Cardano (ADA) definition: A layer 1, proof of stake, blockchain network known for its focus on sustainability, efficiency, scalability, and academic research.

Cardano is a third-generation blockchain platform that focuses on research-driven development and the application of peer-reviewed academic research to its technology. It was founded by Charles Hoskinson in 2015, one of the co-founders of Ethereum, and its development is guided by the company IOHK (Input Output Hong Kong). Cardano aims to provide a secure and scalable infrastructure for smart contracts, dApps, and the transfer of value.

Cardano stands out for its scientific approach to developing blockchain technology. It aims to create a more sustainable and inclusive ecosystem for cryptocurrencies and decentralized applications (dApps). Through its innovative research-driven methodology, Cardano seeks to address the limitations of existing blockchain networks, such as scalability, interoperability, and sustainability.

Cardano's unique approach involves a multi-layer architecture, comprising two main layers: the Cardano Settlement Layer (CSL) and the Cardano Computation Layer (CCL). The CSL handles value transactions and serves as the foundation for Cardano's cryptocurrency, ADA. The CCL is responsible for smart contracts and executing dApps. This separation enhances security and allows for updates to be made without compromising the core blockchain.

Cardano employs a novel proof-of-stake (PoS) consensus algorithm called Ouroboros. This algorithm ensures that validators (stakeholders) are chosen to validate transactions based on the amount of ADA they hold and are willing to "stake" as collateral. Ouroboros enhances energy efficiency compared to the energy-intensive proof-of-work (PoW) mechanism used by networks like Bitcoin.

Cardano places a strong emphasis on interoperability, aiming to enable seamless communication between different blockchains. This approach recognizes that various blockchains have different strengths and purposes, and enabling them to work together can enhance the overall blockchain ecosystem.

Cardano's design and capabilities make it suitable for various use cases beyond simple transactions. Its support for smart contracts and dApps opens doors to decentralized finance (DeFi), supply chain management, identity verification, and more.

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Michelle Legge
By Michelle LeggeHead of Crypto Tax Education
Updated Nov 9, 2023
This article has been fact checked and reviewed as per our editorial policy.