Cardano (ADA) Explained: What Is It and How It Works

Cardano is a blockchain platform that was created to provide a more secure, transparent, and sustainable way to transact and store digital assets. It was developed by a team of experts, including mathematicians, computer scientists, and economists, who sought to create a blockchain platform that was more advanced than Bitcoin and Ethereum. In this article, we will explore the fundamentals of Cardano (ADA), how it works, and why it is becoming increasingly popular.

Cardano (ADA) is a blockchain platform that was founded in 2015 by Charles Hoskinson, who is also one of the co-founders of Ethereum. The project is open source and was built on a scientific philosophy that incorporates academic research and peer-reviewed work to develop new ideas and technology. Cardano has its native cryptocurrency, ADA, which is used to pay for transactions and smart contracts on the platform. So, if you are interested in investing in crypto, here are The Best Stablecoins.

How Cardano Works

Cardano is a Proof of Stake (PoS) blockchain that uses a consensus mechanism called Ouroboros to validate transactions on the platform. PoS is a more energy-efficient alternative to Proof of Work (PoW), which is used by Bitcoin and Ethereum. With PoS, validators (also known as stakers) are chosen to create new blocks and validate transactions based on the amount of ADA they hold and are willing to “stake.” Validators are rewarded with transaction fees, and the more ADA they stake, the higher the rewards.

Ouroboros, on the other hand, is a unique PoS consensus mechanism that was developed by the Cardano team. It works by dividing time into epochs, which are further divided into slots. Each slot is assigned a slot leader, who is responsible for creating new blocks and validating transactions for that slot. Slot leaders are chosen randomly, and their probability of being selected is proportional to the amount of ADA they have staked.

Cardano’s Layers

Cardano is built on two layers: the Cardano Settlement Layer (CSL) and the Cardano Computation Layer (CCL). The CSL is responsible for handling transactions and the transfer of ADA, while the CCL is responsible for executing smart contracts and decentralized applications (dApps). This separation of layers provides greater flexibility and scalability, as each layer can be optimized for its specific function.

Smart Contracts

Cardano’s smart contract language, Plutus, is based on Haskell, a functional programming language. This makes it easier to write secure and bug-free smart contracts, as Haskell has a strong type system that catches errors at compile time. Additionally, Cardano’s smart contracts are subject to formal verification, which is a mathematical process that verifies the correctness of the code. This ensures that smart contracts on Cardano are free from errors and vulnerabilities, making them more secure and reliable.


Cardano is one of the most decentralized blockchain platforms, with over 2,000 stake pools in operation. Stake pool operators are responsible for creating new blocks and validating transactions on the platform. They are also incentivized to run their pools efficiently, as they earn rewards based on the number of blocks they create. This ensures that the network is secure and resilient, as no single stake pool operator can control the network.


Cardano is a next-generation blockchain platform that is designed to be more secure, transparent, and sustainable than its predecessors. Its unique features, such as Ouroboros, Plutus, and its two-layer architecture, make it a promising platform for building decentralized applications and executing smart contracts. As more people begin to recognize the potential of Cardano, we can expect to see its adoption grow and its value increase.

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