First, there was Bitcoin. Then, there was Ethereum, and then, the Cardano foundation gave us ADA (Cardano). That is a very brief version of the evolution of blockchains. Of course, there’s a bit more to it than just that, and this article will answer the question of what ADA is, how it works, and what it is used for.
What is ADA? Crypto 3.0
Bitcoin is seen as the first generation of blockchains. It has a very limited use case, and its functionality is limited to peer-to-peer payments in a trustless and secure manner. Ethereum improved upon that by introducing smart contracts and enabling blockchains to be the foundation for more complex applications, as seen in decentralised finance.
Cardano goes a step further and improves upon the limitations of Ethereum by providing a highly scalable blockchain that can be used on a global scale. It was founded in 2015 by Charles Hoskinson, one of the early Ethereum developers. ADA is the native token of the Cardano blockchain that is used for transactions, smart contracts, and to secure the network.
How does ADA crypto work?
Cardano has developed a proprietary proof-of-stake consensus mechanism that is designed to improve the speed and scalability of the Cardano blockchain to up to one million transactions per second after development is complete. It plans to achieve this feat by using a two-tiered structure for its transactions: a computational and a settlement layer. The computational layer will host all smart contracts, while the settlement layer will record the receipts of these transactions.
What is ADA crypto used for?
ADA is Cardano’s native token and functions as the internal currency on the Cardano blockchain. ADA coin holders can delegate their stake to pools that are randomly selected to validate transactions. One of these pools can handle 1,000 transactions per second, which would yield the targeted one million transactions if 1,000 pools are running simultaneously. Holders are rewarded for delegating their coins to these pools by receiving interest on them.
Cardano underscores how its proof-of-stake consensus mechanism has been scientifically reviewed in over 90 papers. This scientific approach has been a cornerstone of Cardano’s development process and is why many people have high hopes for it.
Is it worth buying ADA in 2021?
The ADA cryptocurrency has seen excellent growth in 2021 by almost 10X’ing it’s valuation as of August. The project is tipped to be one of the few serious challengers to Ethereum’s dominant position as the de facto leader for smart contracts and decentralised applications
However, Cardano has to this day not deployed smart contracts on its blockchain after being in development for over five years. Many analysts believe the agonisingly slow development process and lack of actual functionality will eventually doom Cardano, but so far, the market disagrees. Cardano is scheduled to deploy smart contracts in fall 2021 for the first time ever. If the project sticks to its schedule, this will likely lead to more price appreciation. Therefore, the price of ADA may very well increase beyond the all-time high of $2 it set in spring 2021.
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