Cardano (ADA)

WHAT IS CARDANO?

Named in honor of Gerolamo Cardano, one of the most influential mathematicians of the Renaissance era, the Cardano network is designed and built by engineering and cryptography academics using evidence-based methods and peer-reviewed research. The ecosystem can facilitate a wide variety of services, like retail, education and finance.

Three independent organizations support the Cardano network:

1.Cardano Foundation

A non-profit standards body that oversees the network’s development and governance.

2.EMURGO

A for-profit body that works on commercial adoption and partnerships for the network.

3.IOHK

A technology and engineering company founded by Charles Hoskinson that builds the platform based on peer-reviewed research

HOW DOES IT WORK?

Cardano aims to solve two main issues with Gen 1 and Gen 2 blockchains – high transaction fees and network congestion. The network uses the more efficient and sustainable Proof-of-Stake consensus mechanism, which will make the blockchain highly scalable and process transactions at a much faster rate.

Cardano uses a unique PoS consensus protocol which allows users to stake and earn rewards in the network’s native ADA token for helping secure the network. There are two main parts to the Cardano blockchain:

1.Cardano Settlement Layer (CSL)

This layer acts as an unit of account, where holders ADA can send and receive funds instantaneously with minor transaction fees.

2.Cardano Computational Layer (CCL)

This layer is a series of protocols on which the blockchain operates. CCL is responsible for executing smart contracts and verifying security and compliance.

OUROBOROS PROTOCOL

Cardano operates its PoS consensus mechanism through a specifically built Ouroboros Protocol. The Protocol allows for executing smart contracts, and efficiently sending and receiving ADA tokens.

Ouroboros don’t rely on large-scale mining to expand. Instead, users can opt to validate transactions on the network and earn rewards in ADA. The blockchain’s unique architecture and its security and development structure distinguishes it from other blockchains. Using the Ouroboros Protocol, Cardano can select and verify block validators at random, guaranteeing ADA stakeholders who participate with fair compensation.

HOW DOES THE PROTOCOL FUNCTION?

In order to mine new blocks, the network selects a few nodes or “slot leaders” at random. The nodes can be anyone who stakes ADA on the blockchain’s supported wallets.

The network then splits itself into slots known as “Epochs”, where the slot leaders or main nodes are able to mine their own epoch. Slot leaders can further partition the epoch to allow other miners to assist in mining ADA.

Cardano is able to process a huge number of transactions due its ability to partition epochs infinitely.

Network validators and delegators earn rewards every five days. Rewards are the network’s transaction fees which are distributed amongst stakers and the treasury. Cardano’s treasury holds ADA that is not in supply.

During an epoch, 0.3% of the ADA reserve is distributed as staking rewards and treasury funding. From the total, 20% is reserved for the treasury, and the remaining 80% is rewards for staking operators and delegators.

TREASURY

Cardano’s ecosystem is managed by using its treasury funds, also known as the “Pot”. Treasury is used for further development of the network, system improvements and to deploy projects approved by the Cardano community. Pot ensures the long-term stability of the network.

ADA

Named after Ada Lovelace, a 19th century mathematician recognized widely as the first computer programmer, is the native token of the Cardano blockchain. The token has a maximum supply of 45 billion and as of February 2022, current supply stands at 33.5 billion ADA.

The token is mainly used for three things:

– Staking

ADA holders can stake their tokens to become validators using the blockchain’s supported Deadalus and Yoroi Wallets.

– Governance

ADA Stakers will be able to participate in governance and vote on development proposals for the blockchain.

– Fees

DApps built on the blockchain will use ADA to pay for transactions

The tokens is distributed as follows:

– 57.6% reserved for Public Sale

– 30.9% reserved for the Cardano Reserve

– 1.4% reserved for Cardano Foundation

– 4.6% reserved for EMURGO

– 5.5% reserved for IOHK