# Understanding Cardano: a beginner’s guide and review

*Proof-of-stake blockchain platform*

**Authors:** Manny Reimi

---

Cardano is a decentralized public blockchain that is fully open-source
and the first blockchain protocol to be completely peer-reviewed.
Recently, the project completed its *Shelley* hard fork
and transferred to a complete *Proof-of-Stake (PoS)* consensus mechanism,
a development that no project of this scale has been able to achieve.
Unsurprisingly, this has made Cardano gain considerable interest from the
community at large: users, developers, and the market.

> **TL;DR** : You can get a summary of this article in its last section.

This article is a guide to the fundamentals behind Cardano.
We will cover the team and technology behind the project, its vision,
as well as its market maturity, and the state of its ecosystem.

In presenting this guide and review of the Cardano,
I will divide my analysis into 5 sections,
each containing a salient feature of the project, as follows:

1. legitimacy
1. purpose
1. tokenomics
1. ecosystem
1. summary

## Legitimacy

Cardano was founded by Charles Hoskinson,
a mathematician and one of the eight original co-founders of Ethereum ($ETH).
Hoskinson was Ethereum’s CEO albeit he departed
before the network launched in 2014.

![Image](https://storage.googleapis.com/holdex-public/thread/Understanding%20Cardano%3A%20a%20beginner%E2%80%99s%20guide%20and%20review/charles-hoskinson.png)

Like other co-founders of Ethereum,
Hoskinson went on to start another company and lead other projects.
For Hoskinson, it was the founding of the engineering firm
**Input Output Hong Kong (IOHK)** with Ethereum colleague Jeremy Wood.
IOHK started delivering enterprise Blockchain projects,
one of which led to the realization
that the team could build a next-generation public blockchain
that could solve Ethereum’s scalability and governance problems.
That epiphany led to the creation of Cardano.

An ICO in late 2016 based on a set of guiding design principles
( [Cardano Whitepaper](https://why.cardano.org/en/introduction/motivation/) )
raised $62M for the Zug, Switzerland -based **Cardano Foundation**,
which is the legal custodian of the protocol and the standards body
and caretaker of the ecosystem.
The Cardano Foundation then appointed IOHK to design, build,
and maintain the Cardano platform.

## Purpose

Cardano set out with highly lofty goals,
with Hoskinson listing several goals the project set out to achieve in order to
rethink not just the design but the process behind building a public blockchain
ecosystem:

- The accounting (“value-transfer” or “settlements”) and computation
  (for smart contracts, for example) layers must be separated.
- The core components must be highly modular and functional.
- A science-based method must be established:
  academics and developers participating in the project must compete with
  peer-reviewed research.
- The network must have the ability to be upgraded post-deployment without being
  destroyed in the process.
- The network must eventually work in mobile devices,
  with reasonable security and user experience.
- There is a need to account for multiple assets on the same ledger.
- Optional metadata support in transactions to better accommodate
  for legacy systems.

![Image](https://storage.googleapis.com/holdex-public/thread/Understanding%20Cardano%3A%20a%20beginner%E2%80%99s%20guide%20and%20review/cardano-roadmap-figures.png)

Hoskinson also took into consideration the legal ramifications of the launch of
a fully permissionless system for its growth and adoption, as well as the social
nature of money and commerce and the value that a network derived from its
community.
Cardano thus set out to build a staged roadmap for community governance,
which would happen on-chain, in a decentralized manner.
Furthermore, Cardano would adopt an on-chain treasury to provide economic
incentives for users to be engaged and understand and participate in the social
contract behind their protocol.

The IOHK team has published 82
[research papers](https://iohk.io/en/research/library/) in support of their work
in Cardano.
IOHK runs a distributed research team with many academics from around the world,
but particularly from the University of Edinburgh,
where their chief scientist
[Aggelos Kiayias](https://www.kiayias.com/Aggelos_Kiayias/Home_of_Aggelos_Kiayias.html)
is the University’s chair of cybersecurity and director of its blockchain
technology lab.
IOHK R&D has even helped other projects like Horizen to implement their tech due
to their extensive know-how in cryptography and distributed systems.

## Tokenomics

![Image](https://storage.googleapis.com/holdex-public/thread/Understanding%20Cardano%3A%20a%20beginner%E2%80%99s%20guide%20and%20review/ada-lovelace.png)

$ADA is the native token of the Cardano ecosystem,
named after mathematician Ada Lovelace.
Since the Shelley hard fork,
Cardano operates under a Proof-of-Stake consensus mechanism called
**Ouroboros**.
Ouroboros divides chains into epochs and epochs into slots.
For each slot, a slot leader adds the last block
and considers a few preceding blocks which are still transient.
Blocks will settle after several slots.
This settlement delay is the mechanism
that prevents the subversion of the protocol without requiring miners
and expensive computational resources.
Ouroboros is provably secure and based on peer-reviewed research.
As long as 51% of the participants in the network are honest,
the protocol is guaranteed to be secure.
According to
[this staking rewards calculator](https://www.stakingrewards.com/calculator/?asset=cardano),
the expected yield from delegating $ADA is between 3.9–4% per annum, rewards are
paid every 5 days.
According to the official Cardano staking rewards calculator, however,
the yield would be up to 5.1% per annum.
The actual yield will depend on voluntary factors such
as the staking pool operator you choose,
as well as dynamic factors like the amount of $ADA being staked at any one time.

Cardano’s website has a section
for [stake pool operators](https://cardano.org/stake-pool-operation/)
that explains the concepts behind running a stake pool, receiving delegations,
pledging (a quirk of Cardano staking that makes your pool more attractive —
here is an explainer on
[Cardano pledging](https://iohk.io/en/blog/posts/2020/05/12/how-pledging-encourages-a-healthy-decentralized-cardano-ecosystem/)),
and hardware, software, and technical skill requirements.
Operating a stake pool whether for yourself
or to accept delegations is a 24/7 job,
as the reliability of the resources to secure the network is the core task to
optimize for.

$ADA is currently traded in secondary markets.
According to [CoinMarketCap](https://coinmarketcap.com/currencies/cardano),
$ADA is found with the most volume and liquidity on:

| Exchange | Trading Pairs |
| --- | --- |
| Binance | $ADA / $USDT, $ADA / $BTC, $ADA / $BUSD, $ADA / $ETH, $ADA /USD (in Binance US ) |
| Huobi | $ADA / $USDT, $ADA / $BTC, $ADA / $ETH |
| Kraken | $ADA /USD, $ADA /EUR, $ADA / $BTC, $ADA / $ETH |
| Upbit | $ADA /$KRW, $ADA / $BTC |
| Kucoin | $ADA / $USDT, $ADA / $BTC |

$ADA is supported by several wallets
which have enabled staking like the official wallet
[Daedalus](https://daedaluswallet.io/), also official light wallet
[Yoroi](https://yoroi-wallet.com/), and partners like
[Moonstake](https://moonstake.io/).
Other
[crypto wallets](https://holdex.io/c/learn/what-is-erc20-compatible-wallet) also
support Cardano.

[Flipside Crypto](https://holdex.io/c/flipside-crypto) gives $ADA a
**Fundamental Crypto Asset Score** of ` S `, which stands for *superb* (but
might as well be *sexy* if, like me, you are into assets with strong
fundamentals 😋).
To note, the ` S ` score is higher than ` A `,
and only four assets in the Crypto-Verse have this score.
Cardano is no.2 and is on a trend to possibly surpass Ethereum,
the current King of Cryptoassets.

## Ecosystem

Cardano is working to develop a vibrant ecosystem
that can expand on the use cases that apps tackle through their platform.
Since the start of staking economics with Shelley,
Cardano has been leveraging its “best code in the industry” fame to shake up
DeFi, albeit for now it must wait until smart contracts are available.
However, hundreds of staking pools are already in operation
and about half the supply of $ADA is being staked.

### cFund (Cardano ecosystem fund)

![Image](https://storage.googleapis.com/holdex-public/thread/Understanding%20Cardano%3A%20a%20beginner%E2%80%99s%20guide%20and%20review/input-output-logo-banner.png)

IOHK has set up a $20M fund in a joint venture with California-regulated
[Wave Financial](https://www.wavegp.com/) to invest in startups and early-stage
companies that use Cardano.

The fund is soon to announce its application process
but will target investments between $250–500k in exchange for equity or tokens.

### Development & Roadmap

Cardano has organized its development into 5 “eras”:
the already deployed *Byron* and *Shelley*, the upcoming *Goguen*,
and the subsequent *Basho* and *Voltaire*.
Shelley was about decentralizing the community with PoS.
Goguen will develop the smart contracts platform.
The work is already much advanced and was running in parallel with Shelley.
A goal of Goguen is [Plutus](https://testnets.cardano.org/en/plutus/overview/),
a purpose-built language for smart contracts and an execution platform,
and a Haskell SDK.
On top of Plutus, Marlowe,
a *domain-specific language (DSL)*
for financial contracts is meant to be accessible
for non-programmers like subject-matter experts to model financial instruments
into smart contracts on the blockchain.
Marlowe comes with the Marlowe Playground
which contains an application-building platform and the latest documentation
and tutorials.
There are both a
[course for Plutus](https://www.udemy.com/course/plutus-reliable-smart-contracts/)
and a
[course for Marlowe](https://www.udemy.com/course/marlowe-programming-language/)
on Udemy, both are free and developed by IOHK.

Goguen also includes enabling multi-asset ledgers in Cardano,
which means smart contracts
and dApps being able to handle multiple cryptoassets,
as well as the possibility of creating fungible
and non-fungible tokens in Cardano.
Other parts of Goguen that Cardano wants the community to be involved are KEVN,
a formally-verified virtual machine fully compatible with the
*Ethereum virtual machine (EVM)* but based on the K framework for runtime
verification, and IELE, a virtual machine that enables smart contracts from
higher-level languages to be translated and executed with a uniform gas model
across languages.
Both KEVN and IELE are not receiving contributions from IOHK directly at the
moment but the development house is more than willing to support continued
development by teams in the community.

The [Cardano docs](https://docs.cardano.org) are a thorough resource
that explains the fundamentals of Cardano, how to run a stake pool,
their fee structure and components including the wallet,
how to explore transactions,
and how to provide feedback or seek answers from the core team
or other developers in the community.

Santiment ranked Cardano as the most actively developed cryptocurrency in 2019,
its latest yearly report.

### Community & Partnerships

![Image](https://storage.googleapis.com/holdex-public/thread/Understanding%20Cardano%3A%20a%20beginner%E2%80%99s%20guide%20and%20review/emurgo-banner.png)

Cardano has a strong and active community.
There is a deep belief since the inception of Cardano
that the success of distributed software,
particularly those with financial applications,
relies heavily on social elements like community involvement.
These are not abstract concepts for Cardano,
as in both its proposed eras Basho
and Voltaire focus on scaling & interoperability, and governance, respectively.
The ultimate goal of Cardano is for the network to be community-operated,
with fully-functional on-chain voting and treasury systems.
A key component of Cardano’s ecosystem is Japan-based
[EMURGO](https://emurgo.io/), which functions as the commercial arm of Cardano.
The role of EMURGO is to find corporate
and public-sector partners to build enterprise-level solutions using Cardano
and other IOHK/EMURGO technologies that are Cardano-compatible down the road.

Individual community members can apply to the
[Cardano Ambassadors Program](https://cardano.org/ambassadors/) should they wish
to contribute as content creators, organizers, moderators, or translators in the
effort to bring Cardano to the world.

## In Summary

![Image](https://media3.giphy.com/media/PEf0FKazthTUI/giphy.gif?cid=ecf05e477by4p7tktgnmkf0cv2j4tnpbcbt8hj6wgkk497ug&rid=giphy.gif)

Cardano is a truly exciting project and a worthy candidate
for a *third-generation blockchain*.
Cardano’s scientific approach to conceptualizing, testing,
and developing its technology may prove
yet to be the best way to nurture a public blockchain ecosystem into maturity.
Although there is a long road ahead for Cardano, its advantages are undeniable,
and exactly what mass adoption of public blockchain technology by corporates,
governments, and other mission-critical use cases might be waiting for.

> Excited about Cardano?
> Anything this article missed?
> Reply below to let me know!