5 min readThe beginnings of Cardano
Cardano is a public blockchain designed to improve on the limitations of earlier networks by combining academic research, peer‑reviewed design and a two‑layer architecture. It started as a research project in 2015 under the lead of BitShares and Ethereum co‑founder Charles Hoskinson and was developed by Input Output Global (IOG) with support from the Cardano Foundation and Emurgo. It launched two years later in September 2017, introducing the native cryptocurrency ADA and a proof‑of‑stake (PoS) consensus protocol called Ouroboros.
Cardano aims to address the scalability and sustainability challenges faced by earlier blockchains. Its roadmap envisions a blockchain that is decentralised, secure and self‑sustaining, with on‑chain governance.
Key technical features
Unlike Bitcoin’s proof‑of‑work and Ethereum’s initial proof‑of‑work (before its 2022 merge to PoS), Cardano launched directly as a PoS chain. Cardano’s Ouroboros PoS protocol allows stakeholders to delegate ADA to staking pools to validate transactions, reducing energy consumption relative to proof‑of‑work networks. It also should be mentioned that unlike Ethereum and similarly to Bitcoin, Cardano uses an Unspent Transaction Output (UTXO) model, enhanced to allow more scalability. The system is designed to be flexible; the settlement layer records ADA transactions while the computation layer supports smart contracts and decentralised apps. This separation enables upgrades to one layer without disrupting the other. The network is written in Haskell and uses Plutus and Marlowe languages for smart contracts and financial logic.
The network introduced native tokens without requiring smart contracts, enabling users to issue and transact tokens as first‑class citizens. It also supports multi‑asset transactions within a single transfer. On‑chain governance lets ADA holders propose and vote on protocol upgrades and project funding, paving the way for a self‑sustaining treasury. Upcoming upgrades include improved privacy features.
Network performance
Its dual‑layer design is supposed to allow for faster transactions and multi‑asset functionality; however, actual throughput is moderate relative to high‑performance chains. In order to enhance its performance, Cardano introduced Hydra, a layer‑2 scalability solution funded by the community treasury. Hydra creates “heads” that process transactions off‑chain and settle results on the main chain, in order to deliver low‑latency and high‑throughput transactions. However, this secondary network has not reached its full potential yet.
Fees are generally low and deterministic because gas prices are denominated in ADA. Cardano’s uptime has remained high due to its decentralised pool of validators, and the network has avoided major outages since launch.
What is ADA For?
ADA is the native cryptocurrency of Cardano, it has a fixed supply of 45 billion ADA and a deterministic monetary policy, and serves multiple roles on Cardano’s network.
Transaction fees: users pay fees in ADA to process transactions and execute smart contracts. Unlike other chains, fees are not burned but are partially distributed to stake pool operators and delegators.
Staking: ADA holders can delegate their tokens to stake pools or operate pools themselves to secure the network and earn rewards. Staking allows participants to contribute to consensus without running full nodes. The Shelley era introduced staking, enabling greater decentralisation.
Governance: ADA holders vote on protocol upgrades, funding proposals and parameter changes. Voting power is proportional to staked ADA, aligning incentives between governance and security.
Utility within dApps: ADA is used as collateral and gas in decentralised finance (DeFi) protocols and non‑fungible token (NFT) marketplaces.
Ecosystem and use cases
Cardano supports a growing decentralised application ecosystem. DeFi platforms such as Liqwid Finance and Minswap host lending and automated market making. NFT marketplaces like JPG Store and NMKR Minting enable digital collectibles, while gaming projects (Doom) demonstrate Hydra’s potential. Overall, Cardano is still positioned within a niche segment and shows little interaction with other networks. One clear sign of this is the absence of native major stablecoins such as Tether’s USDT, Circle’s USDC, and Ethena’s USDe on the platform.
To reduce this isolation, Cardano is building cross‑chain bridges and sidechains. IOG’s Hydra and an EVM‑compatible sidechain toolkit aim to connect Cardano with Ethereum and other networks.
On top of these projects, in May 2025, developers from the BitcoinOS project successfully demonstrated a “bridgeless” transfer of Bitcoin to Cardano and back. The demo locked 1 BTC on the Bitcoin chain, minted a programmable xBTC token with cryptographic proof of the underlying Bitcoin, sent it to a Cardano wallet via the Sundial protocol, and then burned and unwrapped it back into BTC on the Bitcoin network. The approach uses zero‑knowledge proofs instead of custodial bridges, reducing cross‑chain security risks. This experiment hints at how Cardano could bring Bitcoin liquidity and functionality into its DeFi ecosystem.
Pros and Cons
Pros
Cardano’s PoS consensus consumes far less energy than proof‑of‑work systems and rewards holders who stake ADA, aligning incentives with network security. The project emphasises formal verification, peer‑reviewed research and incremental upgrades, reducing the risk of critical bugs. The dual‑layer design allows independent evolution of the settlement and computation layers.Despite modest scale, Cardano’s DeFi and NFT sectors are growing, with increasing TV
Cons
Cardano’s base layer processes fewer transactions per second than some rival Layer‑1s. While Hydra aims to improve performance, the solution is still under development and adoption remains low.The project’s reliance on rigorous peer review can slow feature deployment, leading to delays compared with more agile competitors.Cardano’s dApp ecosystem is smaller than those of Ethereum or Solana, making it more vulnerable to liquidity shocks.
Strategic considerations
From an investment perspective, ADA sits within the top‑ten cryptocurrencies by market capitalisation and offers exposure to a network that prioritises security and sustainability. It may complement holdings in Bitcoin (store of value) and Ethereum (dominant smart‑contract platform) by providing a PoS network with a distinct design. However, investors should weigh the slower pace of development, competition from faster chains and the relative immaturity of the Cardano ecosystem. Diversification across multiple networks can mitigate risks. ADA’s fixed supply, staking rewards and governance rights may appeal to long‑term holders, but near‑term performance will depend on the successful deployment of Hydra and the adoption of DeFi applications.
