What is Cardano?

Cardano emerged as a significant player in the cryptocurrency ecosystem during the volatile market conditions of 2017. As Bitcoin reached its all-time high and subsequently experienced dramatic price fluctuations, the digital asset market witnessed unprecedented growth. During this period, traders invested over $20 billion in early-stage cryptocurrency ventures through initial coin offerings (ICOs). While many of these offerings proved to be scams or pump-and-dump schemes, Cardano established itself as one of the serious cryptocurrency projects that emerged from this era. Today, its native ADA token consistently ranks among the top 10 cryptocurrencies by market capitalization, and its founder Charles Hoskinson has become a prominent figure in the crypto industry.

What is Cardano?

Cardano is a decentralized cryptocurrency network designed to provide users with a faster and more scalable alternative to the Ethereum protocol. Like Ethereum, Cardano enables third-party developers to create decentralized applications (dApps) across various sectors, including decentralized finance (DeFi), play-to-earn gaming, and non-fungible token (NFT) marketplaces. Cardano DeFi applications have gained significant traction, offering users innovative financial services without intermediaries. Due to these similarities, Cardano is often categorized as an "Ethereum competitor" alongside other blockchain platforms such as Solana, Avalanche, and Polkadot.

The project was founded by Charles Hoskinson and Jeremy Wood, both of whom were previously lead developers on the Ethereum blockchain. In 2015, they departed from the Ethereum team to pursue new software technologies and address the scalability challenges plaguing Ethereum, particularly its slow transaction speeds and high network fees. Before its public launch in 2017, Cardano raised over $62 million through premarket sales of its ADA coin. The blockchain's ongoing development is managed by software companies Input-Output Hong Kong (IOHK) and Emurgo, while the nonprofit Cardano Foundation oversees funding and organizational matters.

How Does Cardano Work?

Cardano employs a unique proof-of-stake (PoS) consensus mechanism called "Ouroboros" to verify cryptocurrency transactions on its network. In this system, computers (nodes) on the Cardano blockchain lock the native ADA cryptocurrency to earn the opportunity to confirm and record crypto transfers on the public payment ledger. While Cardano uses Verifiable Random Functions (VRFs) to assign validators for each data block, nodes that stake higher amounts of ADA have better odds of posting multiple transactions and receiving crypto rewards.

A distinctive feature of Cardano's PoS system is its organization of transaction data into two temporal sets: epochs and slots. An "epoch" represents five days of transaction data grouped into one-second "slots." The blockchain's algorithm assigns a new "slot leader" approximately every 20 seconds to post ADA transfers. However, confirmation speeds vary based on network usage, allowing Cardano to process an average of 250 transactions per second (TPS). This epoch/slot model provides flexibility that enables Cardano to naturally adjust to network demand, resulting in enhanced scalability, fast confirmation times, and low transaction fees.

Beyond its PoS design, Cardano offers developers access to smart contracts—specialized blockchain-based protocols that execute commands based on precoded instructions. Originally introduced on Ethereum, these smart contracts enable automated functionality. For example, when a user initiates a crypto transfer on a Cardano-based decentralized exchange (DEX) like SundaeSwap, the smart contract automatically processes the transaction data and sends the requested cryptocurrency to the user's wallet. Through smart contracts, Cardano DeFi dApps provide secure peer-to-peer (P2P) features without requiring centralized intermediaries such as banks or governments, establishing Cardano as a robust platform for decentralized finance applications.

What Makes Cardano Special?

Cardano distinguishes itself through a deliberately systematic and methodical approach to building its Web3 ecosystem, earning recognition as one of the most "scientific" cryptocurrency projects. The development team maintains that no new changes are implemented without conducting extensive trials and publishing peer-reviewed research papers for community review and approval. Multiple prestigious academic institutions, including the University of Edinburgh and the University of Zurich, collaborate closely with the Cardano Foundation, IOHK, and Emurgo on software upgrades. While this emphasis on scientific rigor slows the development process, it significantly enhances Cardano's reputation as a credible cryptocurrency project and minimizes bugs or unexpected errors.

Another distinctive feature is Cardano's dual-blockchain system, which separates the Settlement Layer from the Computation Layer. The Cardano Settlement Layer serves as the main PoS network that verifies and records ADA transfers on the blockchain, while the Computation Layer facilitates developers in building dApps with smart contracts on Cardano's Plutus Platform. By separating these two layers, Cardano aims to optimize the core blockchain's security and efficiency while providing programmers with greater flexibility to develop decentralized projects, including sophisticated Cardano DeFi protocols.

What is the ADA Coin?

Named after Ada Lovelace, the pioneering computer scientist, ADA serves as Cardano's native cryptocurrency. Validator nodes lock ADA in "stake pools" on the blockchain to secure the protocol and broadcast new transaction data on Cardano's payment ledger. The amount of ADA in a stake pool directly influences the likelihood of Cardano's algorithm selecting it to confirm transactions and receive crypto rewards paid in ADA. Additionally, validators can use their ADA tokens as "votes" on proposed upgrades from the developer community through on-chain governance proposals.

Cardano charges network fees (gas fees) for every transaction on its blockchain to compensate the ADA staking community. These fees either go to stake pools or Cardano's Treasury. Although gas fees fluctuate based on network demand and protocol changes, the average cost per transaction typically remains below $0.50. Beyond staking and governance, ADA is used to access services on Cardano-based dApps, such as decentralized trading platforms and Cardano DeFi protocols, and to purchase digital collectibles like Cardano NFTs. Furthermore, due to Cardano's popularity, ADA has become an actively traded crypto asset on both centralized and decentralized trading platforms.

Where to Buy Cardano's ADA Coin

ADA is available for purchase on numerous centralized trading platforms, including major exchanges such as Coinbase and Gemini. Some stock trading platforms like Robinhood also offer ADA trading services to their users. To find a comprehensive list of platforms selling ADA, users can visit cryptocurrency price aggregator websites such as CoinMarketCap or CoinGecko and search for "Cardano." On the aggregator's Cardano price page, clicking the "Markets" tab displays all trading platforms where the ADA cryptocurrency is available for trading.

How to Stake Cardano

ADA holders seeking to earn passive income on their cryptocurrency can "delegate" their ADA to a stake pool in exchange for a percentage of the node's crypto rewards. To begin staking, users must first download a Cardano wallet such as Daedalus Wallet, Nami, or Yoroi. After installation, ADA can be transferred into the new account using the wallet's public blockchain address.

For example, to send ADA from a trading platform wallet to a Nami wallet, users should log in to their account, select "Cardano," click "Withdraw," enter the amount of ADA to send, copy the ADA public address from their Nami wallet, paste this address on the platform, and finally confirm the transfer. Most Cardano-specific wallets like Yoroi feature dedicated staking portals where users can choose from various stake pools. Before delegating ADA to a validator, it's important to review each stake pool's reputation and minimum ADA requirements. After confirming an ADA transfer to a stake pool, users can monitor their ADA rewards through their wallet's staking dashboard.

Conclusion

Cardano represents a significant advancement in blockchain technology, offering a scientifically rigorous approach to cryptocurrency development. Through its unique Ouroboros proof-of-stake consensus mechanism, dual-blockchain architecture, and emphasis on peer-reviewed research, Cardano has established itself as a credible alternative to Ethereum and other blockchain platforms. The ADA cryptocurrency serves multiple functions within the ecosystem, from facilitating transactions and governance to enabling staking rewards and access to decentralized applications. The growing Cardano DeFi ecosystem demonstrates the platform's capability to support innovative financial services while maintaining security and efficiency. With its focus on scalability, low transaction fees, and systematic development methodology, Cardano continues to play an important role in the evolving Web3 ecosystem. As the platform matures and expands its dApp ecosystem, particularly in the Cardano DeFi space, it remains a significant project for both cryptocurrency investors and blockchain developers seeking a secure and efficient platform for decentralized innovation.

FAQ

Does Cardano have DeFi?

Yes, Cardano has a robust DeFi ecosystem featuring decentralized exchanges, stablecoins, lending protocols, and other financial applications built on its secure blockchain infrastructure.

What are the main DeFi protocols and applications on Cardano?

Cardano's main DeFi protocols include decentralized exchanges, stablecoins, lending platforms, and yield farming applications. Key projects provide liquidity pools, asset swaps, and lending services, enabling comprehensive decentralized financial infrastructure on the Cardano blockchain.

How do I use Cardano DeFi platforms for yield farming or lending?

Deposit ADA into Cardano DeFi protocols to earn rewards. For yield farming, provide liquidity to earn transaction fees and incentives. For lending, deposit ADA to earn interest. Select a platform, connect your wallet, approve transactions, and monitor your positions for optimal returns.