Hey everybody, I’m Kris with Exodus. We’re going to take a few minutes to explore Cardano Ada – a project that began in 2015 and grabbed a lot of attention not just because of its ambitious plans to create an internet of blockchains, but because of its jump from around 2 cents in late 2017 to nearly a dollar and 30 cents at the beginning of 2018. This parabolic price increase was, of course, not sustainable, and Ada’s price has since declined to around 3 cents as of April 2020.
If you’re a Cardano Ada holder, at which price did you buy? And What is your Cardano price prediction? Let us know your answer in the comments. So, what exactly is Cardano? And what is Ada? There isn’t one simple answer to the question of “What is Cardano?” First of all, Cardano and Ada are two different things.
Cardano is a blockchain, while Ada is a cryptocurrency that lives on the Cardano blockchain. In other words, Cardano is home to the Ada cryptocurrency. And while the Cardano blockchain can be used to send and receive ADA, it will also host smart contracts and applications. Now, this may remind some of us of Ethereum since it does the same thing.
And in fact, Cardano shares many of its roots with Ethereum. But although it is similar to Ethereum, Cardano’s smart contract platform operates much differently. Let’s jump right in. It’s not enough to simply say Ada lives on the Cardano blockchain. Ada is a proof-of-stake coin that fuels Cardano. Its purpose is to provide a quick and secure transfer of value and to allow users to operate smart contracts and applications. The maximum supply of Ada coins that will ever be created is capped at 45 billion.
The current circulating supply is 31 billion Ada coins. New coins enter the ecosystem and nodes validate transactions through a consensus algorithm called Ouroboros Proof-of-Stake. I’m going to throw out some technical lingo here, but stick with me, it’s not as complicated as it may sound. In this protocol, nodes who earn a position as slot leaders generate new blocks in the blockchain and verify the transactions. In this case, Cardano slot leaders perform functions much as Bitcoin miners do.
Anyone holding ADA can be a stakeholder and become a slot leader. You become a slot leader and publish new blocks to the network when Cardano’s consensus algorithm selects a coin that you hold. A node is selected to generate or mint a new block with a probability proportional to the number of coins the node has. If a node has any amount of Ada staked, it is called a “stakeholder”.
If a node eventually becomes chosen to mint a new block, it is called a “slot leader”. What this simply means is the more Cardano you hold, the greater the opportunity is to become a slot leader and receive rewards.
Now that we know a little something about Ada and its purpose, let’s dive a little further into the Cardano blockchain. Cardano is being developed in two layers. This layered architecture is one of the key features that makes Cardano unique. First is the Cardano Settlement Layer which acts as the balance ledger and runs the transfer of ADA tokens.
The other separate layer is The Cardano Computation Layer which contains the information on why transactions occur. It’s this layer that runs Cardano smart contracts. The two layers separate the ledger of account values from the reason why values are moved from one account to the other. In other words, Ada can be transferred from one account to another without the information from smart contracts going along for the ride.
Why, because This separation enables more flexibility for Cardano smart contracts. Since the computation layer is detached from the settlement layer, users of the computation layer can create rules to filter transactions based on the parameters they set. Such as a permission ledger that excludes transactions that don’t include identification data – something that will become more important as blockchain regulation continues to increase. Another key feature of Cardano will be the interoperability of blockchains.
Think of this as the “internet of blockchains” – an ecosystem where Bitcoin can flow into Ethereum and Ripple can seamlessly flow into Litecoin. One way that Cardano wants to do this is by implementing sidechains. Sidechains would enable cross-chain transfers without any middlemen. Cardano supports sidechains based on a new protocol called the KMZ sidechain.
The KMZ sidechain protocol allows funds to move securely from the Computation Layer to any blockchain that also uses the same protocol. With this protocol, ledgers with certain regulatory compliances are able to interact with the settlement layer without having to share the data that needs to remain private.
There’s a lot more to go over, but our goal here was to provide a general overview of what makes Cardano different from other blockchains and cryptocurrencies. If you’re a Cardano fan, let us know why in the comments section. And be sure to hit the like and subscribe buttons for a bullish year.
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