What is Cardano?

Cardano, founded in 2015, is one of the world's largest cryptocurrencies based on market value. Cardano's associated cryptocurrency is actually called ADA, but many people use ADA and Cardano interchangeably.

In addition to being a cryptocurrency, Cardano is a blockchain and a platform designed to run decentralized applications through smart contracts. This is, simply explained, software that lives on the blockchain. Cryptocurrencies with this feature are often called "layer 1" or "L1" cryptocurrencies. This means that they are a platform, on which one can then build other things on top. Ethereum, for example, is also a L1 cryptocurrency (like Cardano).

Developers og other crypto projects can build their solutions on Cardano's blockchain. This is much easier and safer than having to develop their own blockchain from scratch. The cryptocurrency ADA is central to this entire ecosystem, and is used for various functions such as securing the network and paying for transactions. The value of ADA is thus closely linked to the growth and success of the Cardano ecosystem.

On September 12, 2021, Cardano's main network went live through the software update Alonzo, and for the first time it became possible for developers to create decentralized applications on the network.

Firi explains: What is a blockchain?

A blockchain is as a database that contains data, and which is secured through a distributed network of participants. A database is a collection of information. This data is stored in blocks, and each block of data is linked together and forms a chain - and thus it becomes a a "blockchain".

The most common data in a blockchain are transactions. Instead of a centralized entity being responsible for storing the data, the majority of blockchains are secured through the use of cryptography and through a decentralized network of people around the world. The network is collectively rensponsible for storing and securing the informatin in the blockchain and have to agree upon the information stored on the blockhain.

An important factor that distinguishes blockchains from regular databases is that the information in a blockchain cannot be manipulated or changed by any of the participants alone.

Important facts about Cardano

Cardano is a platform that is built with sustainability in focus, and is designed to address the challenges of high power consumption found in existing blockchain solutions.
Like Bitcoin and Ethereum, Cardano is decentralized. One can send ADA to anyone, anywhere in the world without being dependent on a central third party.
Cardano is an open protocol. Anyone can help secure the network, complete transactions or create decentralized applications stored in Cardano's blockchain.
Unlike Bitcoin's blockchain, which is secured using computing power and power consumption through Proof of Work, Cardano's blockchain is secured through Proof of Stake. This method uses the cryptocurrency ADA as security.
Cardano's cryptocurrency ADA is named after Ada Lovelace, the British Countess who is considered the world's first computer programmer.
The term for the smallest unit of the ADA is defined as a lovelace. 1 lovelace is equivalent to 0.000001 ADA. This allows very small transactions that traditional money can not perform, and it is quite possible to own for example 0.1 ADA.

Summary:

Cardano is one of the world's largest cryptocurrencies and a protocol based on blockchain technology. With Cardano, it is possible to create decentralized applications through smart contracts stored on the Cardano blockchain. Like Ethereum, which is the largest smart-contract platform available today, Cardano's cryptocurrency is decentralized, and ADA can be sent and received without the involvement of a key player.

Who made Cardano and what's the story?

Cardano was founded by Charles Hoskinson, one of the original founders of Ethereum. The development of the Cardano platform started in 2015.

Hoskinson had a vision to address the three most important challenges facing all blockchain networks: scaling, interoperability and sustainability.

In 2017, the platform went live, and with it the associated cryptocurrency ADA.

Hoskinson left Ethereum after a dispute with his co-founders in Ethereum, including Vitalik Buterin. While Vitalik Buterin wanted Ethereum's development to be non-profit only, Hoskinson also wanted to have a for-profit entity involved in further developing Ethereum.

As a result of the disagreements, Hoskinson left Ethereum, forming the for-profit company Input Output Hong Kong (IOHK) in 2014. He led the development of Cardano from 2015 as head of IOHK.

There are three main players who have taken on the main responsibility for the further development of Cardano's protocol and ecosystem.

IOHK, a for-profit organization with a primary focus on developing the Cardano platform.
The Cardano Foundation, a non-profit organization responsible for promoting, protecting and standardizing Cardano's protocol.
Emurgo, a global technology company that deals with the commercial adoption of Cardano's protocol and which facilitates integrations with various companies.

Cardano is research-based. The project is written in the programming language Haskell, and built around peer-reviewed documentation from academics and experts around the world.

How to buy and store Cardano?

There are primarily two ways you can buy ADA. You can either buy ADA through a crypto exchange, or you can buy ADA from a private individual who wants to sell their ADA.

Regardless of which method is used, you must store your ADA in a digital wallet for cryptocurrency.

You can choose between creating an account on a crypto exchange and letting the crypto exchange take care of your cryptocurrencies for you, or creating a decentralized Cardano wallet where you are responsible for the storage and security of your ADA.

How to buy and store ADA with a crypto exchange like Firi

An easy and cheap way to buy and store ADA is through a crypto exchange such as Firi. Firi makes it easy to buy, sell and store your ADA and other cryptocurrencies.

When you create an account through Firi, a Cardano wallet is automatically generated for you. In practice, this means that Firi securely stores your ADA for you and that you do not have to deal with the security of your Cardano wallet.

You can access your Cardano wallet by logging in to your user by e-mail or vipps, and by verifying yourself with BankID. You can easily send and receive ADA to your wallet in Firi from other exchanges or other Cardano wallets.

How to buy and store ADA in three easy steps.

Cryptocurrency can be purchased 24/7, and Firi makes it easy to switch between ADA and NOK. In less than one business day, you can also sell your ADA for NOK and transfer to your bank account if you wish.

Store the ADA in a decentralized wallet

Because Cardano is a decentralized network, it is possible to create a separate, private Cardano wallet where you can store your ADA.

When you create a digital wallet directly on the Cardano network, you receive what is called a public key and a private key that is associated with your wallet.

A public key can be compared to an account number for your Cardano wallet. For example, if someone is going to send you an ADA, they need access to your public key associated with your Cardano wallet.

You can safely send others your public key. A public key is a combination of letters and numbers that are unique to your Cardano wallet.

A private key can be compared to the password of your digital wallet. A private key is a combination of letters and numbers that are unique to your Cardano wallet.

A private key can also be generated in the form of a seed phrase, which in practice is 12 words that acts as a backup of your private key. If someone has access to your private key or your seed phrase, they will also have access to all of your cryptocurrency. It is therefore important not to share your private key with anyone.

It is important to note that a Cardano wallet only supports ADA. For example, if you send the ADA from a Cardano wallet to a Bitcoin wallet, the ADAs that are sent will be gone forever without you being able to access them.

It is very important that you pay attention to which public key you send and receive cryptocurrency to

The most common way to buy ADA is through a cryptocurrency exchange. Firi makes it easy to buy ADA and other cryptocurrencies for Norwegian kroner. After you have purchased cryptocurrency from Firi, you can choose whether you want Firi to store your cryptocurrency for you, or whether you want to send it to a separate decentralized wallet.

When you create a Cardano wallet, a public key is generated that acts as an account number and a private key that acts as a password for your wallet. If someone gets hold of your private key, they will have access to all of your cryptocurrency. No key player can help you get your money back.

How does Cardano work?

It is thus possible to both send and receive ADA through Cardano's platform, without the involvement of a key player. Cardano also enables developers to create decentralized applications.

Bitcoin and Ethereum use Proof of Work as a consensus mechanism, which is the mechanism that causes players on the network to reach a common agreement on information stored on the blockchain. This mechanism for verifying transactions can be very energy intensive, as it is based on the use of computing power and power.

Unlike Bitcoin and Ethereum, Cardano has created its own consensus mechanism called Ouroboros, which is based on Proof of Stake, and which is apparently supposed to be environmentally friendly.

From 2020, Ethereum also began work on switching from Proof of Work to its own version of Proof of Stake.

What is Proof of Work?

Proof of Work was first introduced through Bitcoin. Bitcoin's blockchain is secured by a network of "miners" who use computing power to ensure that the information in the network is correct.

Unlike, for example, a bank's database, where a key player (the bank) controls the information on all transactions and balances, Bitcoin's database is secured through a decentralized network of players around the world.

In order to ensure that all transactions and balances on the Bitcoin blockchain are correct at all times, these players must reach a common agreement (consensus) that everyone has equal information. This consensus mechanism in Bitcoin is called Proof of Work.

The players who ensure that all Bitcoin-related transactions and balances are correct at all times are called "miners".

Miners reconcile the information on the Bitcoin blockchain using computing power. In practice, this is a competition between winners to be the first to solve a math problem in the Bitcoin protocol with their computers.

Whoever solves the math problem first, gets a reward in the form of bitcoins.

The computing power used collectively to secure the Bitcoin network requires enormous amounts of power. Bitcoin is not the only protocol that uses Proof of Work, but certainly the largest and most well-known.

How does Cardano's Proof of Stake work?

Proof of Stake an alternative mechanism for common agreement (consensus) in a blockchain. Unlike Proof of Work, Proof of Stake is not based on solving math problems using computing power.

Proof of Stake works so that users commit their cryptocurrency, or stakes as it is called, to validate the transactions that take place on the blockchain. In Cardano's case, it requires locking the cryptocurrency ADA into a so-called stake pool that helps secure the Cardano blockchain. The penalty for trying to manipulate the network with incorrect information is that you lose the money you have unlocked by betting ADA. You create a function where it can not pay to manipulate the network. At the same time, those who contribute to the blockchain by stake will be rewarded with payouts in the ADA. In this way, you can get interest income on your crypto by contributing to the network's security.

A stake pool acts as a validator or node on the Cardano network, and consists of a stake pool owner who maintains the node, and a collection of participants who commit ADA to the stake pool.

Cardano's Proof of Stake mechanism is called Ouroboros, and works like this:

Each block in Cardano's blockchain is divided into what are called slots, and information and data related to Cardano are stored in each slot.
A collection of so-called slots is called an epoch.
The mechanism randomly selects various stake pools as so-called slot leaders. A slot leader is given the responsibility of creating a new block on the Cardano blockchain by verifying the transactions that are in the selected slot.
Each time a slot leader produces a new block that is approved on the block chain, the owner and participants in the current stake pool receive a reward in the form of ADA. A new block is created approx. every 20 seconds in the Cardano blockchain.

A person who owns an ADA can earn rewards in two ways: either by committing their ADA to a stake pool run by someone else (participant), or by operating their own stake pool (owner). Operating your own stake pool requires some technical knowledge.
The more ADA you lock in a stake pool, the greater the probability that that stake pool will be chosen as the slot leader.
After a slot leader has validated new transactions on the network in the form of a block, other staking pools must confirm that the information the slot leader has validated is correct. After a certain number of confirmations have been completed, the block chain is updated with a new block.
Staking pools can not be selected as slot leaders until they have verified information in previous blocks, and thus the consensus mechanism Ouroboros ensures that information in Cardano's blockchain is correct at all times.
With Proof of Stake, it is easy for users to participate in securing the network. Anyone can lock the ADA in a staking pool as a participant without the need for any special equipment. To do this, you receive passive income on your cryptocurrency while helping to maintain the blockchain.

Summary:

Unlike, for example, Bitcoin, which uses computing power and power through the consensus mechanism Proof of Work, Cardanos secures its network via Proof of Stake. This happens in the form of people locking the cryptocurrency ADA in so-called staking pools, which in practice act as nodes on the Cardano network.

Anyone can create a staking pool or delegate their ADA tokens to an existing staking pool. Staking pools are randomly selected as slot leaders, and must verify the information on the Cardano blockchain. In return, to verify the information on the blockchain, staking pools selected as slot leaders receive rewards in the form of ADA. Thus, those who stake get a passive income on their cryptocurrency.

Cardano's blockchain architecture

Cardano's block chain contains two core components; The Cardano Settlement Layer (CSL) and The Cardano Computational Layer (CCL).

The Cardano Settlement Layer (CSL) is used to keep track of all units of ADA in the Cardano protocol, enabling people to send and receive ADA.

The Cardano Computational Layer (CCL) is a set of protocols that are at the core of blockchain computing. CCL helps operate smart contracts and is used to enable advanced functionality on the Cardano blockchain.

Cardanos roadmap

Cardano is developed in five different eras - Byron, Shelley, Goguen, Basho and Voltaire - where each of the different eras is centered around a set of functionality.

Cardano will update the code at given intervals and thus release these updates, but the work is done in parallel. Research, prototyping and development are carried out simultaneously across the various eras. Defining the starting and ending point for each era is therefore difficult.

Byron - The basis of Cardano

Byron was the first era of Cardano's vision to address the three strategic challenges facing all blockchain networks: scaling, interoperability and sustainability.

In 2017, as I said, Cardano was launched, and the Byron era began. This era was about creating a community and getting people interested and involved in Cardano. Furthermore, it became possible to buy and sell ADA.

Shelley - Decentralization

The Shelley era is about growth and development for Cardano. In this era, Cardano must optimize decentralization. Cardano is expected to be 50 - 100 times more decentralized than the other large blockchain networks.

Goguen - Smart contracts

With the integration of smart contracts and the ability to build decentralized applications (DApps), the Goguen era represents a major step forward in the capacity of the Cardano network.

This part of the roadmap was launched through the software update Alonzo in September 2021, which enabled developers to create decentralized applications through smart contracts on Cardano.

Basho - Scaling

The Basho era in Cardano is the time for optimization. Here, the network's scalability and interoperability will be improved, so that it can better support applications with higher transaction volumes and greater growth.

This is the phase many consider Cardano in now, and sees as crucial for the further use of the protocol globally.

Voltaire - Self-government

The Voltaire era will provide the final elements required for the Cardano network to become a self-governing and sustainable system.

Cardano will introduce what they call a "treasury" system where everyone who participates in the network can use their voting right to influence development. The treasury system is like a kind of tax system where a small proportion of the transactions go to a kind of pot, where the funds can be used to improve the platform.

Conclusion: Cardano is thus planned to be developed through a number of phases

If you liked this article about Cardano you might also like to read about other well known cryptocurrencies such as Bitcoin and Ethereum. You can also buy ADA easily here at Firi, and you will automatically get your cardano wallet to store your ADA here at Firi.

You can also visit Cardano's official website and read more here: https://cardano.org/

Milad Mirshahi02/07/2021