Gate.io Blog Cardano (ADA): What is It and How Does it Differ from Bitcoin

Cardano (ADA): What is It and How Does it Differ from Bitcoin

01 January 08:00

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![](https://gimg2.gateimg.com/image/article/1677232719易懂百科.jpeg)

## TL; DR
<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> is a generation 3 blockchain which uses the proof-of-stake algorithm.

ADA is one of top 10 cryptocurrencies which investors can stake and earn rewards for.

There are various platforms where investors can stake their ADA coins which include Daedalus, Yoroi, Exodus, Gaurda wallet and some crypto exchanges.

<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> is faster, more energy efficient and more scalable than the <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> blockchain.

## Introduction
One piece of advice which experts often give to investors is to have a balanced crypto portfolio which includes some top ten cryptocurrencies and promising ones among the best 100. Some of the top 10 cryptocurrencies are <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>, Ether (ETH), Binance Coin(<a href="/price/bnb-bnb" target="_blank" class="blog_inner_link">BNB</a>), <a href="/price/tether-usdt" target="_blank" class="blog_inner_link">Tether</a> USDT, <a href="/price/usd-coin-usdc" target="_blank" class="blog_inner_link">USD Coin</a> ( USDC), <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>, <a href="/price/binance-usd-busd" target="_blank" class="blog_inner_link">Binance USD</a> (BUSD), <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> (ADA), <a href="/price/dogecoin-doge" target="_blank" class="blog_inner_link">Dogecoin</a> (DOGE) and <a href="/price/solana-sol" target="_blank" class="blog_inner_link">Solana</a> (SOL). Today, we focus on <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> (ADA) ranked number 8 with a market capitalization of over $13 billion.

## What is <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> (ADA)?
<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> is an open-source blockchain that hosts many smart contracts which include decentralized protocols. It is a third generation blockchain whose aim is to solve major problems that most first and second generation blockchains like <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> and <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> encounter. The key challenges the second generation blockchains face are scalability, speed and high gas cost.

![](https://gimg2.gateimg.com/image/article/1677233295Cardano1.png)
<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> (ADA)- Capitalcom 
## History of <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>
Charles Hoskinson, a mathematician, is the person who created the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain and launched it on 29 September 2017. The team raised part of the development funds from an Initial coin offering (ICO) it carried out in 2016, raising over $62 million.

The developers will fully outroll the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain, an integration of the distributed ledger technology and smart contract infrastructure, through five stages namely Byron, Shelley, Goguen, Basho and Voltaire. Byron involved testing the initial functionalities, Shelly was the stage of launching the mainnet and Gougen involved the integration of smart contract platforms.

<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> will introduce the Basho and Voltaire stages in the near future. The Basho stage involves the optimization of the blockchain and the implementation of the scaling solution. Through Voltaire, the blockchain will introduce the treasury and the governance systems.

Already, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> launched Alonzo Hardfork and the Vasil Hardfork Upgrades that introduced new features on the blockchain. Specifically, Alonzo upgraded introduced a smart contract system that enables developers to deploy decentralized applications (dApps) and develop non-fungible tokens (NFTs) on the blockchain.

On the other hand, the Vasil Hardfork Upgrade, launched on 29 June 2022, enhanced the speed and scalability capabilities of the network which helps it to support dApps deployed on the blockchain.

## <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> Proof of stake Mechanism 
A blockchain’s consensus mechanism is a method of verifying transactions to avoid the problem of double spending the cryptocurrency when making payments. Double spending occurs if an individual uses the same cryptocurrency to pay for two different transactions. The two most popular consensus mechanisms are proof-of-work (PoW) and proof-of-stake (PoS). 
![](https://gimg2.gateimg.com/image/article/1677233284Cardano2.png)
Proof-of-stake-One37pm

The proof-of-work consensus mechanism uses much processing power to solve complex mathematical puzzles as a means of validating transactions. Currently, most blockchains avoid PoW because it consumes much energy to solve cryptographic equations as it uses much computational power.

On the contrary, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> uses the proof-of stake consensus mechanism which uses less energy than the proof-of-work one. With the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> PoS algorithm called the Ouroboros Protocol, the nodes that stake the required Cardano cryptocurrency (ADA) can verify transactions. However, the validators that stake the greatest amount of ADA over a long period have the highest chance of verifying the transactions.

### Smart contracts
As mentioned, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> is designed to host many smart contracts that carry out different functions. Most of these smart contracts offer innovative financial services which are usually offered by the traditional banking system. These include borrowing, lending, insurance and exchange.

However, the smart contracts execute these functions without involving central authorities or intermediaries such as the government or banks. More importantly, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s double layered system enhances the security of the smart contracts that exist on the protocol. 
 
### <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> layers and security
<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s double layered system promotes the safety and scalability of the blockchain. The <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> Settlement Layer (CSL) executes all the transactions while ADA powers the entire system. On the other hand, the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> Computation Layer (CCL) runs the smart contracts, enabling developers to create decentralized applications.

### <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s main features
<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> has several outstanding features which makes it one of the best blockchains, a reason why it is ranked within the top 10. Some of these features are high speed transaction, decentralization and energy efficiency.

### Fast transactions
Transactions on the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain are very fast resulting in low gas fees. It processes 250 transactions per second. As a result of its scalability, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> charges a low gas fee of less than $1.00 per transaction.

### It is energy efficient 
The blockchain uses very little energy because of its proof-of-stake consensus. To this effect, the founder of <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>, Charles Hoskinson, claims that the <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> blockchain consumes 1.6 million times more energy than <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>.

### <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> is highly decentralized
The <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain enables millions of its users to participate in its consensus mechanism through verifying the transactions. However, some of the people that stake ADA do not directly participate in the validation process. They delegate their roles in the consensus mechanism to others through joining staking pools. 
## What is ADA?
ADA, named after Ada Lovelace, a 19th-century mathematician regarded as the world’s first computer programmer, is a native coin of the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain. It is the cryptocurrency that drives the entire network as people use it to pay gas fees and stake it as a means to protect the blockchain.

In the future, the ADA coin holders will participate in the blockchain’s decision making process. This is because ADA is the governance token for the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> network. Like other cryptocurrencies such as <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> and ETH, ADA is a store of value and a means of payment. Therefore, the network users can receive, <a href="/how-to-buy/cardano-ada" target="_blank" class="blog_inner_link">buy Cardano</a>, store and transfer ADA

## <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> staking 
<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> staking is a process where users lock their ADA cryptocurrency in specific smart contracts in order to earn rewards and contribute to the security of the network through validating transactions. Staking enables the blockchain to maintain decentralization through ensuring that transactions occur according to the standing rules of the protocol.

The ADA holders can participate in a consensus system in their individual capacities or they delegate their roles to others through joining staking pools. When the users stake their ADA coins in the pools they increase the chance of the pool operators to contribute to the security of the blockchain through validating the transactions.

The staking pools with high amounts of staked ADA coins have a higher chance of being selected to verify the transactions than those with less <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">ada crypto</a>.

## How do <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> Staking pools work?
First, a staking pool is a node that holds the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> coins of many users and acts as a single unit. Each <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> node interacts with the network and is responsible for processing transactions and form blocks.

The person who runs the node is called a pool operator and owns the server required to perform the expected tasks. In other words, the pool operator should have specialized hardware and the required know-how.

In essence, the node helps to protect the network against Sybil attacks, a reason why the blockchain rewards the operator using the ADA coin. In return, the node operator distributes the reward to the users who contribute their ADA cryptocurrency to the staking pool. 
![](https://gimg2.gateimg.com/image/article/1677233323Cardano3.png)
<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> staking- Cardanians
## Solo staking Solo staking 
We also have solo staking where an individual investor pledges his/her ADA coin to provide protection to the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> network.  In this case, the investor runs his/her own <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> node and stakes a very large amount of ADA coins. As you may guess, the node does not distribute the reward to any other persons as the computational power for verifying the transactions comes from its own resources.

## How is <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> different from <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>?
Despite the fact that both <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> and <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> are top cryptocurrencies they are different in some ways. For example, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> has a team of experts which checks how the network functions. However, <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> does not have a team of experts to monitor its monetary system. It depends on its preset code to execute its “monetary policy.”

Second, the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain is faster and more energy efficient than <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>. This is because <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> handles around 250 transactions per second while <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> executes between 3 and 5 transactions per second (TPS).

On the other hand, <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> has far more reputation than <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>. The major contributing factor is its first mover advantage. As such, the crypto community has used BTC for a longer period than ADA.

Also, <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> uses the proof-of-work (PoW) consensus mechanism that consumes much more energy than the proof-of-stake one which <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> uses. This also explains the reason why <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> is faster than BTC.

The next big difference between the two blockchains is their maximum supply. <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> has a very small maximum supply of 21 million coins. On the other hand, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> has a maximum supply of 45 billion coins. Nevertheless, <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>’s current circulating supply is slightly over 19 million while that of <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> is just over 3.5 billion.

## Staking platforms 
We noted that ADA holders can stake the coins and get reward for that. Through staking their ADA coins, the network users also help to secure the network from attacks and double spending. In respect of this, there are many platforms where individuals can stake their tokens. Let’s discuss a few of the platforms or wallets where investors can stake their ADA cryptocurrency.

Daedalus: This is a crypto desktop wallet developed by <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>. Once you install it you will be able to access the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain. You are entitled to a 5% annual reward for your cryptocurrency. 
![](https://gimg2.gateimg.com/image/article/1677233341Cardano4.png)
Daedalus wallet- Prnewswrire
Yoroi: This is one of the most popular wallets to stake your ADA coin, with a staking reward of about 5% per year. The good thing is that Yoroi has a web extension which you can use on various browsers.

Exodus: Of course, Exodus is one of the best digital wallets where you can stake your ADA and earn 4.5% of your invested amount per year. However, Exodus is different from other staking platforms in that it requires a minimum staking amount of 5 ADA as well as a fee of 2 ADA.

Other staking platforms: There are other ADA staking platforms which include several crypto exchanges, Uphold, and Gaurda Wallet.

## Conclusion
In summary, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> is a third generation crypto exchange that uses the proof-of-stake consensus mechanism. Although many people want to know how to mine <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>, the truth is that the Ouroboros protocol does not support the mining of the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> coin. Instead, they can stake ADA and earn reward for that.

## FAQ about <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> (ADA)
### What does <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> do?

<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> is a blockchain that hosts different decentralized applications and other smart contracts. Developers can create decentralized finance (DeFi) applications, games and tokens such as NFTs. It enables people to send and receive the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> coin and other native tokens quickly and at very low cost.

### What does <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> ADA stand for? 
ADA is derived from the name of a 19th-century mathematician who is regarded as the world’s first computer programmer called Augusta Ada King, the Countess of Lovelace who lived between 1815 and 1852. It was <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> founder, Charles Hoskinson, who named the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> native cryptocurrency ADA as a way of honoring that great Mathematician and computer programmer. 
### Is <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> ADA good? 
ADA is one of the best cryptocurrencies on the market that offers utility to the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain. The reason why it is a good investment asset is that it drives the entire <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> ecosystem including decentralized applications that run on the protocol. Investors can stake ADA in various platforms and wallets that include Daedalus, Yoroi, Exodus and Gaurda wallet.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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TL_ DR

Introduction

What is Cardano _ADA_?

History of Cardano

Cardano Proof of stake Mechanism

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Cardano (ADA): What is It and How Does it Differ from Bitcoin

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