The price of Cardano’s cryptocurrency, ADA, has surged aggressively since late 2020. Given the current Bitcoin rally, which has breathed life into the altcoin market, Cardano is making a name for itself.
This guide will take a closer look at the Cardano project, why its cryptocurrency ADA is getting attention, and how you can stake ADA to earn passive crypto investment income.
What is Cardano?
Cardano is a public, open-source blockchain that allows users to build decentralized protocols and run smart contracts. Cardano was developed by a team of developers led by Charles Hoskinson, who co-founded Ethereum.
In contrast to many blockchains, Cardano did not begin with a whitepaper. Instead, it was the first blockchain to be peer-reviewed and developed through evidence-based methods by a team of academic experts.
In its own words, Cardano describes itself as “a blockchain platform for changemakers, innovators, and visionaries, with the tools and technologies required to create the possibility for the many, as well as the few, and bring about positive global change.”
The Switzerland-based Cardano Foundation oversees the development of Cardano.
Why is Cardano Gaining in Popularity?
Cardano comprises features that help it improve upon its peers’ shortcomings. The project’s approach has been to adopt unique design principles, engineering best practices, and create channels for continued exploration to achieve its objectives.
This philosophy has seen Cardano move up the ranks to challenge Ethereum for global prominence in the smart-contract platform space. While Ethereum is still the go-to chain for smart contract-powered decentralized applications, the protocol has run into scaling challenges – such as high gas fees and slow transaction speeds. Ethereumis attempting to address this issue with improvement proposal EIP-1559 set to be implemented in July 2021 as part of their London hard fork, but Cardano is far ahead in the scalability department.
In a sense, Cardano was created to address the scalability problem and enhance interoperability and sustainability, which are issues that plague second-generation blockchains like Ethereum.
Cardano uses a proof of stake (PoS) consensus algorithm to generate new blocks and confirm new transactions. The (Ouroboros) proof-to-stake protocol consumes less energy compared to proof-of-work protocols – like Bitcoin and Ethereum – and helps to reduce transaction fees.
The Cardano blockchain is graded into two layers, the Cardano Settlement Layer (CSL) and the Cardano Computational Layer (CCL), which separates Cardano from the smart contract layer. This two-tier blockchain infrastructure ensures high transaction speeds and greater data storage flexibility.
The CSL layer built on top of the proof-of-stake layer facilitates peer-to-peer transactions such as transfer of ADA between users. Conversely, the CCL layer powers the computational requirements of the blockchain, allowing the execution of smart contracts.
In addition to fast transaction speeds, the proof-of-stake model offers advanced features, including mathematical security in choosing blockchain validators, a secure voting process for ADA holders, and a scalable consensus mechanism.
Aside from Cardano’s superior features, there is no denying the recent performance of ADA has placed the protocol on the radar of many crypto investors. As of February 2021, ADA’s price surged 2,000% over the past year. Interestingly, the month of February alone accounted for 300% of the rise.
Echoing other altcoins, ADA breached the $1 mark in early February 2021 before peaking at $1.48 on February 27. Although it pulled back from this level, at the time of writing, it has consolidated its price at above the $1.40 mark.
Cardano (ADA) is currently the 6th largest crypto network in market capitalization and is valued at over $40 billion.
Where to Buy Cardano
ADA has been experiencing a lot of buyer interest as a result of its rising usefulness in the rapidly growing smart-contract marketplace. If you are looking to add Cardano to your crypto portfolio here are a handful of exchanges that allow you to purchase Cardano (ADA) using a bank transfer, credit card, or bitcoin.
Furthermore, you can also access ADA trading pairs on exchanges such as Bitfinex, Huobi Global, KuCoin, and Bittrex.
Cardano Staking: How to Stake Cardano (ADA)
Cardano uses a unique staking model designed to achieve true decentralization, something major crypto networks have largely failed to achieve.
Staking involves purchasing ADA and then “staking” or locking it in a crypto wallet or exchange to earn “interest”, called rewards, in the form of additional ADA, for helping to secure the Cardano network.
There are two ways in which a Cardano holder can earn rewards:
- Delegate their stake to a staking pool run by another operator
- Run a private staking pool
Staking pools can either be public or private. A public stake pool represents a Cardano network node with a public address that allows other users to delegate and receive rewards. Conversely, private staking pools only pay rewards to their owners.
ADA holders who wish to participate in the protocol and receive rewards can delegate to public staking pools. Stake pools can be run by individuals or enterprises with the technical know-how and resources to run a node on a consistent basis.
The amount of stake delegated to a given stake pool is the main way the Ouroboros algorithm determines who should add the next block to the network and receive a monetary reward for the effort.
The more stake is delegated to a staking pool, the higher the probability of making the next block. The rewards earned are distributed between the users who delegated their stake to that stake pool.
In order to delegate ADA with a stake pool, the user needs to have a Cardano wallet. The Cardano blockchain offers full Shelley functionality and integrates transaction metadata to allow a new era of utility. Therefore, ADA holders need a Cardano wallet that is compatible with the Shelley protocol.
Wallets for Cardano staking include:
To learn how much you can potentially earn from staking your ADA, click here.
The staking process is similar across all the ADA wallets that support staking pool delegation, though the procedure may vary from one set up to the next.
The procedure for staking on an app like Daedulus is as follows:
- Open the app and navigate to the Rewards and Delegation section of the wallet.
- Select the Delegation center to view a list of your wallets and their delegation status.
- The user will select a wallet he/she would like to delegate and click on the ‘delegate’ command for that wallet.
- The user will be directed to select your stake pool. Information on a pool’s performance metrics, fees, etc., can be accessed by clicking on its ticker.
- Select and click on the pool you want to delegate.
- Provide the spending password to approve the pool delegation as well as the nominal fee required.
- There is a provision for redelegating your stake to another pool at any time, though changes will not be reflected until the time period completes.
ADA holders can also join a Cardano staking pool from select cryptocurrency exchanges, such as Binance. Exchange staking is an easy way to earn staking rewards without having to deal with the technical aspect of staking crypto on your own.
The Bottom Line
Cardano has positioned itself as a potentially promising alternative to the currently overloaded Ethereum network. While it does not post anywhere near the developer community and users as its pioneering predecessor, it solves many of the issues second-generation blockchains are facing.
This article’s information is for informational and educational purposes only and should not be construed as investment, financial, legal, or other advice. Investing in cryptocurrencies and tokens is highly speculative, and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.