Cardano is a popular decentralized blockchain and cryptocurrency that is heavily focused on security. The project is constantly reviewed by experts thanks to the partnership between the cryptocurrency and a number of leading universities across the world. While the description itself might make it sound like a bunch of other crypto project out there, this third-generation blockchain project has been in the making since 2009.

cardano (ADA)

How Cardano Works

Programming: Cardano takes advantage of its own Cardano Computation Layer which contains transaction data. Smart contracts similar to that of Ethereum are located in the CCL to abide by blockchain regulations that have been set in place. The Cardano ecosystem also uses Plutus, which is a new programming language meant to be used for smart contracts. Plutus’ code is available via a reference library for developers along with a number of tools meant to verify codes and offer code assurance. The Cardano Computational Layer also uses Solidity, the same language that is used on Ethereum’s smart contracts.

Sidechains: A new protocol by Kiayias, Miller, and Zindros (KMZ) known as “sidechains” has been implemented by Cardano. Unlike traditional blockchains, Cardano allows funds to be transferred to and from any blockchain that offers sidechains. All of this is made possible while maintaining regulatory compliances while also maintaining anonymity.

Open-Source Wallet: Cardano uses an open-source wallet that was built specifically for the platform. The Daedalus wallet supports multiple currencies and allows free-flowing exchange with first and second-generation cryptocurrencies like Bitcoin and Ethereum Classic being available too. The wallet is available on Windows and MacOS.

ADA and Ouroboros: There is a limit of 45 billion ADA coins that will be created which are validated by the Ouroboros Proof-of-Stake. Slot leaders are responsible for generating new blocks and verifying transactions. It is possible for anyone who holds an ADA coin to become a slot leader. Manual verification is avoided by allowing nodes to automatically verify transactions.


How Cardano Improves Over Existing Blockchains


A number of blockchains have become interoperable with Ripple being one of the most popular examples. Interoperability refers to a system that does not tie down the digital currency to a single token. Having cryptocurrencies that share tokens makes it much more difficult to have different cryptocurrencies following different rules. It allows blockchain projects to be far more transparent and lives up to its promise of decentralization. This is not the case for older cryptocurrencies like Bitcoin and Ethereum Classic.

Cross Chain Transactions and NIPoPoWs: Cardano seeks to offer interoperability by facilitating cross-chain transactions without needing third parties to get involved. It is made possible through the use of sidechains that restructure and compress data to make all of the data verifiable by other blockchain entities without compromising the security of the tokens. The transaction data is kept compressed and with the help of Non-Interactive-Proofs-of-Proof-of-Work (NIPoPoWs). NIPoPoWs carefully places metadata to ensure the cryptocurrency can be traded across blockchains and banks while offering sufficient information to financial institutions.

Transparency: Illegal activity using Cardano is not possible with compliance measures in place that allow banks access to the identity of the customers and their basic transaction details. While it takes away the complete anonymity some cryptocurrencies offer, financial institutions will be far more willing to work with Cardano with a more transparent financial system in place.



One of the biggest problems of blockchains from the first and second generations is scalability. Bitcoin is limited to just seven transactions per second which is astonishingly low considering how popular the cryptocurrency has been in recent times. Ethereum, on the other hand, can push out a maximum of 13 transactions per second.
Another issue with scalability is how data is handled. With an increasing number of transactions, the amount of data that needs to be processed has also increased over time. With millions of users invested into cryptocurrency usage and trading, it is not just the number of transactions but also the amount of data that is processed.

Innovative Proof-of-Stake Algorithm: Cardano takes advantage of a new and secure Proof-of-Stake (POS) algorithm dubbed Ouroboros. It is one of the most efficient mechanisms and also uses a unique approach to proof-of-work. The Slot Leader concept in cryptocurrency was introduced by it which allows new blocks to be generated efficiently. It is far less energy-intensive, and the amount of GPU power needed to process the cryptography puzzles is far less than anything out there.

RINA: Another core element of Cardano is the RINA (Recursive Inter-Network Architecture). RINA is fairly new in the world of crypto, but it is capable of reconfiguring how the internet works. It is a self-sustaining scalable network that does not require all nodes to be active to process transactions. Cardano also solves the problem of data scaling by using a small number of nodes to store all transaction records and uses compression methods, Pruning and Subscription to process transactions exponentially faster than first and second-generation blockchains.



When it comes to businesses, a standard business firm is capable of covering operational costs through various means. However, it is not so simple for a cryptocurrency to sustain itself, and it needs measures in place that allows the currency to support its operational costs. An initial coin offering is what most blockchain projects opt for allowing an initial amount of money to be generated from the public and through proper financial planning, some projects are able to sustain themselves long-term.

Treasury: Just like previous generation blockchains, Cardano needs to be self-sustainable as well, and it does so by using ‘Treasury’. A treasury serves as a decentralized bank account, and stores printed money from the blockchain. Every single minted ADA is stored with a small transaction fee value attached to it. How the minted currency is spent is decided by stakeholders. There is also a limit of 45 billion ADA coins that can ever be generated as we discussed earlier to ensure the project is sustainable long term.



Cardano seeks to be a revolutionary third-generation blockchain project, and its innovative solutions may change how other new blockchains operate as well. With the number of security issues involving cryptocurrencies being at an all-time high, Cardano offers assurance that it is safe from all known exploits.
One thing that cryptocurrency enthusiasts need to keep in mind is that the decentralized currency is attempting a number of systems that were implemented for the first time like the ‘Treasury’ and it remains to be seen if Cardano’s projects are sustainable long term. The key takeaway here is that Cardano seeks to be a free-flowing entity in the cryptocurrency world and not be tied to its own network the way many other cryptocurrencies are which is a bold and much needed new move.


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