Cardano is home to the ADA cryptocurrency, which can be used to send and receive digital funds. This digital cash represents the future of money, making possible fast, direct transfers that are guaranteed to be secure through the use of cryptography.
Cardano is more than just a cryptocurrency, however, it is a technological platform that will be capable of running financial applications currently used every day by individuals, organizations and governments all around the world.
The platform is being constructed in layers, which gives the system the flexibility to be more easily maintained and allow for upgrades by way of soft forks. After the settlement layer that will run Ada is complete, a separate computing layer will be built to handle smart contracts, the digital legal agreements that will underpin future commerce and business. Cardano will also run decentralized applications, or dapps, services not controlled by any single party but instead operate on a block chain.
This is the first blockchain project to be developed from a scientific philosophy, and the only one to be designed and built by a global team of leading academics and engineers. It is essential that the technology is secure, flexible and scalable for use by many millions of users.
Consequently, considerable thought and care from some of the leading experts in their fields has been devoted to the project and informed design decisions. The scientific rigour applied to mission-critical systems such as aerospace and banking has been brought to the field of cryptocurrencies, with a high assurance implementation. We believe this is the first time that this has been done.
A major innovation of Cardano is that it will balance the needs of users with those of regulators, and in doing so combine privacy with regulation. The vision for Cardano is that its new style of regulated computing will bring greater financial inclusion by providing open access for all to fair financial services.
Insight to Cardano Investing
Cardano is a “second generation” crypto-currency that is trying to solve a lot of the problems that plague Bitcoin. Similar to Bitcoin, it’s an open source crypto-currency that launched in September 2017. Cardano uses a token (the actual currency) called Ada. However, most people simply refer to it as Cardano.
Cardano is trying to differentiate itself from Bitcoin by being designed from the ‘ground up’ to deliver a secure and sustainable blockchain that can protect user privacy whilst allowing for regulation. It also hypes up that its been designed by academics and scientists who understand the needs of the marketplace. However, Cardano isn’t the easiest crypto currency to buy. It requires some additional steps compared to investing in Litecoin or Ethereum. But let’s break it down and show you what to do.
If you want to get a head start, investing in Cardano will require two accounts:
- Coinbase – To easily buy Bitcoin (and get $10 free when you invest $100)
- Binance – To invest in Cardano (ADA) using Bitcoin
What Is Cardano?
Cardano was launched in September 2017 via ICO (initial coin offering) to be a better alternative to Bitcoin. The goal was to create a network that valued privacy and security, but at the same time meeting the needs of regulators as well. As the currency has gained popularity, it’s value has risen dramatically. Cardano, like most other crypto-currencies, has seen it’s price spike in the recent months.
How Cardano Is Different
The big difference of Cardano compared to other currencies is that it maintains a two-tiered network, which allows for faster transaction processing time (similar to Dash). Cardano’s multi-layer protocol performs advanced functions, and has at its foundation a settlement layer that is linked to a control layer. The settlement layer will have a unit of account, while the control layer will run smart contracts and will be programmed to recognize identity, assisting compliance.
It’s also focused on protecting privacy rights of users, while also taking into account the needs of regulators. This is unique in the crypto-currency space. The advocates of Cardano see it as one of the best potential currencies to gain mainstream adoption due to it’s regulator friendly nature.
How To Invest In Cardano?
As we mentioned earlier, Cardano is not “easy” to invest in. However, there are rumors that Coinbase will be adding support for Cardano (ADA) in the near future. If that happens, you can likely expect the price of Cardano to increase substantially as new investors will easily be able to purchase the currency.
However, today, you need to follow a strict process to buy Cardano, just like you have to do with Electroneum.
1) Create A Binance Account
The first thing you need to do is setup a Binance account. Binance is the place where you will hold your Cardano tokens. Binance is a popular choice, because it allows crypto-to-crypto transactions from companies like Coinbase. It’s important to note that you can’t send money to Binance (or any other Cardano exchange currently), so you have to go to Coinbase -> Exchange (Binance) -> Cardano (ADA).
So, you’ll always need two accounts:
- Binance: which you can signup
- Coinbase: Coinbase gives you $10 in free Bitcoin when you signup and deposit $100 or more
Hopefully this changes soon, but that’s how it goes today.
2) Buy Bitcoin or Ether on Coinbase
Once you have a Binance account setup, you need to buy Bitcoin or Ether on Coinbase. It’s very easy to do once you have a Coinbase account setup. You simply go to the Buy/Sell page and enter your information. Then, your Bitcoin will be in your wallet and you can move to step 3.
3) Transfer Your Bitcoin To Binance
Once you have your Bitcoin or Ether in your Coinbase account, you can transfer it over to Binance. This is also fairly easy to do. In your Binance account, simply click “Funds” -> “Deposits/Withdraws”, and you can see all the different coins you can hold in your account. In our case, we’re transferring over Bitcoin, so click on Bitcoin, and you’ll see a Wallet Address generate. Here’s what it looks like:
Once you have that address, you go back to Coinbase, choose “Acccounts”, and then “Send”. You’ll see this screen come up where you can send your Bitcoin to the address generated in Binance:
4) Buy Cardano
Once you have your Bitcoin in your account at Binance, you can finally buy Cardano (ADA). At the top of the Binance homepage, you can click on Exchange -> Basic, and then on the right side, choose ADA/BTC:
- Invest in Cardano ADA
- Once you place your trade, it will show up in your Binance account.
Proof of Stake Mining
Cardano uses a new proof of stake algorithm called Ouroboros, which determines how individual nodes reach consensus about the network. The algorithm is a crucial part of the infrastructure that supports the Ada cryptocurrency and is a major innovation in blockchain technology. Ouroboros eliminates the need for an energy-hungry proof of work protocol, which stands as a barrier to blockchain scaling up for much wider use (See BlockGeeks Article: Proof of Work vs. Proof of Stake).
Designed a team led by IOHK Chief Scientist, Professor Aggelos Kiayias, Ouroboros is the first proof of stake protocol that has mathematically been shown to be provably secure, and the first to have gone through peer review through its acceptance to Crypto 2017, the leading cryptography conference. The level of security demonstrated by Ouroboros compares to that of Bitcoin’s blockchain, which has never been compromised.
What is a Proof of Stake?
In proof of work, miners invest computing power to compete to be chosen as the leader who gets to make the next block and win a reward for doing so. By contrast, in proof of stake, the stakeholder who will form the next block is randomly selected, proportionally to the size of the stake that they have, according to the blockchain ledger.
“Proof” means having evidence that blocks of transactions are legitimate. “Stake” means the relative value held by addresses on the node. “Relative value” is all the value held by wallets on a particular node divided by total value in the system. There have been a number of attempts by other cryptocurrencies to develop a proof of stake algorithm, although these protocols have suffered from flaws and have not been shown to be provably secure.
For a blockchain to be secure, the means of selecting a stakeholder to make a block must be truly random. An innovation of Ouroboros to produce the randomness for the leader election process is to do this by way of a secure, multiparty implementation of a coin-flipping protocol.
How Does Cardano Work?
Cardano is being developed in two layers that separate the ledger of account values from the reason why values are moved from one account to the other. This separation enables the smart contracts on the platform to be more flexible. It also provides businesses the opportunity to tailor the design, privacy, and execution of each contract to more perfectly fit their specific use-cases.
Cardano Settlement Layer (CSL)
The Cardano Settlement Layer (CSL) acts as the balance ledger and is the first layer of the platform. Created as an improvement to Bitcoin, this layer acts as a cryptocurrency built from the whitepaper Ouroboros: A Provably Secure Proof of Stake Blockchain Protocol by Aggelos Kiayias.
The CSL uses a proof-of-stake consensus algorithm to generate new blocks and confirm transactions. And, it includes:
- Two sets of scripting languages
- One set to move value
- One set to enhance overlay protection support
- Sidechains to link to other ledgers
- Multiple signature types including quantum resistant signatures
- Multiple user-issued assets
- Scalability in which the capabilities of the system increase as more users join
- Cardano Computation Layer (CCL)
- The Cardano Computation Layer (CCL) is the second layer of the Cardano platform and contains the information on why transactions occur. It’s within this layer that the Cardano smart contracts run.
Because the computation layer is detached from the CSL, different users of the CCL can create different rules when evaluating transactions. For example, you could create a permissioned ledger that leaves out any transactions that don’t include AML/KYC data – something that will become more important as blockchain regulation continues to increase.
The Cardano team is creating a new programming language to use to develop smart contracts on the CCL – Plutus. The CCL also support Solidity, the language behind Ethereum smart contracts, for low assurance applications on the platform.
To help developers, Cardano also includes a reference library of Plutus code that’s available to use in dApp’s. Beyond that, the team is creating a set of tools for the purpose of verifying code and improving code assurance.
Cardano supports sidechains based on a new protocol by Kiayias, Miller, and Zindros (KMZ) involving proofs of proofs of work. The KMZ sidechain protocol allows funds to move securely from the CSL to any CCL or any blockchain that also uses the protocol.
With this protocol, ledgers with certain regulatory compliances are able to interact with the CSL without having to share the data that needs to remain private.
Daedalus is an open-source wallet created by the Cardano team. It’s a multi-currency wallet in which you can freely exchange between the supported currencies. The wallet is beginning the expansion of support with Bitcoin and Ethereum Classic.
Daedalus Wallet Interface
The wallet also includes an app store containing applications built by the Daedalus community. You can currently download the wallet on Windows and MacOS operating systems.
ADA and Ouroboros Proof-of-Stake
The Cardano team has set that there’ll be a maximum of 45 billion ADA coins that will ever be created.
New coins enter the ecosystem and nodes validate transactions through a unique consensus algorithm, Ouroboros Proof-of-Stake (PoS).
In this protocol, slot leaders generate new blocks in the blockchain and verify the transactions. Anyone holding a Cardano ADA coin can become a slot leader. When the “Follow the Satoshi” algorithm selects a coin that you hold, you become a slot leader and publish new blocks to the network. Your node automatically does this process, so you don’t have to worry about manually verifying each transaction.
The fees to transfer ADA vary and are determined by the following equation:
- transfer fee = a + b * size.
- a = a constant currently equaling 0.155381 ADA
- b = a constantly currently equaling 0.000043946 ADA/byte
- size = size of the transaction in bytes
This effectively means that the minimum transaction fee you’ll pay is 0.155381 ADA and will increase by 0.000043946 ADA with each byte increase of your transaction size.
The transaction fees of each epoch are collected in a pool and distributed amongst the appropriate slot leaders. An epoch is simply a period of time in which slot leaders validate transactions. When one epoch ends, the next one immediately starts.
Like any currency, there is a high degree of risk involved if you’re considering investing in Cardano.
However, given the low price point, it does have the possibility for a high return with low barrier to entry. If you don’t like the idea of a digital wallet and/or all of these steps, there are no ETF’s that track Cardano yet. However, GBTC is an ETF that tracks Bitcoin, and you can get $5 for free when you invest at Stockpile and buy Bitcoin.
You never know, Cardano could skyrocket as high as Bitcoin is today, and you might be thanking yourself in several years. Even better, it could potentially be adopted as a more legitimate currency. But don’t get your hopes up – there is still extreme risk here. Learn more on what the best IRA options for cryptocurrency are.
Do you have any questions on investing in Cardano ADA for your IRA? Ask below!