectors.
As of writing, IOHK has published just about 80 academic papers in their library covering technology and spurring partnerships with universities across the world.
The rise of ADA
Named after 19th century mathematician Ada Lovelace, ADA is the native token used for transactions and participating in governance on the Cardano blockchain. You need to own ADA to become the next slot leader following the PoS model, vote for software policies such as inflation rates, and it determines who earns a share of fees paid for block transactions.
The token was launched during the Cardano ICO in 2016 bringing in a total of $62 million. After it became available for trading on the crypto markets in 2017, the price jumped 6050% from $0.02 to $1.23 in just 3 months. Those were the ICO frenzy days when the moon seemed closer than ever. Since then, the price has corrected ranging between $0.07 and $0.04 for the better part of 2018 and 2019.
ADA has been on the rise. The token is currently trading at $1.32.
What is behind this rapid rise?
First, the deployment of the Shelley update has created more interest in the protocol as its staking system offers rewards, incentive schemes and low rates. These are attractive features for investors in the Cardano protocol. Second, CEO Charles Hoskinson has started to make a play for DeFi saying in a video Cardano could “win the race for decentralized finance”. The DeFi game is heating up and any project that puts itself in a position to play a leading role will reap the rewards both in adoption rates as well as token valuation.
If Cardano really lives up to winning the race for DeFi, ADA presents a huge growth opportunity for both the organization itself and traders on the crypto markets looking to make gains on the back of rapid DeFi expansion.
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