What is Cardano (ADA)?

Cardano is a decentralized proof-of-stake (PoS) blockchain designed to be a more efficient alternative to proof-of-work (PoW) networks. Scalability, interoperability, sustainability, growing costs, energy use and fast transaction times are critical tenets behind Cardano's development.
Cardano's native token ADA is used in the blockchain's PoS consensus mechanism. ADA is given as a reward for work done for the blockchain by users participating in a stake pool.

Understanding Cardano (ADA)

Charles Hoskinson, the co-founder of Ethereum, began the development of Cardano in 2015 and launched the platform in 2017. Cardano has positioned itself as an alternative to Ethereum. Both platforms are used for similar applications, such as smart contracts, and have goals of building a connected and decentralized system.
Cardano considers itself an updated version of Ethereum and has anointed itself a 'third-generation' platform compared to Ethereum’s 'second-generation' credentials. The blockchain platform also has a goal of providing banking services to the world’s unbanked.

Consensus algorithm

The Cardano platform runs on the Ouroboros consensus protocol. Ouroboros, created by Cardano in its foundation phase, is the first proof-of-stake (PoS) protocol designed to reduce the energy expenditure required by proof-of-work mining. It does this by eliminating the massive computing resources that the proof-of-work (PoW) algorithm uses.
👀 Fun Fact
'ADA' is Cardano's digital currency and is named after Ada Lovelace, a 19th-century countess and English mathematician recognized as the first computer programmer.


In Cardano’s PoS system, staking determines a node’s capability to open blocks on the blockchain. A node’s stake is equal to the amount of ADA it holds over the long term. A stake is an interest held by a pool participant, secured with ADA that is pledged. Pledged ADA cannot be used or spent by the holder because it is held as collateral for honest validation behavior. Users with pledged ADA are given rewards in the form of transaction fees. The rewards are distributed according to the amount of ADA a user has staked.
Users join staking pools (groups of ADA holders that have pledged their coins) and work together to update the ledger, open new blocks and earn rewards.

Staking pools

Cardano uses the proof-of-stake consensus mechanism, where users 'stake' a coin for the opportunity to become a validator. Users can participate in the staking and validation process in two ways. You can become a stake pool owner or a stake pool operator. Stake pools are trusted server nodes that conduct the work of validating transactions.
A stake pool owner is someone who has delegated ADA to a pool. You can create your own stake pool and keep it private or allow others to join your pool. You can also become a pool owner by pledging your ADA to another pool.
A stake pool operator is a trusted person tasked with maintaining the stake pool by renting servers, monitoring the node, holding the pool key and other pool administration tasks.

Smart contracts

Cardano implemented smart contract support in 2021 with its Alonzo update. This testnet update was the first iteration of bringing the promised scalability and use cases to users. This update allowed users to create smart contracts, non-fungible tokens, and manage multiple assets. Future releases and forks will bring smart contracts and more capabilities to the mainnet.

Future of Cardano

Cardano is designed to be developed in 'eras' named after notable figures in poetry and computer science history — Byron, Shelley, Goguen, Basho, and Voltaire.
Basho (current, mid-2022) is the era of scaling and optimization, intended to bring more capabilities to Cardano.
Voltaire is the final era for Cardano development, intended to bring voting and treasury management of the blockchain and network through previously introduced smart contract functionality and system improvements.
When Voltaire is complete, IOHK's goal is to release the blockchain and network to the community, as it will be fully decentralized and able to be developed on, maintained and kept secure.