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Introduction to Cardano

Updated: May 8

Sidney Williams, Author of the article.

Author: Sidney Williams

Date of Publication: 05/01/2023

This post may contain affiliate links, which means I may receive a small commission, at no cost to you, if you make a purchase through a link

Cardano is among the top 10 cryptocurrencies years now. It has an insanely strong community and it’s often the topic of the day. Many see Cardano as one of the potential ‘eth killers’. But why is that? How much is its capability and how far can it go? Let’s have a look.

Cardano is famous for being a third-generation cryptocurrency. In fact, the project is developed by Input Output Global (IOG, sometimes still known as IOHK). In particular, Cardano is a decentralised platform that has smart contracts running on it and is completely open source. It adopts an exclusive proof-of-stake algorithm by the name Ouroboros. This allows its users to earn rewards for validating transactions on the network. Also, Cardano further has a treasury system, operating through the name of Project Catalyst, that funds future development of the platform.

What is Cardano in a Nutshell?


Cardano is the first blockchain platform to derive from a scientific ideology as well as a research-first strategy. This means that every upgrade must be subjected to a peer review assessment before it can potentially be implemented. What’s more the development team is made up of a worldwide group of skilled engineers and researchers.

Moreover, Cardano is created and run by three companies: IOHK, Emugro, and the Cardano Foundation. The blockchain's native currency is known as ADA, named after Ada Lovelace. IOHK's objective is to "provide accessible financial services for everybody".

The development is supported and funded by Emugro. Finally, as the custodian organization for Cardano, its Foundation is a non-profit corporation that is subject to regulation. This foundation mostly aims to preserve and protect the Cardano protocol.

Blockchain Trilemma

The way Cardano approaches what is often described as the blockchain trilemma of security, scalability, and decentralization, is as follows:

First, the project has created and now uses a proof-of-stake algorithm they named Ouroboros which enables users to collect rewards for validating transactions on the network. Ouroboros is super energy efficient. It enables the system to run on a large number of nodes without the need of any specific hardware.

Secondly, there is the Cardano treasury system, which funds the development and improvement of the blockchain. Cardano further adopts a specifically designed system of layered protocols. This enables it to scale without diminishing security or decentralization while it does so.

To help tackle this scalability, Cardano and its collective of experts have drafted a scientific paper with the name ‘Hydra’. Yes, it refers to the mythological creature of the sea. Actually, it is a layer 2 solution that is expected to soon be deployed on the Cardano blockchain. The image underneath depicts the basis of Hydra.

The Cardano treasury system, which funds the development and improvement of the blockchain.

It shows that Cardano’s blockchain can confirm that the 30 ADA coins, which once left to ‘Hydra’s head’ are finally being returned to the blockchain. Therefore, the number of coins in the process never changes. It is just that in the second layer (Hydra), ownership of ADA might have changed due to people transacting with one another. In this case, giving Alice 20 ADA and Bob and Carol each 5. The advantage is that many transactions between many users can happen at the second layer without directly affecting the blockchain. Hence, more speed and less fees.

Moreover, every stake-pool, the ones confirming transactions on the network due to the ouroboros mechanism, can open one of these Hydra heads. One head is designed to cover 1000 TPS. This shows that as over time the project continues to grow, the number of pool operators will increase as well, which in turn allows more Hydra heads on the network and thus more throughput and Transactions Per Second. A linear growth model, and the first of its kind. That’s why the name of ‘hydra’ is so befitting.

Cardano vs Ethereum

Cardano is often compared to Ethereum because both platforms are designed to host decentralized applications (DAPPS). Also, both aim to solve some of the same problems. Due to its early entry into the market with significant adoption Ethereum has the first-mover advantage. However, Cardano's advantage is that it has learned from the errors of thousands of earlier initiatives. So it creates a more resilient and robust solution that is future proof. It's important to note that Charles Hoskinson, the founder of Cardano and CEO of IOG, originally co-founded Ethereum before leaving due to a different vision.

Moreover, Cardano is more scalable than Ethereum. This means that more transactions can be processed per second. As mentioned before, Hydra is one of the solutions created by Cardano for this reason. Additionally, Cardano is more flexible than Ethereum, as it has many features that can be adjusted to fit the needs of a particular application. However, this does not mean Ethereum isn’t a player. The most probable scenario is that both chains will coexist and fulfil the needs of its clients.

The picture below shows some of the current stats, (compiled by community members and no official company release)

Projects building on Cardano

Cardano and Africa

IOHK has plans to help develop Africa. They aim to do so through their partnership with the African Development Bank. The partnership/project is called “IOHK for Africa” and it is a five-year plan. The goal is to use blockchain technology to help with financial inclusion, elections, and land rights. They have also been working on a project called “Atala Prism”. This is a blockchain-based identity system designed to give safe and secure identity to millions of Africans who lack it.

IOHK has been working towards innovation that helps balance back the influence of institutions and politics in Africa. Many of which are disbalanced due to corruption. One way they aim to reach this goal is by creating a decentralized platform on which African entrepreneurs can establish and develop their enterprises. These businesses will then have access to the same worldwide market as their competitors in developed countries because of blockchain. This would immensely help to even out the playing field and allow African entrepreneurs to compete on a global playground.

From an investment perspective, partnerships and real-world applications and solutions like these, open a path towards more adoption. Cardano has stated multiple times that they are building a road towards a billion users. And by conquering the continent of Africa, this ambition goes beyond just a possibility.

Backlash for Cardano

One of the main complaints that the Cardano ecosystem has received over the years is its slow development. Its scientific approach and development which includes writing papers and having these ideas peer reviewed, take a long time. Only after that, development starts which takes a while as well. This slow approach results in the ecosystem still being at the very start and behind competitors, some that even launched after Cardano..

Compared to its competitors such as Ethereum or Binance, Cardano only has a handful of projects actually operating. Many of them are still developing and are/are waiting for various updates on the network. There is not much DeFi happening on the chain, nor does it have a stable coin yet. The main activities taking place currently are NFT’s and staking.

It is fair to say that they are still behind on their competitors regarding the ecosystem as of today. Charles Hoskinson, the CEO and founder of IOHK, has stated that this is only for the better as it means that every implementation is carefully designed to outperform and outlast its competition.

Looking at the technology of Cardano, it is in many aspects ahead of its competition, despite the fact they are slow. Especially with looking at current problems in the crypto space: many blockchains are unsustainable as they are not able to scale. Others are not designed to be interoperable. IOHK has taken every detail since its inception into careful consideration by numerous experts in various fields to make Cardano future proof. Perhaps the slow but delicate progress of the project will deem to be profitable in the near future. As they often say, ‘slow and steady wins the race’.

As all of this is NFA, please DYOR and use the terms, topics, processes and arguments stated to verify yourself.

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