What is Cardano (ADA)? A Simple Guide for Newbies.
Why does the rising player stand out and how does it seek to change the world? How does it differ from competition?
***I do not provide personal investment advice and I am not a qualified licensed investment advisor.
What is Cardano? What is ADA?
First and foremost all readers should know and understand the difference between Cardano and ADA. Whereas Cardano is a blockchain platform, ADA is first and foremost the currency used on the Cardano blockchain. Cardano can be used to send and receive ADA and store smart contracts and applications. ADA may also be described as a Proof of Stake (PoS) coin that fuels Cardano, allowing a quick and efficient transfer of value and allowing users to operate smart contracts and applications.
Cardano has 2 layers: the Cardano settlement layer, running the transfer of ADA tokens, and the Cardano computation layer, containing information on why transactions occur and thus running smart contracts. The separation of the two layers is expected to enable greater flexibility. Users of the Cardano blockchain’s computation layer can generate “rules” to filter transactions based on set parameters.
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.
Nodes validate transactions. They do so through ouroboros proof-of-stake (the way in which nodes reach consensus about the state of the ledger). The node is the core component that underpins the network and enables you to participate in the Cardano decentralised blockchain. The algorithm selects which nodes will earn a position as slot leaders. A slot leader is a node which has been given the right to create a block in the current slot (enabling users to receive rewards).
Cardano also seeks to create an internet of blockchains, where you can trade different cryptocurrencies without going through intermediaries. Sidechains will enable cross-chain transfers. Tokens will be traded across different blockchains. In case anything is unclear, have a look at this video great video by Exodus https://www.youtube.com/watch?v=XMrVrWK1mjA, trying to simply explain Cardano & ADA.
What makes Cardano special?
Cardano claims it will solve most of the issues that plague well-established cryptocurrencies such as Bitcoin and Ethereum. Nonetheless ADA calls itself the first third-generation cryptocurrency and aims to tackle scaling and infrastructure problems of bitcoin and Ethereum. If, on the one hand, it may be challenging to assess Cardano from a technical and technological point of view, it may be FUN for us to try evaluate its potential from an economic perspective. Try and understand what distinguishes Cardano from competition.
Why Cardano (ADA) can outperform competition in the long run?
· Accountability, leadership & hype — the role of the founder Charles Hoskinson
· The social mission of the initiative — a unique value proposition
· Energy consumption
One of the main limitations of initiatives in the space of cryptocurrencies and blockchain solutions is the lack of leadership & accountability. It is yet pretty unclear to the majority of people who stands behind Bitcoin, who are the decision makers within the initiative, what to expect and what to forecast and what are short-term and long-term goals. In other cases leadership is clear, but the person in charge of the initiative, most likely the founder and usually also CEO, struggles to communicate with his/her audience. As to Cardano, the CEO and founder Charles Hoskinson, not only communicates on a regular basis with its audience through his Youtube Channel, Twitter profile and other social media platforms but is also incredibly good at generating hype and interest towards the initiative.
Charles Hoskinson, who worked for Ethereum prior to becoming the founder of Cardano, has a very distinctive way of communicating and generating hype. He is also particularly transparent when it comes down to Cardano’s goals, ambitions and strategy. If we look at Google Trends (from the 17/04/2016 to the 16/04/2021) and compare the level of attention on Google towards Cardano against that of competitors with similar market caps, we notice that Cardano has always outperformed other players, who may have actually increased in value at greater pace than Cardano.
Not all cryptocurrencies seek to scale at the same pace and across the same markets. Not all solutions share the same go-to-market strategy. Cardano’s plan to become the currency and “legal infrastructure” of the African continent is unique and distinctive. While the unconventional plan implies to potentially scale at fast pace, it obviously also entails greater risks. Cardano is one of the few cryptocurrencies aiming to serve underdeveloped nations by banking the unbanked.
Furthermore, Bitcoin’s wild ride renews worries about its massive carbon footprint. Bitcoin has a carbon footprint comparable to that of New Zealand, producing 36.95 megatons of CO2 annually, according to Digiconomist. The cryptocurrency consumes more electricity than the entire annual energy consumption of the Netherlands, Cambridge University researchers say. Cardano and some other digital coins rely on a “proof of stake” consensus mechanism, where participants buy tokens which allow them to join the network. Hoskinson says the cardano cryptocurrency network consumes only 6 GWh of power, a tiny fraction of bitcoin’s energy consumption. Similar proof-of-stake tokens include polkadot and algorand, he added.
Why Cardano (ADA) may underperform against competition?
· Corruption and political turmoil
· Increase in circulating supply of coins
· Market cap
Needless to say, Cardano’s go-to-market roadmap entails a great amount of perils and dangers. Its ambition to play a pivotal role in war-torn and poverty striken countries is challenging. As obvious as it may sound, building the economic and legal infrastructure of developing nations is far more challenging and slower especially than expanding and reaching users by partnering up with corporate tech giants.
The current circulating supply is, according to coinmarketcap about 32 billion coins, with the max supply being set to 45 billion .The maximum supply of coins has thus not been reached yet. The increase in supply of ADA is supposed to reduce price in the future.
Do not be fooled by the price. ADA’s current market price is $1.24 (19/04), a price per coin much lower than that of a great amount of competitors. Bitcoin, for example, as you all know, has a price per coin, at present, of circa $56.000 (45.161x Cardano’s price per coin). Such premise may lead an early-stage investor to believe that there is room for exponential growth in price. If we look at the market cap of Cardano however, we see that its market cap stands at $39.63Bn. The high market cap derives obviously from the total available supply of ADA coins, almost 32Bn. With Bitcoin’s market cap being just over 1 trillion dollars, ADA’s market cap is merely 26,6 times inferior to Bitcoin’s. Consequently, ADA would have the same market cap as Bitcoin’s current market cap by merely reaching a price of 33$!
Recommended Material on the Topic:
Charles Hoskinson talks at a TEDx event about blockchain technology and how it is about to revolutionise property rights, banking, remote education, private law and crowd-funding for the developing world:
https://www.youtube.com/watch?v=97ufCT6lQcY&t=519s
Charles Hoskinson addresses a packed crowd at LSE and discusses Cardano’s goals for Africa and the developing world:
https://www.youtube.com/watch?v=YSzVsjG2QoQ&t=4165s
Link to Charles Hoskinson’s Youtube Channel:
https://www.youtube.com/user/charleshoskinson
What is Cardano:
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