Cardano is an open-source, smart-contract platform that aims to provide multiple features through layered design. Its modularization will eventually allow for network delegation, sidechains, and light client data structures. Cardano uses a version of Proof-of-Stake (PoS) called Ouroboros to secure the network and manage the block production process. The network features a native token called $ADA that gives stakers a claim on new issuance in proportion to their holdings and allows users to pay for transactions.
Cardano is an open-source blockchain originating from peer-reviewed academic research. Cardano does not have a single published white paper but is developed from a collection of academic papers. Cardano sees itself as a “third-generation” protocol, improving on Bitcoin and Ethereum as the first and second generations, respectively. Cardano is named after an Italian Renaissance mathematician, Gerolamo Cardano, and its native currency $ADA is named after Ada Lovelace, a 19th-century mathematician sometimes referenced as the first computer programmer.
Cardano distributed vouchers for 25.9 billion ADA in a public token sale from September 2015 to January 2017. Participants could redeem the vouchers for actual ADA through Cardano’s native Daedalus wallet. The three entities supporting Cardano’s development received 5.2 billion ADA following the mining of Cardano’s genesis block. Their allocation was as follows:
- 2.46 billion ADAs were allocated to IOHK which voluntarily adopted the following vesting schedule for its Ada: A third of IOHK’s ADA holdings were immediately available to IOHK. A third was made available on June 1st of 2018. The final third of IOHK’s Ada was available on June 1st of 2019.
- 2.07 billion ADAs were allocated to Emurgo
- 0.648 billion ADAs were allocated to the Cardano Foundation
$ADA has an inflationary emission type. Cardano caps the supply of $ADA at 45 billion. The current $ADA supply is roughly 34 billion (Oct 2022), which leaves the remaining 11 billion for network incentives. Cardano incentives compensate for the network’s decrease in monetary expansion. Incentives increase as network use increases.
Unlike Bitcoin or Ethereum, Cardano, who launched in 2017, adopted PoS instead of PoW at the very beginning. It also developed a proprietary PoS consensus mechanism called Ouroboros.
Cardano has a two-layer structure, a settlement layer, and a computation layer. The settlement layer is for executing and recording transactions of $ADA between network participants, while the computation layer enables Cardano to support smart contracts. Cardano was wildly popular among retail investors once it appeared.
Cardano is backed by three entities: IOHK, The Cardano Foundation, and Emurgo. IOHK is a blockchain research and development company founded by Charles Hoskinson and Jeremy Wood that is contracted to work on Cardano from 2015 through 2020. The Cardano Foundation is a non-profit organization focused on core development and ecosystem growth for Cardano. Emurgo is a Japanese venture capital firm.
Cardano's full launch will consist of five phases: Byron, Shelley, Goguen, Basho, and Voltaire. The Byron era arrived in September 2017 with the mainnet launch of the Cardano blockchain. During this phase, the chain operated as a federated network that only supported $ADA transactions. The next phase, Shelley, launched in July 2020, bringing Cardano's proposed Ouroboros Proas Proof-of-Stake (PoS) protocol to life. It's now in the process of rolling out its third phase, Goguen, which will add support for smart contracts and native token issuance. Cardano development teams, IOHK and Emurgo, are researching and building the network's remaining phases, Basho and Voltaire, in parallel with Goguen.
- Byron (Federated Mainnet)
- The Byron era marked the first iteration of the Cardano network. It allowed users to buy, sell, and transaction its native cryptocurrency, ADA, across the protocol. The Byron chain ran on a purpose-built consensus layer, called Ouroboro Genesis, which operated as a federated network with the majority of the node managed by the Cardano Foundation. Therefore, any block rewards generated during this initial phase were burned (no inflation during Byron).
- The Byron era also saw the delivery of the Daedalus wallet, IOHK's official desktop wallet for ADA, as well as Yoroi, a light wallet built by Emurgo for quick transactions and day-to-day use.
- 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 operated as a federated network managed primarily by the Cardano Foundation.
- Goguen (Smart Contracts)
- The Goguen era 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 estates, 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 Bash era are sidechains and parallel accounting styles.
- Voltaire (On-chain governance and treasury)
- The Voltaire era will introduce Cardano's proposed on-chain governance and treasury system. Participants will be able to use their staked ADA to voting on the future direction of 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.
- 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.