Cardano is an open-source, decentralized, proof-of-stake (PoS) blockchain platform designed to be a more efficient and environmentally sustainable alternative to proof-of-work (PoW) platforms like Ethereum and Bitcoin.
The native token on the Cardano blockchain is Ada, named after Ada Lovelace, a 19th-century mathematician. (Cardano itself is named after Gerolamo Cardano, a 16th-century scientist and mathematician.)
Cardano is the sixth largest form of crypto, as of January 2022. It was created as a platform for the development of decentralized applications (or dApps), and to provide a multi-asset ledger and smart contract capabilities. Cardano’s proof-of-stake protocol is called Ouroboros, a consensus mechanism that is designed to be highly secure and to use minimal amounts of energy by enabling those who own Ada crypto to validate transactions and participate in the platform’s governance.
Keep reading to learn more about this innovative form of crypto and whether investing in ADA might be right for you.
How Does Cardano (ADA) Work?
Rather than launching with a white paper outlining its vision and business case like many other cryptocurrencies, Cardano was established in 2017 to bring a scientific rigor to its framework, protocols, and products. The aim was to establish a peer-reviewed decentralized network that could validate transactions in a scalable, secure way — paving the way for dApps and smart contracts — while ensuring that the Cardano platform would be as energy efficient as possible.
To that end, the Cardano blockchain relies on a proof-of-stake algorithm called Ouroboros (a reference to the mythic serpentine symbol of renewable life). Rather than using a network of miners racing to solve a puzzle like PoW systems, Cardano’s PoS uses a network of participants who stake their own Ada. Stake pools are designated nodes that run the protocol, hold members’ Ada, and validate transactions and produce new blocks. Validators are rewarded based on the amount of their stake.
Cardano is divided into two layers: the Settlement Layer (which contains the ledger of accounts, and where transactions are validated); and the Computing Layer (where smart contract operations enable the functioning of apps on the blockchain). This two-layer design was set up to increase efficiency and enable the network to process up to a million transactions per second.
Advantages and Disadvantages of Cardano (ADA)
As innovative as Cardano is, there are some pros and cons to consider when deciding whether to buy Ada crypto. Let’s consider some of the advantages first.
Because the Cardano blockchain relies on a PoS consensus mechanism, it’s considered more environmentally sustainable compared to cryptocurrencies that use PoW — which consumes vast amounts of energy. According to an estimate by Charles Hoskinson, one of Cardano’s founders, in February 2021 the network was using only 6 GWh (gigawatt hours) per year, which was less than 0.01% of the estimated 110 TWh (terawatt hours) used by the Bitcoin network.
Another potential upside for investors: New Cardano products and updates are research driven, meaning they are peer reviewed and tested to minimize bugs and maximize security.
In addition, Cardano has faster transaction speeds than other platforms and typically charges lower fees. That has given it an edge over other coins and tokens in terms of scalability.
Nonetheless, the Cardano platform faces some challenges. Although Cardano is well-known as the first and still the largest crypto using proof-of-stake, it has yet to gain the kind of momentum that would allow it to compete with the bigger players.
And although its scholarly bent gives Cardano a lot of credibility, the emphasis on peer review and testing may have slowed the network’s growth. It has been difficult for the platform to make notable progress in areas like smart contracts.
For this and other reasons, ADA does not yet have the widespread acceptance of other crypto for payments and other transactions.
• Considered one of the greener types of crypto, thanks to its low-impact PoS protocol.
• Has not gained the momentum that could help it compete with other, bigger crypto platforms.
• Research-based focus enhances the reliability of products and rollouts.
• Emphasis on research and peer review tends to slow Cardano’s growth.
• A more efficient and potentially more scalable blockchain.
• ADA lacks the wide acceptance of other forms of crypto.
Who Created Cardano (ADA)?
Charles Hoskinson, the co-founder of Ethereum, began the development of Cardano in 2015 with Jeremy Wood. The two had also founded IOHK (Input Output Hong Kong), a tech company which designed the Ouroboros algorithm. They launched Cardano in 2017. Cardano has positioned itself as an updated version of Ethereum, defining itself as a third-generation platform versus Ethereum’s second-generation status.
Today, Cardano is maintained by three separate organizations:
• The Cardano Foundation – a non-profit responsible for overseeing the development of the Cardano blockchain.
• IOHK – IOHK built Cardano and designed Ouroboros, the proof-of-stake algorithm Cardano uses to operate its network.
• Emurgo – The company charged with helping encourage enterprises and larger organizations to adopt Cardano’s technology
Why Does Cardano (ADA) Have Value?
Ada has value because users need to buy ADA to facilitate transactions and participate in governance on the Cardano blockchain. How much ADA investors own determines who gets to be a slot leader or validator and add new blocks of transactions, and therefore who earns a percentage of the transaction fees.
Ada tokens are also used for voting on software and other policies, such as the crypto’s inflation rate, giving participants an incentive to hold ADA and ensure its future value.
With a recent platform upgrade release, Cardano enabled delegated staking. This allows ADA owners to allocate votes to other users and earn Ada rewards on its live blockchain.
Price of Cardano (ADA)
The price of ADA as of Jan. 24, 2022 is $1.06, with a market cap of $36.38 billion and a circulating supply of 33.55 billion.
Since its inception in 2017, ADA maintained a low of just a few cents throughout most of 2018, 2019, and 2020, but the price began to rise significantly in February of 2021. It reached a high of about $3 in September of 2021.
Why Use Cardano (ADA)?
Like many other tokens and coins, Ada cryptocurrency can be used as a medium of exchange. People can send each other Ada through digital wallets for whatever purposes they like. Ada can also be used for speculative purposes. Traders can try to buy coins when the price is low and sell them after the price rises.
It’s also important to look at the specific use case for Ada on the Cardano blockchain. Ada crypto is used as fuel to run programs, much like ETH is used as “gas” on Ethereum.
Ethereum and Cardano are both smart contract platforms. Because smart contracts represent decentralized agreements that execute themselves when certain conditions are met, there is no intermediary (like a bank or a notary) to facilitate the transaction. Instead of paying a fee to a third-party provider, users on these blockchains must use the appropriate crypto token as a tool to conduct business, run programs, play games, etc.
How Can I Buy Cardano (ADA)?
You can buy ADA on most major crypto exchanges and investing apps. Here’s how to buy ADA on SoFi Invest®.
Step 1. Open your account.
Start by opening an Active Invest account with SoFi Invest. You can trade ADA and dozens of other cryptocurrencies on SoFi Invest, 24/7, and get started with as little as $10.
It’s best to check that the app or exchange carries the crypto you want to buy; sometimes there are geographic restrictions on certain types of crypto.
Step 2. Fund your account.
Fund your SoFi Invest account using a secure bank or wire transfer. The buying power in your account can be used to trade crypto as well as stocks or ETFs.
Step 3. Trade ADA!
Select ADA from the list of cryptocurrencies and go to the quote page. There, click “Buy” and enter the amount (in either dollars or coins), and finalize your transaction. You can only buy ADA with the buying power in your Invest account. Currently SoFi doesn’t offer the option to trade one type of crypto for another.
How to Sell Cardano (ADA)
Here’s how to sell Ada on the SoFi Invest app.
Step 1. Select the coin you want to sell.
From your crypto account, select ADA, then from the quote page click “Sell” to submit your trade in either dollars or ADA. Currently, SoFi doesn’t offer the option to trade one type of crypto for another.
Step 2. Make the trade!
Complete your transaction.
Step 3. Keep taxes in mind.
Remember that selling crypto is similar to any other investment: Your crypto gains are subject to taxes. Be sure to consider the tax implications of selling your ADA, and consult a professional as needed.
Does Cardano (ADA) Have Staking?
Yes. Cardano uses the proof-of-stake consensus mechanism to validate transactions and reward community members with Ada. You can stake your Ada holdings on an exchange or in a crypto wallet that supports ADA staking. By staking ADA, you can earn rewards — currently about 4.6% of your stake.
Cardano (ADA) is the sixth-largest crypto by market cap, as of Jan. 25, 2022. Launched in 2017 as an open-source, decentralized, proof-of-stake (PoS) blockchain platform, Cardano is designed to be a more efficient and environmentally sustainable alternative to proof-of-work (PoW) platforms like Ethereum and Bitcoin. Additionally, because Cardano relies on research, testing, and peer review for all its products, it aims to be something of an innovator.
Cardano’s native token, Ada, runs on the Ouroboros consensus mechanism, which allows Ada holders to join staking pools on the Cardano platform to earn more Ada. Ready to invest in crypto? When you open a brokerage account with SoFi Invest®, you can start buying and selling dozens of different crypto with as little as $10. SoFi enables you to buy and sell crypto 24/7. It is considered a secure platform and is designed to protect your crypto against fraud and theft. SoFi does not offer a crypto wallet.
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