What is Cardano – the full guide to ADA
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Cardano and its ADA currency has been one of the more interesting cryptocurrencies to emerge. But exactly what is Cardano?
In this guide, we’ll explain step by step what this new crypto is about. Plus explain how you can invest in Cardano for yourself.
Let’s get started.
What is Cardano
Cardano is both a cryptocurrency and a new smart contract platform. It uses its ADA crypto coins to operate its smart contracts. This is a bit like how Ethereum uses Ether to run smart contracts on Ethereum.
In one way Cardano is similar to Ethereum, which also runs smart contracts on its platform. Even if Cardano offers more security thanks to its layered structure platform.
Secondly Cardano can also be compared to Bitcoin, because the platform can also be used to make and settle payments. With the platform combining cryptocurrency and smart contract functions, Cardano has bought a fresh idea to the crypto market.
Cardano has been invented by Charles Hoskinson in 2015, (who co-founded Ethereum), and the company IOHK. It was finally launched a few years ago in 2017.
While Ethereum is a second generation cryptocurrency and has its limits, Cardano was created with the aim to improve the Ethereum concept. This is why it has been considered an ideal form of a smart contract platform.
The company’s main aim is to create a smart contract and crypto platform that is both sustainable, scalable and interoperable.
How Does Cardano Work
So now you know that Cardano is both a cryptocurrency and a smart contract platform, but how does Cardano work exactly?
The first thing to know is that there are 3 different companies working on the Cardano development:
- The Cardano Foundation
IOHK is the company founded by Charles Hoskinson with the aim to develop Cardano’s blockchain technology.
Emurgo is a Japanese company which is responsible for finding investors for the project as well as overseeing the adoption of Cardano. These 3 companies make sure that the development of Cardano is not limited to 1 company alone, unlike other cryptocurrencies.
Okay, so how does Cardano work exactly?
As mentioned previously, Cardano is a smart contract platform as well as a cryptocurrency. This means that you can exchange cryptocurrencies (i.e. Bitcoin) with another person. Of course certain conditions need to be met.
For example: you give 10 Bitcoins to Mr. Green, but for the deal to be finalised, Mr. Green has to meet some conditions first (smart contract)
A traditional smart contract has some limits though:
Cardano’s goal is to have a smart contract without any of the three limitations. What do these limits mean though?
1- Cardano’s elements: Scalability
Scalability is a very difficult concept, but we will try to keep it as simple as possible. What makes Cardano unique is its layered structure.
This structure is crucial to what makes Cardano scalable.
The transactions happening on its platform, are secured by different controls operating across different layers. This means that information is not shared from one layer to another.
To picture the concept, try to imagine a rope which is then split into 3 different string parts.
When a transaction moves from the end of the first string part and enters into the second part, the information gathered in the first part will remain there. Whilst in the second part, the transaction will be processed under a new system.
This is a new concept because Ethereum’s security controls are made from one single phase, so only 1 string – not divided.
2- Cardano’s elements: Interoperability
One of the biggest topics related to blockchain last year was compliance, and how to deal with topics outside of the blockchain.
For instance, when a transaction is made, it’s difficult to know who made the transaction. This is due to the privacy and decentralized concept behind cryptos. It’s also very hard to communicate between systems which speak a different language (codes).
There’s also still the problem of communication between real entities (such as banks) and virtual entities (crypto platforms).
Cardano is aiming to solve this issue and become the platform where every crypto entity can easily communicate with each other. This includes communication with external entities too.
3- Cardano’s elements: Sustainability
There are many questions about what is Cardano’s future? Some people have questioned how long is it going to be financed for? This is where the topic of sustainability comes into play.
Cardano is financed in 2 different ways:
- by a number of different investors buying Tokens
- by patronage (one single investor owning all the Tokens and financing the whole project)
With both of these situations there are some issues. With patronage the problem is that everything is owned by one person. This could lead to a centralized system and privacy topics.
And the problem with many investors buying tokens is that there isn’t a real sustainable, long-term model.
To find a solution to this, Cardano’s founders introduced a new system called liquid democracy.
What is a liquid democracy?
Liquid democracy allows people to vote in order to approve the ownership of a block part of the chain.
For instance, when a block is added to the chain, part of it will be added to the treasury and it’ll be eventually owned by a person.
This person can ask to buy it and the request will be granted or not by a liquid democracy vote.
In this way it is possible to keep the concept of decentralization, ensuring that there are different owners of the blocks whilst keeping a limited number of them.
It’s possible to buy some ADA crypto coins from many cryptocurrency exchanges. It’s also possible to speculate on the price of Cardano by trading on it, this can be done with an online trading account. But more on that later!
First you should know the general price history of Cardano. However, because it was only launched in 2017, there have only been 2 years of trading history. This means there is not too much financial data to analyse.
When it first launched in 2017, the price grew steadily to reach a high of $1.15 in early January 2018. Cardano’s market cap also grew to $18 billion only four months after launching.
Then for the rest of 2018, the ADA price was affected by volatility when the whole crypto market took a bear turn.
Prices naturally dipped, but for 2019 the ADA price has remained quite steady and not dropped any further.
Generally the experts’ opinion of Cardano is that it’s probably better for a long-term investment. With a strong team behind the project and investors keen to use their blockchain technology, the Cardano price is likely to see a boost in the next 2 to 3 years.
So if you should buy some ADA coins, it’s probably worth holding on to them for a while to see a return from the investment.
Currently the value of 1 ADA coin, (as of August 2019) is worth $0,051. This is an incredibly low purchase price especially if you’re looking for an affordable crypto to hold on for the long-term.
One last thing to mention is that like all cryptocurrencies, there is a set coin limit for Cardano. Currently there is a circulation supply limit of 45 billion ADA coins.
Why Invest in Cardano
Another point you should consider before investing, is that compared to the other cryptocurrencies like Ethereum and Bitcoin, Cardano is still under the radar for a lot of people.
This provides a good investment opportunity, as normally the less well-known coins will have a lower purchase price. This could be important if you are looking to invest in the crypto market without spending too much.
The fact that one of the Ethereum co-founders created Cardano also has given credibility to the project. Credibility is an important factor you should consider as it can help you judge whether a company is worth investing in for the future or not.
In Cardano’s case, the fact that they have ongoing development and partnerships is a great sign. Last year, the Ethiopian Government signed a business agreement (MOU) with Cardano to help apply the blockchain technology to Ethiopia’s agricultural industry.
Although the partnership progress is still in the early stages, it is happening, and it is likely to increase as Cardano develops in the future. All healthy signs that the company is likely to grow and have a positive effect on any investment.
How To Buy Cardano
It’s up to you though to decide whether you want to buy ADA coins outright, or if you want to trade and speculated on the Cardano price. It is important though that you remember the difference between the two.
For example, if you want to trade Cardano then you’ll need an account with an online broker that offers CFDs trading. CFD stands for contract for difference, and they replicate the actions of other financial products like cryptos or commodities.
So a Cardano CFD will mimic the performance of the real Cardano price. You make a trading decision based on what you think will happen to the price.
That’s why when you trade you don’t actually own the Cardano crypto, instead you are just speculating on its trading price. You open a position based on whether you believe the price of Cardano will increase or go down.
For example, if you think the Cardano price will go up then you set your trade action to ‘buy‘. It’s the same situation if you think the price will drop, you just choose to ‘sell‘ rather than to buy.
If your trading decision is correct to the market change, then you’ll make a profit.
Trading vs Buying
This is why sometimes trading Cardano can be preferable to only buying it, because you can potentially make a profit even if the Cardano price goes down.
If you wish to only buy Cardano’s ADA coin, then you’ll need a crypto exchange from where you can make your purchase. You should remember though that you only make a profit if the value of ADA goes up. If the coin price goes down, you will lose money.
Remember, the cryptocurrency market is naturally volatile so it’s worth remembering that before making any investment.
But no matter which exchange you use in the end, the most important thing is to buy a hardware wallet to store your coins when purchased!
This is because if you keep your coins in an online wallet, that’s linked to the exchange, it’s at a greater risk of being hacked. Whereas a hardware wallet keeps your coins secure and requires an offline privacy key for you to enter the wallet.
Some wallet suggestions that support ADA include the official Cardano wallet which is called Daedalus and was developed by the company themselves. If you are interested in ‘staking’ ADA coins, this would be a good wallet to have. Other wallets that work with ADA include the Ledger Nano S and Atomic Wallet.
Now let’s take a look about where you can trade ADA.
Where To Buy Cardano
There are many places where you can invest in Cardano, but as mentioned before you need to think whether you want to buy or trade?
Let’s start with only buying ADA. For this you’ll need a crypto exchange like Binance or Coinmama for example.
Both Coinmama and Binance are crypto exchanges which offer ADA for purchase. The main difference is that Coinmama lets you buy ADA easily with a credit or debit card, whereas for Binance you can’t.
It’s a slightly more complex process where you have to buy Ethereum ETH or Bitcoin BTC first with a credit card, and then convert it to Cardano ADA.
So if you are looking for the more straightforward route Coinmama might be the better choice. The fees are fairly low and the verification process is user-friendly.
Trade Cardano in IQ Option
IQ Option is a popular choice because it offers many cryptos as part of its CFDs crypto assets, including Cardano. It also offers the lowest minimum deposit on the market of just $10!
They are also a fully regulated and licensed broker. Besides their website, they also have a smartphone app available for both Android and iOS devices.
To get started you will need to sign up for a trading account with IQ Option. This includes providing some personal details such as name, email and address. Then for security reasons you’ll need to provide some identification documents to have your account verified.
Once these steps are done you need to deposit your account. The minimum deposit is only $10, so you are free to decide how much you want to spend. It’s possible to add the money by credit/debit card or via WebMoney.
Then you are ready to trade and invest in Cardano! Simply search for Cardano / ADA in the asset selection and when the Cardano page shows you’ll be able to see the recent price performance and stock charts.
To the left-hand side of the page you’ll see the green ‘buy’ and the red ‘sell’ buttons. Decide which trading action you would like to do and click on the button.
This will open the trading window where you can confirm the order and setup the trade including short selling options.
Anytime you wish to close the trade you can do so manually via your account. Remember there is no need to have a hardware wallet here, because you are only trading on the Cardano price and not buying.
Trade Cardano in eToro
If you’re looking to learn from other traders in the crypto world, then eToro may be a good choice for you. This is because they are famous for offering social news feeds and the option to interact with other users.
They’re well-known for their CopyTrader feature which lets you automatically copy the other trades of successful traders.
eToro, which is a fully regulated online broker has a large selection of cryptocurrencies available to trade. Besides Cardano there is also Bitcoin, Ethereum, NEO, Ripple and many others. All can be traded as CFD instruments. Like IQ Option they also offer a mobile trading app as well as the website.
To get started you will need to create a trading account with eToro. This is a very quick process and simple to do. Once your account has been created you will need to have your account verified.
This is needed as a security measure to prevent fraud, you will need to upload some identification documents with your proof of identity and address on.
To start trading you’ll need to deposit your account, which you can do so via credit/debit card, bank transfer and PayPal. When the funds are showing in your account you are ready to trade.
Making the trade
Start by searching for Cardano or ADA in the search bar near the top of the trading page. The Cardano trading page will then appear and from here you’ll be able to see the latest prices as well as the newsfeed. To start trading click on the ‘Trade‘ button.
In the trading window you’ll be able to set up the amount you wish to trade as well the stop limit and loss features. Then based on your decision click on ‘sell’ or ‘buy’ to confirm and open the trade. You can manually stop and close the trade anytime via your account.
Investing in Cardano
When it comes to any investment either by making a trade or buying, you should be clear about the product you are investing in. So we hope that this guide has explained a bit more about what ADA and Cardano is about.
However, you should have in mind exactly how much you want to spend and how much you can afford to risk.
It’s also worth considering if you want to make a long-term or short-term investment. Especially in the case of buying Cardano, it may be worth holding onto the coins for a longer period to possibly make a return on your investment. But like any investment, the Cardano value may decrease as well as go up, that is the risk you take.
Generally a long-term period is classed as a time period of over a year, and a short-term investment is anything from 1 month to a year. By putting together a brief investment plan you can have a clear overview of everything.
If you’re looking to trade more often, understanding the crypto market will help you get the most out of your trades. To do this all brokers offer charts and statistics which you can analyse. By studying the market indicators you can see the recent patterns in the market and how this has affected the Cardano price.
Can you mine Cardano? That is the question. Well technically the answer is no. This is because mining doesn’t fit Cardano’s ‘proof of work’ pact. However, it’s possible for Cardano to be staked.
This means that you keep your Cardano wallet online, (a bit like a proof of purchase), and in return you can receive a set percentage of the ADA coins you already bought. The ‘Proof of Stake’ system manages this method, as the system just confirms transactions from already owned ADA coins.
So there is no need to have any mining software or hardware at all. You just need to make sure that your wallet is kept online and the process is complete. The income allocation is done automatically.
It’s up to you how many Cardano coins you buy and stake. The more you own the more you’ll receive back.
Please note that this staked option is only open to people who have bought ADA. If you’re only trading Cardano then this option is not available to you.
To learn more about other crypto click here.