what is it and how does it work


What is it? It is a question that can be applied to a variety of topics. For example, it can refer to a type of technology, a product, or a process. How does it work? This part of the question will depend on the specific item being discussed. Generally, the answer to this question will involve a description of the features, functions, and processes of the item in question.

Cardano min


Cardano min



Expert advice for this material was provided by representatives of the Russian-speaking community of Cardano.


  • Cardano is a blockchain platform based on the Proof-Of-Stake algorithm written in a programming language Haskell and designed to create decentralized applications based on smart contracts.
  • Cardano (ADA) is the native cryptocurrency of the Cardano blockchain. ADA coins can be delegated to network staking pools, including through the most popular Daedalus and Yoroi wallets.
  • Cardano has a number of unique architectural solutions, made possible by a large research community. Its representatives publish a large number of peer-reviewed scientific papers on the development of the blockchain project.

Who and when invented Cardano

Cardano has several founders:

  • Charles Hoskinson is a mathematician and entrepreneur who was at the forefront of Bitshares and Ethereum. He is the CEO of IOHK and the “spiritual leader” of Cardano.
  • Jeremy Wood is the director of strategic development. At the end of 2013, he served as the Executive Director of the Ethereum Foundation, after which he acted as a consultant on a number of other cryptocurrency projects.
  • Aggelos Kiayas is the project’s chief scientist, cryptographer and professor at the University of Edinburgh.

In June 2014, Hoskinson left Ethereum due to disagreements regarding the further development of the project, after which, together with Wood, he founded Input Output Hong Kong (IOHK), which in 2015 began developing and developing Cardano.

On February 7, 2017, IOHK developers presented the whitepaper of the Ouroboros blockchain protocol.

The official launch of the Cardano platform took place on September 29, 2017. Token trading began on October 1, 2017.

Blockchain decided to be named after Gerolamo Cardano (1501 – 1576), an outstanding Italian mathematician, physicist, biologist, chemist, astrologer, philosopher, writer and gambler.

The creator of Cardano, mathematician Charles Hoskinson named after Cardano a project aimed at creating a flexible and interoperable variety of programmable money using scientific methods based on mathematical proofs and game theory.

Who is developing Cardano

  • Cardano Foundation is a non-profit organization registered in Zug, Switzerland, whose main function is to “standardize, protect and develop Cardano technology”. She is responsible for communications with financial regulators, government agencies, the public, and also develops strategic partnerships with other projects.
  • IOHK (abbreviation for “Input Output Hong Kong”) is an engineering and technology company founded by Wood and Hoskinson. IOHK is engaged in cryptocurrency development and research activities. The company is bound by a contract with the Cardano Foundation, under which it will remain the main developer of the platform until 2020.
  • Emurgo is an investment fund with offices in Singapore, Japan, USA, Indonesia and India. Its mission is to “grow and support businesses and help integrate businesses into the Cardano ecosystem.”

One of the main differences between Cardano and its competitors is its large research and development community. Solutions of tasks and problems facing the project, offer authors in scientifically peer-reviewed publications.

How Cardano (ADA) works and what are its features
The dynamics of the number of scientific publications on the fundamental aspects of Cardano from 2017 to May 2022. Data: IOHK

Cardano Blockchain Architecture

Although Cardano initially used the Proof-of-Stake mechanism, it also used the UTXOthat came from bitcoin. At the same time, the Shelley era also allowed the use of an account model similar to Ethereum. Addresses of this format are used for awarding rewards. Cardano takes advantage of both models.

Inputs and outputs contain information about the origin and movement of funds. The inputs tell which address the funds originate from, and the outputs tell which address the funds are transferred from.

To prevent double spending, every node on the network keeps a record of transactions. When a new transaction becomes available (either in a block or in a mempool), it is analyzed to see if it modifies the unspent output associated with each address in the network.

The UTXO model cannot optimally support the functionality of smart contracts. To solve this problem, Cardano released its own customized version of UTXO called Extended UTXO (EUTXO).

It uses mechanisms that divide the execution of a smart contract into many transactions. Each transactional output contains a data field with randomly selected information associated with a specific smart contract. The EUTXO model was implemented after the activation of smart contracts in the main Cardano network.

Features of the Ouroborous algorithm

How declare in Cardano, Ouroboros (a variation of PoS) is the first algorithm with mathematically proven resistance against attacks.

The process of creating blocks in Ouroboros is divided into eras and slots. An epoch is formed by a certain number of slots, during which a certain level of stake distribution is set. It is either programmed, or at a later stage of development it is calculated from the snapshot of the block.

At the beginning of each epoch, leaders are elected, each of which is empowered to process transactions and sign blocks in specific slots. For each slot, a leader is randomly selected from among the stakeholders, who creates the next block associated with the previous one in the chain.

While transactions are recorded in blocks, the distribution of stakes through which the leader is elected changes. In Cardano, the likelihood of blocks being recognized as “canonical” increases as the number of blocks created on top of them grows (as in the Proof-of-Work mechanism).

The processes for selecting leaders and assigning slots are based on stake distribution and a lottery. However, not everyone who gets the correct hash first wins – the leader for each slot is determined by the number generated by computing a number of stakeholders in the previous era. The slot’s chances of winning are proportional to the amount of its stake, the percentage of coins that it controls either directly or through delegates.

Cryptocurrency Cardano (ADA): features and staking

The native cryptocurrency Cardano is traded under the ticker ADA. It is an abbreviation for Augusta Ada King, Countess of Lovelace (1815-1852). Daughter of the poet George Byron, Ada Lovelace was a mathematician and author of the description of the first computer, for which she compiled the world’s first program. She is considered the first programmer in history. The subunit of the ADA cryptocurrency (0.000001 ADA) is called Lovelace.

The main function of ADA is transfers in the Cardano blockchain. According to Messari, in September 2022, the average transfer fee was about 0.33 ADA, which was equal to $0.15-$0.17.

Staking is available for ADA. Ordinary holders can delegate their coins to staking pool node operators that participate in the consensus algorithm. In Cardano, the delegation mechanism is built into the official wallets: Daedalus (developed by IOHK) and Yoroi (developed by Emurgo). The current yield on delegation of ADA is from 3.7% to 4.2% per annum.

Staking pools are involved in the network consensus algorithm – all of them are now in Cardano around 3200 (data as of September 2022). In addition to the size of the involved stake, the profitability of the pool depends on some other parameters. Among them:

  • Saturation. This criterion depends on the weight of the pool compared to competitors and the ratio of the total number of pools compared to the target value calculated by the Cardano protocol. The more “saturated” the staking pool, the lower the return it has. This parameter is a mechanism to combat the centralization of the Cardano network and prevent the emergence of dominant pools.
  • Desirability Index. It is calculated based on the size of the stake, the costs and income of the pool, as well as on its saturation level and work history. With this parameter, Daedalus and Yoroi wallets distribute ADA coins, which holders delegate through them.

Scaling the Cardano Blockchain

The current performance of the Cardano blockchain is about 250 transactions per second (TPS), which is significantly less than projects like Solana. How says in one of the IOHK publications, at the moment there are several areas of development in the Cardano community at once to increase the speed of work.


One way to increase Cardano’s scalability is to introduce pipelining into the Ouroboros consensus algorithm, which will speed up the so-called new block propagation time. The latter means how long the nodes are able to distribute information about the new block throughout the network. The current goal of the developers is to bring the block propagation speed to 5 seconds.

Entrance endorsers

The introduction of so-called Input Endorsers into the Cardano protocol is also aimed at increasing the speed of block propagation. These actors keep track of all new transactions and distribute them into pre-assembled blocks. In total, it is planned to create two sets of blocks – one for the transactions themselves and the second for reaching consensus.

Tiered pricing

The developers also plan to add the principle of tiered pricing to the Cardano protocol. In the current implementation of Cardano, all transactions are executed in turn, without the possibility of changing the priority. Once the network can no longer handle the load, this can lead to delays in confirming operations, as well as the potential success of DoS attacks.

Tiered pricing should make this system more flexible with a new network fee generation mechanism where each block will be divided into three tiers: fair, balanced and immediate. Each of these blocks will include different types of transfers assigned by senders.


Another group of solutions is related to the deployment of second-level protocols that work “on top” of the blockchain. It includes sidechains, which should appear in one of the next Cardano updates in 2022-2023. Now in IOHK already works alpha version of the first sidechain.


Another way Cardano scales is through the so-called Hydra channels, named after a multi-headed monster from Greek mythology. These are state channels opened between various participants, similar in principle to Bitcoin’s Lightning Network. Transactions in such channels can be carried out outside the blockchain, while using smart contracts of the main network.


The goal of the Mithril project, proposed in 2021, is to improve the efficiency of data synchronization between applications running on Cardano. This solution reduces the time required to validate a message through faster multi-signature aggregation.

Roadmap of Cardano

Long-term development strategy for Cardano includes five phases (er).


This era is named after the poet Byron, father of Ada Lovelace. This is the initial stage (started in September 2017) where the key components have been developed and the settlement layer has been prepared for decentralization.


Named after the English poet Percy Bysshe Shelley, friend of Lord Byron and author of the famous Ozymandias sonnet. According to another version, this phase is named after the English writer Mary Shelley, known as the author of the book Frankenstein, or the Modern Prometheus.

At the Shelley stage, thanks to the implementation of the Ouroboros Genesis consensus algorithm, the platform was completely transferred to a decentralized mode. In particular, in July 2020, staking was added to Cardano, after which it became possible to create staking pools in this blockchain, to which ADA cryptocurrency can be delegated.


The current phase of Cardano’s development, Goguen, is named after the American mathematician Joseph Gauguin (1941 – 2006), a professor at the University of Oxford and California who worked on algebraic semantics and formal verification. The main task of this era is to create a foundation in Cardano for the development of decentralized applications.

Several major updates have already taken place within Goguen. In particular, in the fall of 2021, Cardano blockchain implemented its own standard for native tokens. In addition, a computational layer was created for executing smart contracts, which includes the following elements:

  • Plutus is a platform for developing smart contracts and executing code based on the Haskell functional programming language.
  • Marlowe is a domain-specific language for writing financial smart contracts. With it, contracts in Cardano can be created by specialized experts who do not have deep knowledge in programming. Open for developers on Marlowe special portal.

In September 2022, a major upgrade called Vasil was successfully activated on the Cardano mainnet. It included a second, more performant version of Plutus scripts and a new cost model. All this is intended to reduce the execution price of smart contracts and the size of transactions, as well as increase the speed of the Cardano network.


The fourth stage of the Cardano roadmap is named after the Japanese poet Matsuo Basho, a master of the haiku poetry genre. The main goal of this era is to significantly increase the scalability and interoperability of the network. At this stage, it is expected that the underlying network performance will increase and Cardano will start accepting applications with a high transaction volume.

One of Basho’s key innovations will be sidechains, that is, autonomous blockchains that are operationally compatible with the Cardano mainnet. They can be used to transfer the load from the main blockchain. In addition, sidechains can serve as a suitable testing environment.

At the Basho stage, the implementation of various account models will take place. While the main Cardano blockchain will continue to use the UTXO model, it will be possible to transition between UTXO and different account models. As a result, interoperability will increase and new use cases will emerge.


The fifth and final era of Cardano is named after the 18th century French Enlightenment philosopher Voltaire (Francois-Marie Arouet). This stage includes the implementation of decentralized on-chain governance (i.e. direct democracy, with which the Enlightenment and Voltaire are associated) and a treasury system.

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