ADA is the token that powers the Cardano network. Named after Ada Lovelace, an English mathematician and early contributor to the field of computing ADA can be staked to support the network and earn passive rewards or used for transaction fees and governance voting.
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A brief history
Cardano is a blockchain founded on peer-reviewed research by Charles Hoskinson, a co-founder of the Ethereum project. He began developing Cardano in 2015, launching the platform and the ADA token in 2017. Positioned as an alternative to Ethereum, Cardano aims to offer greater security, scalability, and energy efficiency than its peers. Currently, Cardano has released three products: Atala PRISM, Atala SCAN, and Atala Trace. The first product is marketed as an identity management tool that can be used to provide access to services, while the other two products are being used to trace a product’s journey through a supply chain. Additionally, Cardano utilizes Ouroboros, an algorithm that uses proof-of-stake (PoS) protocol to mine blocks. The protocol is designed to reduce energy expenditure during the block production process to a minimum by eliminating the need for massive computing resources that are more central to the functioning of the proof-of-work (PoW) protocol. In Cardano’s PoS system, staking determines a node’s capability to create blocks, and a node’s “stake” is equal to the amount of ADA held by it over the long term.
ADA in practice
The staking process on Ouroboros goes as follows: First, physical time is divided into epochs (five-day periods) that are made up of slots, which are fixed periods of time. Each slot then selects a leader through a “lottery” system, where the higher the stake, the better the chances of winning the lottery. Slot leaders are responsible for the following tasks: validating transactions; creating transaction blocks, and adding newly-created blocks to the Cardano blockchains. The protocol also requires a small number of ADA holders to be online and maintain good network connectivity. To further cut down on energy consumption, Cardano uses stake pools in which ADA holders organize themselves and elect a few to represent the pool during protocol execution. Doing so makes it easy to participate and ensures block creation even if some of them are offline. In return for staking ADA, users are rewarded in ADA (rewards can be estimated using the Cardano staking calculator). Additionally, ADA is used in voting, meaning everyone who owns the cryptocurrency has a say in Cardano’s development.