Cardano: A Guide

Cardano first appeared in 2015, right at the dawn of a general movement to change the way cryptocurrencies are designed and developed. Cardano was one of the first representatives of the so-called third generation of crypto.

First generation of cryptocurrency was Bitcoin, which came in as a digital token usable to transfer and store value. Bitcoin was a quality solution until its scalability issues started to rear their ugly head in. Bitcoin block size and frequency are limited so the amount of transactions per a set period of time you can do is limited as well. Also the amount of energy and computing power required for Bitcoin blockchain verification is infamous and is growing with each new added block.

Second generation of crypto wanted to improve on Bitcoin and its issues and its prime representative is Ethereum. It brought in smart contracts and improved scalability, but not enough to ensure global, commercial adoption of its blockchain. Ethereum brought a new programming language called Solidity that is somewhat complicated to master; many users and developers of Ethereum complain about its high gas fees.

All these previous generations came with governance issues, where as a result of a disagreement between the developers we would end up with the original technology hard forking and creating a completely new blockchain (Bitcoin Cash, Ethereum Classic). The realization set in that something new is required, something that will be able to scale up to millions of world-wide transactions per second while keeping the fees low and energy expenditure almost non-existent.

This is where the third generation of cryptocurrency stepped in. Cardano is a member of this new generation and in spirit of many other open source projects, Cardano did not start with a clear roadmap or even an authoritative white paper. Rather it embraced a collection of design principles and engineering practices which opened up new avenues for exploration. These include the following:

  • Separation of accounting and computation into different layers
  • Implementation of core components in highly modular functional code
  • Small groups of academics and developers competing with peer reviewed research
  • Heavy use of interdisciplinary teams including early use of InfoSec experts
  • Fast iteration between white papers, implementation and new research required to correct issues discovered during review
  • Building in the ability to upgrade post-deployed systems without destroying the network
  • Development of a decentralized funding mechanism for future work
  • A long-term view on improving the design of cryptocurrencies so they can work on mobile devices with a reasonable and secure user experience
  • Bringing stakeholders closer to the operations and maintenance of their cryptocurrency
  • Acknowledging the need to account for multiple assets in the same ledger
  • Abstracting transactions to include optional metadata in order to better conform to the needs of legacy systems
  • Learning from the nearly 1,000 altcoins by embracing features that make sense
  • Adopting a standards-driven process inspired by the Internet Engineering Task Force using a dedicated foundation to lock down the final protocol design
  • Exploring the social elements of commerce
  • Finding a healthy middle ground for regulators to interact with commerce without compromising some core principles inherited from Bitcoin

Cardano (apparently named after an Italian scientist Cardano, a once great friend of Leonardo da Vinci) claims to bethe first one that was developed “using scientific philosophy “. As Cardano observes the latest peer-reviewed research and engineering insights, as well as previous industry lessons (like the DAO failure), and uses them to build a platform suitable for creation of high quality commercial grade applications. After more than two years of under-the-radar planning and development, Cardano blockchain was publicly launched on the 29th September 2017. Cardano’s ADA token was then made available for trading on the 1st October at Bittrex exchange. The entire Cardano blockchain is completely open source software and is available to see on Github.

How will Cardano work?

According to the Cardano website, Cardano will be a platform capable of running decentralized applications usable by individuals, banks, organizations and governments all over the globe. Therefore it will be similar to Ethereum, with the platform divided into three layers. On the very first layer sits ADA. The next layer is a separate computing layer which will handle smart contracts which will be the basis for future commerce or business. Final layer will be Cardano’s ability to run decentralized applications, better known as “Dapps”. Dapps are basically services that are not controlled by any single entity, but rather they operate on the Blockchain itself, controlled solely by the smart contract associated with the application.

Scalability, interoperability and sustainability

Cardano is a decentralized public blockchain-based platform that is utilizing the smart contract technology and seeks to bring levels of scalability, interoperability and sustainability into the world of blockchain the likes of which were never seen before.

  • Scalability

There are three factors which affect the scalability of the blockchain technology: transactions per second, network bandwidth and storage.

  1. Transactions per second

People often speak about Bitcoin having 7 transactions per second or Ethereum allowing 20 transactions per second. This is called a throughput and is basically telling you how many tx/s are you able to get into a block in a finite period of time. A commercially viable blockchain needs to be able to handle throughputs of hundreds of thousands, even millions of transactions per second.

  1. Bandwidth

More transactions mean more data. More data means you need more network bandwidth to transfer all that data.

  1. Storage

Data is stored on the blockchain forever. Every new piece of data will increase the size of the blockchain, potentially resulting in huge Exabyte-sized blockchains which will need to be properly stored.

Cardano looks to solve these issues organically. By adding new users, you would get more bandwidth and more data storage without compromising the security. They plan to rely on a Proof of Stake consensus protocol called Ouroboros to achieve commercial viability. In mythology represented as a snake that eats its own tail, Ouroboros represents a symbol of the cyclic Nature of the Universe, creation out of destruction, infinity of wholeness. As such, it is clear why Cardano choose to use this name for the key, ever-growing and self-reliant part of their protocol.

Ouroboros works by dividing time in three epochs, where every epoch has three slots. Each slot is a time period during which a single block can be created.

Ouroboros delegates a slot leader for each of these slots, making him in charge of verifying blocks during that time period. The delegation is done by ADA owners staking their coins and voting for the users they want to have as network validators/slot leaders. Slot leader is ordered to pick up the transactions from his slot, verify them, add them to the block and finally add the block to the blockchain. If he doesn’t complete his task in time or if he engages in some form of malicious behavior he will be replaced by a different slot leader. It is important to note that Ouroboros is supposed to run multiple, parallel epochs at the same time, thus exponentially increasing the throughput of the platform with each new epoch.

Regarding the bandwidth, the issue presents itself once we increase the throughput to thousands of transactions per second. Normally the verifying process works on the mempool principle, where available transactions are stored in a memory pool from which miners (network validators) get to take them and add them to their blocks. However, when you increase the throughput to thousands of transactions per second, the nodes will require a lot of bandwidth to download and store all that data. All of this results in scalability issues. Cardano looks to solve this problem by splitting the network into sub-networks, using a technique called RINA (somewhat similar to the TCP/IP protocol used for Internet networking). Each of these sub-networks will contain nodes which will be able to communicate with each other as well as with their siblings from other sub-networks.

Finally, the storage issue isn’t among the main priorities of the development team. As of now storage space is relatively cheap and potential storage issues will be tackled in late 2018 – start of 2019 by implementing techniques like pruning, compression and partitioning.

  • Interoperability

This one can be split into two sub-issues:

  1. Availability of cryptocurrencies

There are plenty of cryptocurrencies out there that are rarely interchangeable. Even when they are, you need an intermediate (an exchange). Cardano team realized that in the future we will have multiple cryptocurrencies existing side by side, each with its own protocols and rules. The Cardano project wants to become an Internet of Blockchains, meaning it wants to be able to communicate directly to other blockchains. This would mean perfect interoperability and allow moving assets and value across multiple chains.

  1. Lack of trust from banks and governments

Pretty self explanatory, no institution likes the idea of a decentralized currency which they can’t control.

As cryptos don’t adhere to regular currency laws (in more ways than one), the regulatory sector has a disapproving stance towards them to say the least. Crypto transactions don’t contain metadata like who made a transaction and for what purpose. This makes governments uneasy, as it opens up space for criminal activities (and for evading taxation). Thing is, there are plenty of non-criminals who wish to stay anonymous while purchasing goods and crypto gives them a perfect platform to do so. Cardano project looks to implement a Smart Contract system which would allow you to enter your metadata, but only if you wish to share it with the blockchain. They view this as a “you scratch my back, I scratch yours” move which will make the government ease its stance on cryptos.

  • Sustainability

The final (but no less important) issue is the issue of sustainability. While initial operations are funded with ICO money, the question that arises is how do you fund further development? Cardano team feels that raising money only once isn’t a model which promotes continuous development and improvement. Therefore Cardano plans on implementing a treasury system. This treasury will be endowed via some portion (yet to be defined), of newly-minted ADA and by charging fees for transactions on the network.

The fees are yet to be decided upon

The treasury will be governed by ADA holders, meaning that no one will have direct control over the resources. When a developer wishes to make an improvement on the technology, he will present his idea to the network (ADA holders). These holders will vote on the proposed ideas and decide if the treasury should release the necessary funds or not.

Haskell programming language

Cardano is unique in that it’s written in the Haskell programming language.

Haskell logo

Haskell is considered to be one of the most secure programming languages which minimizes the number of errors and adds robust security to the platform. This includes use of a technique called formal verification, which allows mathematical proof of the correctness of code. Cardano is also designed to operate in regulated industries as it allows applications built on it to meet regulatory requirements while allowing individuals to protect their privacy by choosing whether they want to enter these regulated domains on not.

Potential issues with Cardano?

There are a couple of issues that Cardano naysayers often focus on in attempts to call out the project. First of all, Cardano claims their papers are “peer-reviewed”, but the issue here is that those peers are in some ways related to Cardano, IOHK and other key member of the project.

The issues with Ouroboros are often cited as well. It will be a robust algorithm that will require plenty of storage space. The protocol is criticized for its proof of stake roots as well, since this algorithm needs to have the currency spread out properly and somewhat equally among holders to function democratically enough. We have seen the best example of why this is important with the latest issues that EOS experienced. A lot of EOS tokens ended up in the wallets of whales, making this 4 billion USD network much more centralized than desired.

There is also the issue of competition. Cardano will be competing with projects like Ethereum, Zilliqa, TRON, NEO which are already way ahead of Cardano in terms of development/commercial viability. One wonders if the technology Cardano promises will be enough to sway developers and users from already established projects.

Cardano team

The team behind Cardano development is made up of a large global network of experts in engineering and research. It consists of three companies who each have distinct roles in the project:

  1. Cardano Foundation: A Swiss non-profit organization that wishes to protect, enhance and evolve the Cardano ecosystem and to aggregate, educate and grow the Cardano community. It also aims to proactively work with governments and regulatory bodies in order to propose and create fitting Cardano regulation. Finally they seek to form strategic partnerships with enterprises and other open-source projects to ensure global adoption of the Cardano technology.
  2. IOHK: A world-class engineering and technology company committed to using peer-to-peer innovations to provide easily accessible financial services to billions of people around the world. This group is in charge of designing, building and maintaining the Cardano platform until 2020. The company has 6 core projects that are currently in development. Alongside Cardano, the company is currently working on: Ethereum Classic, Daedalus(a highly engineered wallet with advanced security features), Qeditas (a library of formalized mathematics), Scorex (a platform which combines consensus protocols, transactional structures, and networking infrastructure), and RS coin (a proposed cryptocurrency framework which will allow central banks to implement monetary systems based on cryptographic methods).
  3. Emurgo: a company formed to integrate, develop and support businesses who want to utilize Cardano’s decentralized blockchain. The blockchain technology can potentially be used in legal, financial and logistical areas and Emurgo is there to show interested people how.


The CEO of the IOHK Company and Cardano’s stand out developer is Charles Hoskinson, previously known for his stint as the CEO and CTO of the Ethereum project and for his cooperation with Dan Larimer (man in charge of EOS development) on the Bitshares project. While a genius when it comes to programming, Hoskinson has often been called out on his controversial views about Ethereum and similar projects. He also likes to get himself in social media grudge matches maybe a bit too much for his own and the good of his projects. Nevertheless, Hoskinson founded IOHK alongside Jeremy Wood in 2015 and at their core they are an engineering company focused on building life-changing cryptocurrencies for academic institutions, governments and corporations.

Their ideas stem from the company’s founding principle called cascading disruption. The proponents of the cascading disruption principle claim that most of the world’s financial, governance and social systems lie on inherently unstable foundations and thus even minor disturbances to those foundations can cause a ripple effect that fundamentally reconfigures the entire system. This principle is extremely exaggerated in the crypto world as changes in a single coin have been known to cause a butterfly effect across the board.

IOHK wants to identify and develop technologies which will cause these disturbances, which will hopefully push the world towards a more fair and transparent order. Those are some big words and big plans indeed, which probably won’t sit well with major financial institutions across the globe. IOHK takes pride in being a decentralized company, made out of many smaller, interconnected teams. This form of organization has so far proven to be a very fertile ground for new blockchain related ideas. As mentioned before, IOHK takes a highly scientific approach in developing the Cardano platform. In accordance to this approach, there is extensive scientific documentation about the project which can be viewed here.


The cryptocurrency of Cardano is called ADA. A unit of ADA is equal to a million Lovelaces (the smallest Cardano unit).

ADA logo

ADA is capped at an arbitrary 45,000,000,000 tokens. The total amount of ADA that was made available at the launch is equal to 31,112,484,646 tokens. 25,927,070,538 ADA were sold during the sale that occurred at the launch. Around 20% of the total ADA (5,185,414,108) vouchers were generated and distributed among the three entities in charge of Cardano, IOHK, Emurgo and the Cardano Foundation.

In order to interact with the Cardano Blockchain you need to own ADA. Users of the Cardano Blockchain can use this coin to pay for services or goods, utilize the money on exchanges for trading or gain access to server resources. Cardano is planning to issue a debit card that will allow people to spend their ADA, with the funds being automatically converted into the currency of choice. This debit card will work as your usual debit cards, allowing for both online and in-store payments.

Daedalus wallet

Daedalus is a highly engineered wallet with advanced security features, designed to protect assets with strong cryptography. It is the official wallet of the Cardano project and supports storage of ADA coins. Daedalus is built on top of Electron, an open source platform used to build cross-platform desktop apps with Javascript, HTML and CSS. It allows users to manage any number of wallets thanks to a hierarchical deterministic wallet implementation. It also comes with backup features which allow users to recover their funds anytime. Daedalus does not hold your keys, giving users full control (and responsibility) of your money. IOHK are developing a small but flexible React UI framework which will give users a consistent, simplified experience with the development workflow. The wallet will also have a light client suitable for mobile devices and short, human friendly addresses.

How to buy Cardano (ADA)?

To be able to buy and store ADA you will need to install and set-up a Daedalus wallet. You can download the software required from here. Just pick the version you want, wait for the download to finish and install the wallet on your hardware. For the full instruction on how to become an owner of your very own ADA visit this link.

Cardano roadmap

As it became a custom with major crypto-projects, Cardano team eventually released a full roadmap. This roadmap marks the stage of development the project is currently in as well as the milestones that the project achieved in the past/plans to achieve in the future. Currently the project is in its Shelley/Goguen phases. The Cardano team promises that this roadmap will be regularly updated, with a countdown clock indicating the next update release. This intent to stay in touch with the community and keep them notified is a good signal which should increase the overall confidence in the project.

Final thoughts

Cardano is a unique project that wants to absorb all the lessons learned in the generations past while bringing forth a set of their own improvements to some common and less common cryptocurrency issues. Their scientific, peer-reviewed approach gives out positive signals about the project but still has many wondering if the practical qualities of Cardano will be as good as the paper suggests. The project will in short be looking to bring significant upgrades on Ethereum, its unofficial role model. Whether this comes true or not, Cardano remains one of the most interesting (and potentially most profitable) cryptocurrencies on the market.

This article was originally written by Dobrica and can be found at