ADA is the native cryptocurrency of the Cardano blockchain platform, which was established in 2017 by the co-founder of the Ethereum network Charles Hoskinson.
Cardano, one of the best decentralized proof-of-stake (PoS) blockchain platforms in the world, was created to outperform proof-of-work (PoW) networks. Cardano Blockchain, as a third-generation blockchain network, provides scalability, interoperability, and sustainability that PoW networks like Ethereum and Bitcoin are less recognized for. These monolithic networks, although providing a solid foundation for today’s more inventive blockchains, are severely hampered by their high energy consumption, rising infrastructure costs, and sluggish transaction times.
Blockchain has proven to be a remarkably functional technology in industries ranging from finance to art. The fundamental structure of decentralized blockchains, however, comes with a set of unique challenges. Achieving a watertight secure network over a vast decentralized network while managing internet-scale transactional output is one of the biggest challenges to begin with.
Charles Hoskinson, the co-founder of Ethereum, saw these challenges beforehand and started developing the Cardano blockchain and its native currency, ADA.
How Does Cardano Blockchain Work?
The Cardano platform operates on the Ouroboros consensus mechanism. Developed in Cardano’s foundational phase, Ouroboros is the pioneer of the PoS protocol that was not only secure but also based on academic research. Ouroboros is a blend of mathematically-verified mechanisms and unique technology to ensure top-notch security and sustainability of the blockchain network. Each development phase in the Cardano roadmap is based on research, peer-reviewed insights, and methods based on evidence to achieve the holy grail of blockchain technology and the ADA token.
Even though Cardano is a blockchain network, it takes a different approach and follows a slightly different model. Its network has two layers: a settlement layer and a computational layer. The settlement layer is ready and functional and allows users to exchange ADA tokens from their wallets. The computational layer is in the development phase and its objective is to effortlessly get the users to initiate and sign up for smart contracts. While it may sound like the Ethereum blockchain, it has fundamental differences.
To begin with, Cardano is more flexible as it can be modified as per the requirements of the end-users. Let’s understand with an example; various countries have a multitude of financial and monetary regulations. With Cardano, the information on the same contract can be processed, stored, and accessed as per those regulations. And given that this layer is independent of the settlement layer, ADA users can use the tokens and still comply with those laws and regulations.
As both layers are separate, the Cardano project team can make changes to the computational layer without disrupting the ADA or the settlement layer. It uses a proof-of-stake protocol to verify transactions. Users who want to stake their coins must have a certain number of tokens to demonstrate they have a stake in the whole process, and they earn rewards depending on their stake. The result is a network with proven security and minimal energy requirements.