Table of Contents

🤔 What is Cardano ?

Cardano is a blockchain that supports smart contracts.

Cardano was named after 16th-century Italian scientist Gerolamo Cardano. He was one of the most influential mathematicians and the earliest introducer of the binomial coefficients and the binomial theorem in the Western world. He wrote more than 200 works on science.

It aims to overcome Etherium’s limitations(scalability trilemma).

Scalability trilemma was first described by Vitalik Buterin, the co-founder of Ethereum. It states that it is very difficult to develop a blockchain that has all the three features:

  • Scalability
  • Security
  • Decentralization

A developer can choose a maximum of 2 of the desired qualities.

Cardano aims to solve the scalability trilemma.

💡 What role does ADA token play ?

ADA is the native cryptocurrency of Cardano.

It is named after Ada Lovelace: a 19th-century mathematician who is recognized as the first computer programmer.

ADA token  plays following role in Cardono ecosystem:

  • Transaction fee: Users have to pay ADA as transactions fees to include their transactions on the Cardano blockchain.
  • Staking: Users can stake their tokens to participate in the process of validating blocks.
  • Validator rewards: Validators receive ADA tokens as rewards for building blocks.
  • Governance: Cardano team plans to decentralize the governance of the protocol in the future. ADA token holders will propose and vote on updates to Cardano once the governance is decentralized.

📝 Origin of Cardano

  • Hoskinson left Ethereum in 2015 after a dispute with one of its co-founders, Vitalik Buterin; Hoskinson wanted to accept venture capital and create a for-profit entity, while Buterin wanted to keep it running as a nonprofit organization.
  • After leaving, he co-founded IOHK, a blockchain-engineering company for developing Cardano.
  • Cardano was first released to the public on September 29, 2017, with the Bryon phase, supporting only ADA transactions.
  • The next phase, Shelley, launched in July 2020. It improved the network’s decentralization, and allow ADA holders to stake ADA.

👴🏻 Charles Hoskinson - Founder

  • He was born in 1987  in Hawaii, USA.
  • He attended Metropolitan State University of Denver and University of Colorado Boulder to study analytic number theory but left before completing his Ph.D.
  • Hoskinson joined the Ethereum founding team as one of eight original founders with Vitalik Buterin in late 2013. For a brief time, Hoskinson held the position of CEO at Ethereum.
  • Hoskinson left Ethereum in 2014 after a dispute over whether the project should be commercial (Hoskinson’s view) or a nonprofit (Buterin’s view).
  • In late 2014, Hoskinson and former Ethereum colleague, Jeremy Wood formed IOHK (Input Output Hong Kong) to work on Cardano.

😌 What problems does it solve ?

  • Cheap: Transaction fee on Cardano is currently 0.16 ADA per transaction. This is several times less than that of Etherium.

Note: This may increase as more apps are built on Cardano, but can also reduce if the team is able to scale Cardano even further.

  • Proof-of-stake vs Proof-of-work: Cardano uses s variation of proof-of-stake which has several advantages over proof-of-work:
    • It is much more energy-efficient.
    • Governments cannot ban miners, unlike proof-of-stake in which governments can trace miners depending on excessive energy usage and seize their hardware.
    • It has been observed that proof-of-stake systems get more decentralized over time(Initially Bill Gates had more than 90% of the Microsoft shares, today he has less than 5% Microsoft shares.Whereas proof-of-work systems get more and more centralized over time around hardware, cheap electricity, favorable jurisdictions, etc.
  • Peer review: Cardano team tests their code thoroughly and follows peer review system to get their work reviewed by scholars all over the world before updating the protocol. This reduces the chances of bugs and exploits.
  • No downtime: Thousands of node operators running 24 X 7 ensure the network is always online.
  • Scalability: Cardano performs 250 transactions per second (TPS), whereas Etherium can perform about 30 transactions per second.
  • No trusted third party: Users do not have to trust Cardano team. The code is open source, anyone can see and verify how the code works.
  • Cardano is run by thousands of decentralized nodes spread all over the world. It is not possible for the governments to control/ regulate Cardano.
  • Efficiency gains: Projects building on Cardano do not have to run servers and hire an army of developers.

🤖How does it work ?


Cardano works on a specially designed proof-of-stake (PoS) blockchain protocol for consensus called Ouroboros.

Ouroboros processes transaction blocks by dividing chains into epochs, which are further divided into time slots.  A slot leader is randomly selected for each time slot and is responsible for adding a block to the chain. The more stake the stakeholder has in the system, the more chance they get to be elected as slot leaders.

The Slot leader adds the next one block to the blockchain. Solt leader also receives reward for minning new block.

An epoch can be partitioned infinitely. This means that the Cardano blockchain is, in theory, infinitely scalable, making it possible to run as many transactions as needed without hitting a bottleneck.


The Cardano blockchain is also divided into two separate layers:

  • Cardano Settlement Layer (CSL): The CSL contains the ledger of accounts and balances (and is where the transactions are validated by the Ouroboros consensus mechanism).
  • Cardano Computing Layer (CCL): The CCL layer is where all the computations for apps running on the blockchain are executed — via the operations of smart contracts.

🏛️ Governance model

The team will decentralize the governance of protocol and treasury in future(Voltaire stage).

After the governance is decentralized, ADA holders will be able to propose updates in form of CIPs(Cardano improvement proposals) and vote on CIPs. They will also vote on how funds in the treasury will be utilized.

The governance will closely resemble liquid democracy model in which ADA holders will be able to delegate their voting powers to other trusted nodes.

There are three teams working on Cardano:

  •  The Cardano Foundation – supports the research and development of the network.
  • IOHK – a company that works in conjunction with several universities on research and development.
  • Emurgo – a separate company contracted to work on the blockchain and make it appealing to businesses.


  • Polkadot
  • Tezos

and many more.

🤩 Development plans

The team aims to develop full functionality of Cardano in five phases:

  • Byron:
    • Byron set the foundation for Cardano development allowing users to buy and sell ADA on a proof-of-stake blockchain network.
    • Initially, the Cardano ledger was established as a federated network, where block production and transaction validation were maintained by Input-Output Global (the company that develops Cardano technology) and Emurgo (the company that drives Cardano commercial adoption) stake pools.
    • Byron saw the delivery of Daedalus and Yoroi wallets, and also provided users with a Block Explorer ‒ a tool specifically designed for browsing the blockchain.
  • Shelley(Proof-of-Stake):
    • Shelley will introduce the Cardano’s proposed Proof-of-Stake (PoS) consensus layer, enabling users to contribute to the transaction validation process either directly or via delegation, in exchange for staking rewards.

    • The upgrade also marks a notable step forward on the path towards decentralization as the current mainnet is operated as a federated network managed primarily by the Cardano Foundation.

  • Goguen(Smart Contracts):
    • The Goguen phase will add smart contract functionality, giving developers the ability to build decentralized applications (dApps) on Cardano.
    • DApp development will occur through Cardano’s purpose-built smart contract language, Plutus, which makes use of the functional programming language Haskell.
    • Goguen will also introduce Marlowe, a domain-specific language (DSL) for financial contracts built on Plutus. Marlowe and Plutus combined will enable developers to create Cardano-based tokens, such as native fungible or non-fungible tokens or the tokenization of external digital or physical assets (e.g., equity, commodities, real estate, etc.).
  • Basho(Scaling):
    • The Basho era will aim to optimize the network for scalability and interoperability. The goal is to improve the underlying performance of Cardano to better support growth and adoption for applications that require high transaction volumes.

    • Two of the primary developments proposed for the Basho phase are sidechains and parallel accounting styles.

    • Sidechains are new blockchains (like shard chains) that interoperate with the main chain. They can help off-load work from this base layer to increase the overall capacity of the network (scalability through parallel computation).

    • While Cardano uses a UTXO model, sidechains will also have the ability to support account-based models. By having parallel accounting styles, Cardano might be able to interoperate with external networks more easily or support new kinds of uses cases.

  • Voltaire(On-chain governance and treasury):
    • The Voltaire phase will introduce Cardano’s proposed on-chain governance and treasury system. Participants will be able to use their staked ADA to vote on future updates to the network.

    • Upon the launch of Voltaire, protocol improvement proposals will originate from community participants instead of solely through the management of IOHK and Emurgo.

    • Token holders, either through direct staking or a delegation system, will then be able to vote on which proposals the network should implement.

    • Voltaire will also see the addition of a treasury system, whereby a fraction of all transaction fees will be pooled to provide funds for development activities undertaken following the voting process.

🤑 How much money does the project have for future development ?

  • The project raised:
    • Nov 2015: $2.66M
    • Apr 2016: $16.49M
    • Sep 2016: $14.32M + $19.36M
    • Feb 2017: $ 36.36M
  • Founders and Project hold 16.67% of the total ADA token supply which will be used to fund future development of the protocol.
  • A part of transaction fee goes to Cardano treasury.

👍 Tailwinds

  • Growing ecosystem: Large number of projects are building on Cardano blockchain.
  • Sustainable model: Most crypto projects raise huge amounts of money one time at the start of the project during initial coin offering. They do not have any recurring source of income to fund their treasury. Cardano team has long-term vision and a way to fund it.
  • Cardano community consists of hundreds of thousands of hardcore developers, technologists, designers, users, HODLers, and enthusiasts.
  • Switching cost: It will be very difficult for apps built on Cardano to migrate to other blockchain solutions with their community and ecosystem.
  • Network effects:
    • New apps can use the functionality of existing apps to build new features.
    • More apps will attract more users. As more users interact with apps, new apps will decide to build on Cardano.
    • Number of Cardano developers will increase as more users and apps join Cardano ecosystem. As more developers learn to code on Cardano: more apps will be built.

😨 Risks and challenges

  • Peer-review-approach: Cardano team tests their code thoroughly and follows peer review system to get their work reviewed by scholars all over the world before updating the protocol. This process is good for minimizing bugs, but takes a long time to implement.
  • Code is law: Smart contracts are uncompromisingly strict. Even the developers cannot go back and change what has been recorded on the blockchain. This is an advantage and disadvantage at the same time.
  • Cardano and projects built on it are a direct threat to the current banking, government and legal system. Governments will resist and  fight the change
  • Competition: There are many crypto projects that are in direct competition with Cardano.

💰 Tokenomics

ADA token has max supply of 45 billion tokens. They have been distributed as follows:

The token will be released as follows:

Demand pressure

Token’s price increases due to demand pressure.

Demand pressure on ADA will come from:

  • Transaction fees: Users will acquire and pay ADA tokens to include their transactions on Cardano blockchain.
  • Staking: Users will acquire ADA tokens to participate in the process of block validation.
  • Speculators: They will acquire ADA tokens for future price appreciation.
  • Governance: Users will acquire and lock ADA tokens to participate in the governance process.

Market cap

Cardano is a proof of stake blockchain. The market cap of ADA tokens should be more than the value captured by the protocols built on it.

It is safe to assume that value of ADA token should rise in future as more and more apps are being built on it.

🧐 Indicators to watch out for

  • Daily transactions are growing:
  • YouTube channel is growing:
  • Twitter account is growing:

👋Final remarks

Cardano is one of the few projects working at places that need crypto the most:

The project has a wonderful founder and team, who want to make the world a better place. They are doing valuable research which will help the entire crypto community to move forward.

😊 Do further research

You can continue your research by using following resources: