Batman and Superman get all the attention in the DC Comics universe. Everyone knows all about their trials and tribulations. Their strengths and weaknesses and what they’re up against.

But just like in the DC universe, there are plenty of other superheroes in the crypto space. Coins like Solana or Cardano might be in the shadow of BTC and ETH but they’re starting to emerge on their own.

Cardano (ADA), the fifth-largest cryptocurrency by market capitalization is more like… the Green Lantern. Sure he isn’t as popular as the Big Two but he’s still incredibly powerful.

He has a pretty good origin story too.

The Green Lantern was chosen for his willpower, yielding the ability to manifest it’s will into weapons and barriers. ADA similarly, is adaptable and plans its moves out carefully. It’s unique power set may even allow it to beat out the Big Two in the future, or at least to gain some ground.

Cardano was created by Charles Hoskinson, one of the co-founders of  Ethereum, in response to challenges that Bitcoin and Ethereum face.

A society grows great when old men plant trees in whose shade they know they shall never sit.

– Charles Hoskinson, Founder of Cardano

Unlike other altcoins, Cardano uses careful peer-reviewed research to inform the development and changes on the blockchain. They’ve literally turned the blockchain into a science. Cardano is called the Ethereum-killer because of its speed, scalability, and potential for creating better smart contracts. If ADA accomplishes its lofty goals, it could push Ethereum to the side.

 

The Promise of Cardano

Scientists have a built-in measure to prevent fraud and mistakes from persisting in their work. They write up and summarize their results, sending them for peer-review. Here, several other experts in the field take a look to make sure that the findings are scientifically sound.

Cardano introduces this peer-review structure to the blockchain. While some critics question whether it is appropriate, it excites many investors. It means that developers work towards keeping the blockchain functioning optimally.

Other cryptos post their whitepaper online, without any proofing beforehand. Peer review adds an extra measure, ensuring that Cardano’s development remains secure, transparent, and open-source.

 

The Value Proposition

Cryptocurrencies like Bitcoin and Ethereum have difficulty with speed, energy consumption, and scale. The Cardano Blockchain, like any technology, will be buggy and slow in its first iterations. Just think back to your Nokia and Motorola flip phones. Compare that to the speed of your iPhone.

If Bitcoin was the first-generation blockchain and Ethereum is  second-generation, Cardano aims to usher in the third-generation.

Until Ethereum upgrades its blockchain to proof-of-stake, Cardano will remain much faster  at processing transactions. Another benefit is that  transaction fees on Cardano are low, making it useful for peer-to-peer transactions.

Cardano also saves on energy consumption by using a modified version of Proof-of-Stake, called Ouroboros.

The code itself is written in the Haskell computer language, ensuring that Cardano doesn’t need to reinvent the wheel for smart contracts. After all, tried and tested concepts have already been integrated into first and second generation blockchains. Additionally, Haskell is already used by companies like Bank of America for generating assurances and contracts.

 

Better Smart Contracts

Rather than continually adjusting the code of existing blockchains, it made more sense to develop a new one.

Charles Hoskinson has admonished the current Ethereum model of dApps.

“We have very real problems with this DApp model, and if the goal is just rampant speculation, Ponzi schemes, and no real use and utility and no ability to scale to billions and billions of people, I want nothing to do with that.”

Instead, ADA is hard at work developing better smart contracts, leading to better applications. Additionally, the coding architecture allows for the development of bridges to other blockchains. That means a user won’t be stuck working within one single network.

The developmental company behind Cardano is partnering with the Ethiopian government to develop an identity system. This will allow schools to create tamper-proof records of school performance for 5 million students. This is the first step of integrating smart contracts for identity verification for other purposes.

 

A Brief History of Cardano

One of the co-founders of Ethereum, Charles Hoskinson, created and continues to advocate for Cardano. He was approached by Input Output Hong Kong (IOHK), an engineering company that builds blockchains, to research improvements in the crypto space back in 2015.  The project itself is named for Ada Lovelace, credited with developing the first computer algorithm way back in the 19th century.

Cardano Roadmap and Important Milestones

The roadmap of Cardano is divided into time horizons, each of which has its own mainnet and is forked from the others.

Product milestones are named after famous English poets.

Byron , 2017

Shelley, 2020

Goguen, 2021

Basho

Voltaire

 

Milestones and Developmental Stages

Byron

  • Named for Lord George Gordon Byron (1788–1824)
  • Influential poetry works include: Don Juan, Irish Avatar
  • This stage is named for Lord Byron as he is the father of Ada Lovelace.

In September 2017, this phase of ADA was launched. At this stage, ADA only supported peer-to-peer transactions. Nonetheless, it started building a strong community due to its unique approach to blockchain. That is, their dedication to transparency and peer-review, especially when it comes to their technical whitepapers and future protocols.

In January 2018, it used an initial coin offering (ICO) to sell ADA and raise money for future development. This is like an initial public offering, where a company sells shares to retail investors, to raise capital. At the time of the ICO, the cardano price was $0.02. Anyone who invested at that point  has made more than a 6000% return on investment to date. Today Coinmarketcap says Cardano’s ADA has a market cap of over 70 billion dollars.

Shelley

  • Named for Mary Shelley (1797–1851)
  • Influential works include: Frankenstein
  • Cardano named this stage after Shelley, because staking made the blockchain platform more autonomous, like  Frankenstein’s monster.

In July 2020, the next upgrade was implemented, allowing for improved decentralization through staking. The project created Ouroboros as the proof-of-staking algorithm used by ADA for verifying transactions. That means, anyone holding ADA can decide to become a validator.

Users put down their own money as collateral, the same way you leave a deposit for the first and last month when renting. Then when new transactions are being processed, the user can act as a validator. If they pass fraudulent transactions, then they lose their collateral or stake.

Shelley allows users to add their ADA tokens to an active staking pool, to receive validator rewards. That way, you don’t need $10,000 to participate in the validating process. As long as you hold ADA tokens, you can become a validator.

The proof-of-stake algorithm is compared to other blockchains later in this article.

Goguen

  • Named for Joseph Goguen, Computer Scientist  (1941 – 2006)
  • Goguen’s work in computer sciences helped set the stage for ADA’s smart contract verification.

This upgrade went live in August 2021, allowing for the creation of smart contracts on the ADA blockchain. These smart contracts will also allow developers to create and issue native tokens/crypto, including non fungible tokens (nft). Rather than reinventing the wheel and making their own blockchain technology, developers can use the existing smart contract and code of the ADA blockchain to build a token on top of it.

There is a budding ecosystem of smart contracts that are being developed, with as many as 200 that will soon become usable.

Basho

This phase will focus on improving the scale of the blockchain and allowing it to communicate with other blockchains. Basho will make sure that ADA remains flexible, fast, and competitive with other blockchains.

This stage aims to implement scalability in an elegant, yet simple way, similar to how Bashõ used simple words to build meaning.

Voltaire

  • Named for Voltaire (1694–1778)
  • French philosopher and writer
  • Voltaire criticized the monarchy and the church, paving the way to better governance through revolution.

Voltaire will allow anyone who owns ADA to vote and govern its protocols. People can then write and present proposals and amendments to the ecosystem. People can then use their ADA to vote on these proposals.

Other updates, like Alonzo, Daedalus and Adrestia are regular, and add significant functionality to the Cardano Blockchain.

The Easiest Way to Buy Cardano

There are dozens of different exchanges out there where you can invest your hard-earned cash. Much like Homer Simpson, we like things that are simple and easy to do. Unlike Homer though, we will be doing our due diligence on different exchanges.

Newton Coinbase Crypto.com
Ease-of-Use ✔✔✔✔✔ ✔✔✔✔✔ ✔✔✔✔✔
Trading Fees None Vary depending on your transaction; high fees Lower fees than coinbase
Payment Method Interac e-transfer, wire transfer Debit or Credit Card Debit or Credit Card
Recurring Buy Available? No Yes Yes
Other Notes Covers gas up to $5 (move to your wallet for free) Offers the opportunity to earn various crypto for free through learning rewards Promotion, when you join, waives fees for 30 days
Security & Reputation Cold storage of your assets

FINTRAC#: M19607029

Strong reputation and track record

FDIC Insured

FDIC Insured

Storing ADA

After you purchase your cryptocurrency, even Dogecoin, from an exchange, you should move it to a private wallet. You are entrusting the exchange to manage your crypto as a custodian if you leave it there. Instead move the crypto to your private wallet, only you will have access to it.

If you’re storing small amounts of ADA, planning on staking it (more on this later in the article), or using it for day-to-day transactions, a hot wallet can be ideal. It takes the form of an open-source app for your phone or your computer. However, these devices are connected to the internet, putting your crypto at a small, but real, risk.

The best way to secure your cryptocurrency from online hacks is through the use of a cold wallet. This wallet is hardware that you can plug and unplug from your computer. It looks like a USB or small hard drive, and as long as it’s not connected to a computer, your crypto is safely stored.

These are some of the best wallets available for storing ADA.

Hot Wallets Cardano Specific Cold Wallet
Wallet Exodus Yoroi AdaLite Daedalus Ledger Trezor
Supported Platforms Windows, Android,  macOS, iOS, Windows, macOS, Linux Runs as a browser app Windows, macOS, Linux Connects to any computer via USB Connects to any computer via USB
Supported Cold Wallets Trezor Yoroi, AdaLite Yoroi, AdaLite
Mobile App Available No Yes Yes, via browser No (requires 8 GB of space) No No
Initial Setup Instant 10 – 15 mins 1-2 hours 10 – 15 mins 10 – 15 mins
Non-Custodial Yes Yes Yes Yes Yes Yes
Staking Yes Yes Yes Yes Yes Yes

Ouroboros and Staking

To verify and validate transactions on the blockchain, ADA uses Proof of Stake (PoS). This is more efficient than blockchains like Bitcoin which use Proof of Work.

A Short Primer on Proof of Work

Simply put, Proof of Work requires a lot of energy and it’s inefficient at processing transactions. Miners compete to solve very complicated math questions, competing with each other to be the first to get an answer. That means that they need really powerful computers (and a lot of money to buy them). The miner that solves the problem first gets to validate the blockchain transactions and receive the reward.

Proof of Stake with Ouroboros

Cardano uses a Proof of Stake protocol called Ouroboros. Anyone who owns ADA can become a validator of transactions. It acts as collateral, meaning that you will lose it if you validate fraudulent transactions. A validator earns rewards based on the number of blocks that they validate.

But across other Proof of Stake protocols, you need a lot of money to become a validator. With the Ouroboros protocol, you can put a little bit of ADA into a staking pool. This process is called delegation.

Any time a new set of transactions, a block, is announced on the network. The amount of ADA that is staked will determine your chances of being assigned a block to validate. It’s like a lottery pool. If each token is a lottery ticket, 100 ADA makes it unlikely you win anything. But if you pool with 10,000,000 other tickets, your chances go way up.

Choosing a Staking Pool for ADA

Information about available staking pools can be found in your wallet. There are also websites that let you search and sift through all available ADA staking pools.

Here’s a quick guide to help you select a trusty pool.

  1. Retaining Your Private Key: Always stake through your wallet. Your wallet will allow you to retain your own private keys. You will be able to withdraw your ADA whenever you’d like (and even switch pools).
  2. Communication: Many pools provide a link to their Twitter, Website, Discord, or Telegram. You can check them out, ask questions and learn more about them through there. Pools with a large social media presence are more likely to respond to your questions.
  3. Pool Fees: To maximize rewards, choose a pool with low fees. There are two types of fees:
    1. The fixed fee is ADA taken from the total rewards that your staking pool generates. This is like a flat fee for participating in the staking process.
    2. The margin fee is a percent taken from the pool’s rewards, compounded every five days. These five day periods are also called epochs. The rewards are given to the people who run the pool so they can keep it going.
  4. Pool Size: After the fees are accounted for, the rest of the rewards are distributed amongst the people in the pool. In a large pool, you earn less because the reward is divided amongst more people. In a smaller pool, you can earn more for that exact reason. If the staking pool earns 1000 ADA after fees, of course you’ll earn more if there’s only 10 people in the pool as opposed to 100.
  5. Return of ADA (ROA%): This value tells you how much ADA the pool earns over the course of the year. For example, if 1 000 000 ADA are staked, an ROA of 5% would net a return of 50 000 ADA.

The Case for Investing in ADA

It is no surprise that ADA is the fifth-most popular cryptocurrency according to crypto market capitalization. It is ambitious and offers innovations across the blockchain. It looks like solid investment over the medium to long term, is backed by strong leadership, and has established a solid peer-reviewed framework.

Cardano is on pace to solve many of the problems of Ether and Bitcoin. Already, the Proof of Stake system used by ADA saves a lot of energy while ensuring speedy transactions. Furthermore, the company developing ADA has experience with developing smart contracts, and will be upgrading ADA in August 2021. This allows it to be a firm defi foundation.

Cardano remains secure and open source, with the ambitious aim of implementing better smart contracts, in part due to its coding language. Additionally, it’s smart contracts will function on a sublayer of the ADA blockchain, preventing them from slowing down ADA peer-to-peer transactions. Furthermore, it is being developed to easily fit into use cases across industries, from healthcare to agriculture. Because of this flexibility, it will be good in short term and long term portfolios.

If you’re investing in crypto – you should definitely consider adding ADA to your portfolio, because it is a good investment, despite its potential volatility.

 

Disadvantages of ADA

ADA isn’t the only third-generation blockchain. Ethereum is also planning to upgrade to a Proof of Stake system, which allows for faster transactions than ADA, while also lowering fees and makes it more energy efficient.

ADA may also be slowed by the peer-review process and may be outcompeted.

ADA also faces competition from many other new blockchains that at some point have been called “Ethereum killers”. This includes Polkadot (DOT), Solano (SOL), and Algorand (ALGO).

Even if ADA is superior to Ethereum, it’s a crypto-eat-crypto world out there (or as some might say a Doge-eat-Doge world), and no one knows which of these cryptos will come out on top (or even survive).

 

ADA’s Achilles Heel: Disaster Capitalism

ADA’s parent company IOHK, announced their intentions to help Ethiopia rebuild during its civil war in July of 2021. But critics argue that this merely allows companies to use citizens of these countries as guinea pigs.

International Development lecturer Pete Howson argues this could be harmful for the country as a whole, and wouldn’t provide citizens any benefits. If it becomes clear that ADA and IOHK aren’t benefiting the situation, or making it worse, there could be a social backlash that affects its price.

 

Conclusion

ADA is an ambitious project that hopes to solve many of crypto’s largest issues. Its unique approach involves peer-reviewed innovation and allows anyone to earn passive income by staking their ADA. While there is a lot of  competition amongst other third-generation blockchains, ADA remains a standout due to its features, low risk, and leadership of Charles Hoskinson.

At a cost of just over $1 USD, it seems undervalued and in our opinion ADA would make a great addition for investors looking to diversify their crypto portfolio.

 

Key Points

Founded by Charles Hoskinson, in close collaboration with IOHK

Uses a peer-reviewed model to publish new blockchain protocols as opposed to simply posting a whitepaper

Current features:

  • Fast peer-to-peer transactions
  • Ouroboros proof-of-stake protocol
  • Allows for passive income generation via staking
  • Low energy usage combined with low fees

Future features:

  • Better smart contracts
  • Bridging divides between different blockchains
  • Improving scalability
  • Allowing people who hold ADA to submit and vote on new protocols for the blockchain

Yoroi and AdaLite integrate with commonly used cold wallets

Potential barriers to adoption:

  • ETH 2.0 upgrade could close the gap with ADA
  • Multiple competitors offering a new blockchain (DOT, SOL, ALGO, etc.)
  • Potential fallout from interventions in other countries

Overall, ADA looks like it will be a solid investment and great way to diversify a crypto portfolio.

Do your own research.

If you want an even deeper dive on Cardano watch or listen to this:

Once again the Lex Fridman Podcast  comes through for us. In #192 Lex sits down with Charles Hoskinson to go through complete story of Cardano.

This is a super interesting conversation and one that I highly recommended listening to. It took a few days to get through the almost 5 hour runtime mind you.