Robert has reported for a variety of international publications including the Associated Press, The Guardian, Vice, and Decrypt. Current areas of interest include the political economy of technology, cryptocurrencies, and privacy. Robert has a Bachelor of Science from UCL, and a Master's degree from the University of Oxford's Internet Institute.
Although Bitcoin sextupled in price in 2021, problems abound: Bitcoin’s technology is ancient, and it’s cracking under the pressure. It’s slow, expensive, uses the same amount of energy as a small country, and doesn’t support the financial applications its rivals do.
Cardano, also known as ADA, is one of several currencies that promises to solve these problems; in doing so, it hopes to knock Bitcoin off of its top spot and claim the pole position for itself. It’s produced by the Cardano Foundation, a non-profit, as well as IOHK, an organisation that works with university researchers to build the Cardano blockchain.
Soon, Cardano plans to add technology that allow for the creation of smart contracts—self-enforcing bits of computer code that power decentralized financial applications.Buy and Sell Bitcoin, Ethereum, and over a dozen other cryptocurrencies with Wealthsimple. Sign up and Trade here.
What is Cardano?
Cardano was founded in 2015 by one of the co-founders of Ethereum, Charles Hoskinson, as well as another Ethereum developer named Jeremy Wood. It launched to the public in 2017 in a limited release.
Cardano has a lot in common with Ethereum—a “second generation“ blockchain that expands on the limitations of Bitcoin. On Bitcoin, you can’t do anything but buy, sell and store the cryptocurrency. And Bitcoin relies on cryptocurrency mining, an energy-intensive process that mints new Bitcoin and maintains the network.
Where Bitcoin could be considered a single app, Ethereum is comparable to an app store. It allows for the minting of new tokens, each of which can power independent protocols. Cardano plans to implement this feature. In May, 2021, it rolled out a testnet—a test version of the blockchain that uses pretend cryptocurrencies. It intends to implement this feature for real by August, 2021.
Cardano’s creators consider Cardano to be a ‘third generation’ blockchain that takes Ethereum even further. They consider Ethereum to be limited in its design and unsuitable for widespread adoption. Some evidence of this is in rising “gas” prices—fees paid to process transactions on the Ethereum network.
While Ethereum currently uses the same energy-intensive consensus mechanism as Bitcoin, Cardano has already implemented a far more energy-efficient one called proof-of-stake, which lets the biggest bagholders process transactions.
Cardano calls its consensus mechanism Ouroboros. It groups transactions by time slots, then selects a miner to add each batch of transactions to the blockchain. Cardano therefore isn’t “mined” like with bitcoin, but instead paid out to “validators” who perform the aforementioned proof-of-stake task. Ethereum plans to move to proof-of-stake in 2021.
Cardano promotes itself as a blockchain built on academic research. Any change that is made to the network must first be approved by academic researchers. This is supposed to ensure that the changes to the network are backed by the research of qualified academics, rather than a forum full of random users.
Cardano uses a token named ADA, after Ada Lovelace, a revolutionary pioneer of early computing and the daughter of the poet Lord Byron. Miners who successfully verify all the transactions in a block are rewarded by the network with ADA.
ADA, like most other cryptocurrencies, has spiked in price in 2021. As of May, a single ADA coin is worth just over $1.7 and the entire network has a market cap of about $50 billion, making it the seventh-largest cryptocurrency by market cap on CoinGecko. A year before, it was worth just five cents.
Cardano’s lengthy development
Although Cardano launched in 2017, it’s still very much a work in progress. Cardano named its first development updates after English poets. The first version was called Byron, then another, Shelley, launched in mid-2020. Then it moved to famous computer scientists.
As of May, 2021, it’s in the Goguen era, after American computer scientist Joseph Goguen. This adds smart contracts. (The specific update that adds smart contracts is called Alonzo, after Alonzo Church, an American mathematician who made huge contributions to theoretical computer science.)
And with smart contracts comes a whole network of decentralized applications, such as non-custodial exchanges or lending protocols. These will be written in Plutus, a smart contract language and platform based on Haskell. There’s also Marlowe, a high-level computer language specifically built for financial contracts. Goguen will also allow for Cardano-based tokens to be minted, much like the panoply of Ethereum-based tokens that have thrived on that network.
Next up comes the ‘Basho’ era, which ‘scales’ the blockchain. This means that the blockchain will become a lot quicker and will be able to support more transactions. The final era in the blockchain’s development is called Voltaire, after the French satirist of the same name. Voltaire will add governance mechanisms to the network, meaning that anyone, including you, can stake tokens to vote on the future development of the network.
This is what is known as a decentralized autonomous organization (DAO); such governance structures are already popular over on Ethereum. This takes power away from the current overseers of the network, IOHK and its leader, Charles Hoskinson. Anyone will be able to use their tokens to vote on the future of the network, including on how to spend treasury funds and on which updates to implement. It’s unknown exactly when the Basho and the Voltaire eras will start.
A note on what Cardano is
Although Cardano plans to implement smart contracts, it should be noted that these are quite different from, say, Ethereum smart contracts, insomuch that you can’t use your Ethereum-based coins in Cardano, and vice versa. This remains a critical pain point for blockchains.
A couple workarounds exist for Ethereum, and these will likely work for Cardano, too, once it launches its smart contracts. This is the idea of the ‘wrapped’ token. You send, say, some Ethereum to a protocol, and in return the protocol issues you with a Cardano token that represents your Ethereum. It’s a little unwieldy, but the workaround is good enough. (Cardano plans to add interoperability with its ‘Basho’ update, but this refers to interoperability with Cardano-based blockchains rather than with Ethereum).
How to buy Cardano?
You can buy Cardano (ADA) just like you can any other cryptocurrency. Let’s quickly run through two popular options: on an exchange or through a brokerage platform.
Buying Cardano on a cryptocurrency exchange is the most common route. Cryptocurrency exchanges are run by companies that develop complicated matching engines to process trades. You buy and sell directly from other users, and the whole thing is designed for professional traders to trade Cardano as quickly as possible.
These exchanges can seem slightly unwieldy, but they all do the same thing and are fairly easy to get to grips with. If all you want to do is buy Cardano at the market price, you’re looking for something called a “spot” trade. This matches you with another user who’s selling at the current market price. Spot trades let you trade ADA as close to the market value of the coin as possible. Each exchange is different and prices can differ between them (profiting from these differences is a type of trading strategy known as exchange arbitrage), but with a coin as large as ADA, these differences will rarely be significant.
You can also place different types of trades on exchanges. Another popular type of trade is called a limit order. These let you set a price at which you’d like to buy or sell ADA. The exchange then processes your trade as soon as it’s found a match. To trade on crypto exchanges, you’ll have to first set up an account, which usually requires you to submit a form of identification. Then you’ll have to choose a currency in which you plan to buy your ADA.
Cardano’s most popular market is with UDST, a cryptocurrency that is pegged to the US dollar. The ADA/USDT market on crypto exchange Binance accounts for 22% of the overall traffic. To trade ADA for USDT, you’ll have to first buy USDT, which you can usually buy with regular money or with another cryptocurrency. The second-largest market for ADA is straight for US dollars on crypto exchange Coinbase. Kraken and Binance.US are also popular markets for ADA. Crypto exchanges come with a few risks; they offer no insurance on holdings and you could lose all your money if they go bust.
Brokerages are like cryptocurrency exchanges, but instead of trading directly with other users, you’re buying crypto directly from a company (who has likely bought a whole load of the cryptocurrency from an exchange or an over-the-counter, or OTC, desk). Revolut, Ziglu, and Coinbase are some of the only major brokerages to support Cardano. (Most brokerages tend to offer a more limited selection, often just Bitcoin, Ethereum, and a handful of other coins). Brokerages usually let you buy crypto, including Cardano, straight for regular money. They tend to be very easy to use and often charge larger fees for the convenience.
How to store your Cardano
ADA is a cryptocurrency, meaning you can store it in an exchange or in a wallet. Wallets are generally more secure since you control the keys; exchanges are more like banks but without any government insurance. Exchanges often use their customers’ money to back their own trades, but if they collapse or turn out to be fraudulent, you can’t do much to get your money back.
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