Cardano is a blockchain platform with a native token called ADA. Cardano was launched in 2017 by Charles Hoskinson, a co-founder of Ethereum. Cardano is seen as a more environmentally friendly alternative to popular public blockchain platforms such as Bitcoin and Ethereum, as its underlying proof-of-stake protocol, Ouroboros, consumes less electricity than the proof-of-work ones used by competitors. ADA is currently the world’s largest cryptocurrency to use proof of stake.
Cryptocurrencies are not regulated by government organizations or banks, so they need another method to confirm transactions. This confirmation is done by network nodes called miners. Presently, the majority of cryptocurrencies use a protocol called proof of work while Cardano uses proof of stake.
In a proof-of-work protocol, miners compete to solve complex mathematical puzzles. The first miner who solves the problem gets to add a block of chains and earn rewards. This means that processing power all over the world is used up trying to answer these questions, which requires an immense amount of energy. With people becoming more aware about how crypto mining negatively impacts our planet, proof-of-stake protocols offer a greener option that doesn’t use as much electricity.
Cardano’s Ouroboros protocol doesn’t require stake pool operators to solve puzzles. Instead, they can simply delegate their ADA coins to a stake pool.
The more people delegating to a particular pool, the greater chance that block has of being added to the blockchain. Those who delegate their stake earn rewards when their chosen pool is successful in adding a block, and those rewards are distributed among the delegators.
Cryptocurrencies are a new and exciting investment opportunity, but they can be confusing for those not familiar with the terminology. We hope that this article by Crypto Tax Calculator Australia was helpful and gave a better understanding into what Cardano is and how it works.
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