Cardano (ADA)

Cardano

Type	Smart Contract Platform
Consensus mechanism	Proof-of-Stake
Total supply	Total Supply: 31,112,483,745 ADA Max Supply: 45,000,000,000 ADA
Website	https://www.cardano.org/en/home/

Cardano is a UTXO based PoS blockchain

Basics

• Based in: Hong Kong
• Started in: 2015
• Cardano and the ADA token launched in September 2017 after a multi-stage ICO.
• Smart contract platform created "by scientists". Smart contracts went live in 9-2021.
• The team has published a set of other papers, one for a scalable and decentralized randomness algorithm, one for an efficient and decentralized poker protocol, and one for secure sidechains.

History

• "The name “Cardano” comes from an Italian physician and mathematician born in the year 1501 called Girolamo Cardano, who invented, amongst other things, the combination lock, the solution of the cubic equation, the solution of the quartic equation and also the first systematic computation of probabilities."

• Created by IOHK (Input Output Hong Kong) “Founded in 2015 by Charles Hoskinson and Jeremy Wood, IOHK is a decentralized technology company committed to using peer-to-peer innovations to provide financial services to the three billion people who don’t have them. We are an engineering company that builds cryptocurrencies and blockchains for academic institutions, government entities and corporations.”. In October, 2017, Hoskinson stated that IOHK had nearly 100 employees and contractors, three research engineers, and operate in nearly ten countries.

Audits & Exploits

• Bug bounty program can be found [insert here].
• From DeFi Safety (5-7-2022):

"Cardano has yet to experience unplanned downtime. Holding up as a top 10 market cap platform, the chain has been stable and delivered on sustained runtime. The organisation boasts itself on testing, and we would love to see more of it documented publicly. Looking at the node software, the test repository and the node repository display acceptable test-to-code ratio, but there is room for improvement. Additionally, code coverage in Haskell is not publicly documented. While some coverage in JavaScript and old Rust code coverage could be found, the current node software is written in Haskell and therefore, we cannot confirm how extensive the software testing is.

While Cardano’s resilience has been proven for years, 2 software implementations (Jorgmundr and cardano-node) are good but we recommend adding more for added security. The node software discussion is always incredibly detailed with each release being discussed for well over 100 days. Bug bounty security is a healthy indicator of security and Cardano’s 10 000$ bounty is not a good outlook of that health. Looking at security practices, we would love to see more auditing work; being audited by a single entity (Root9B) allows for auditing holes that could be mitigated by having multiple audits from different entities."

• Has been audited by Quantstamp (3-8-2020):

“It’s clear they’ve put a lot of internal effort to solidly test and properly engineer the code and it’s really shown through the smooth launch. We also recently audited prysm from eth 2.0 and we would say that in terms of quality, similar to prysm, it is one of the best codebases we have seen.”

• From The Block (24-4-2020):

"The release of Daedalus follows the ubiquitous rollout of the Byron reboot of Cardano's blockchain. A recent third-party security audit commissioned by IOHK revealed 11 potential vulnerabilities in the blockchain. Having resolved the exploits, IOHK chose to publish them in the name of transparency."

• From Bitcoin.com (18-2-2022):

"Starting from February 14, hackers and bounty hunters that identify critical vulnerabilities in the Cardano Node will be paid a maximum of $20,000."

Bug/Exploits

• From a commissioned Messari report (18-4-2023):

"In January, a bug caused ~50% of nodes to go offline for around two minutes of elapsed time due to an internal memory structure issue. The network did not miss any blocks or need to restart, and the bug was swiftly resolved in node version 1.35.5 with the support of the Cardano developer community. There were other negative side effects of the degraded network performance, such as a double-mint occurring on Cardano naming and routing protocol ADA Handle."

• From a commissioned Messari report (27-12-2022):

"Since its launch over five years ago, Cardano has never skipped a block or had to reboot. There have also been no network shutdowns during upgrades."

Governance

• From a commissioned Messari report (11-2023):

"SanchoNet is a testnet for onchain governance, and Intersect is a Cardano member-based organization."

• From this article (28-12-2017):

"Cardano intends to provide on-chain mechanisms for making decisions about the future of the protocol. Cardano plans to implement this by creating a constitution that lays out in detail the mechanism for agreeing on protocol updates and a program for creating and voting on Cardano Improvement Proposals in a transparent and censorship-free way.

Cardano hopes to realize a long-term vision of expressing Cardano Improvement Proposals in terms of machine understandable specifications that can be tested and verified using software tools. A less ambitious governance process, which is slated to arrive with the Shelley release of the platform, starts out with IOHK making all improvement proposals and evolves to provide “an increasingly better mechanism for gaining consent for them.”

DAO

• ADA token holders now (2-9-2024) have the power to elect representatives and vote on key development proposals. As Cardano executed the 'Chang' hard fork at block 10,764,778, entering the “Voltaire Era” and introducing on-chain governance using its native token ADA.
• From this article (28-12-2017):

"Cardano’s long-term governance vision includes “the creation of a modular regulation DAO that can be customized to interact with user written smart contracts in order to add mutability, consumer protection and arbitration”, however their greatest and most immediate advantage may come from eradicating the need for bail outs in the first place."

Treasury

• From a commissioned Messari report (8-2023):

"ADA is being used to reward voters and fund projects in Project Catalyst, Cardano’s decentralized innovation engine that uses a novel governance process to fund ecosystem projects via the Cardano Treasury. Cardano’s Treasury balance grew 8.5% to 1.30 billion ADA during Q2. The 100 million ADA increase is generally in line with growth from previous quarters. Due to ADA price depreciation, the treasury’s value in USD terms decreased 20.7% QoQ from $452 million to $358 million."

• From a commissioned Messari report (18-4-2023):

"Cardano’s treasury balance grew to 1.21 billion ADA during Q1. The 100 million ADA increase is generally in line with growth from previous quarters. The value in ADA terms increased 9.1% QoQ, but the value in USD terms increased 66% from $278 million to $460 million."

• From a commissioned Messari report (17-3-2023):

"The treasury holds over 1.1 billion ADA ($290 million as of December 31)."

• From a commissioned Messari report (27-12-2022):

"A fixed 20% of transaction fees goes into the treasury rather than being fully distributed to stakers."

• From this article (28-12-2017):

"The idea, which is not new, is to create a treasury system, funded by transaction fees, to support future development. Stakeholders decide how to spend treasury funds by voting on proposed projects (i.e. Cardano Improvement Proposals)."

Token

ICO

• Cardano’s ICO took place in 4 stages between September 2015 - January 2017 with heavy Know Your Customer (KYC) requirements. It was marketed as an “investment to retire on” to primarily Japanese investors; in fact, 95% of the buyers were of Japanese origin, primarily in the 35-55 age bracket. 2.56% of buyers were Korean, and 2.39% were Chinese. The ICO oversaw a total sale of approximately 26,000,000,000 of the 45,000,000,000 maximum supply of ADA tokens. At the conclusion of the ICO a total of approximately $63 million USD was raised; this puts the price at an average of $0.00242 per ADA, and the market capitalization immediately after the ICO at approximately $109 million USD.
• While around 26,000,000,000 ADA was sold in the ICO, an additional 5,185,414,108 ADA were distributed to IOHK, Emurgo, and the Cardano Foundation.
• A total of 31,112,484,646 ADA was made available at Cardano’s launch.

Token allocation

• From a commissioned Messari report (27-12-2022):

"The max supply of ADA is 45 billion. About 31.2 billion ADA were minted during the Genesis Block Distribution with the remaining 13.8 billion ADA to be minted as block rewards. About 35 billion ADA (78%) is currently in supply.

The supply of ADA is inflating by 0.3% of reserves per epoch. There is currently no burn mechanism. At this time, the treasury holds over 1 billion ADA to be used for ecosystem development.

The initial ~31.1 billion ADA tokens were distributed to ICO participants (~83%) and Cardano’s three main entities (~17%).

ICO participants purchased ~25.9 billion ADA token vouchers throughout four tranches between 2015 and 2017 for a value of ~109,000 BTC, or $63 million USD.

About 5.2 billion ADA was distributed to IOHK (now IOG), the Cardano Foundation, and EMURGO, as follows:

1. IOHK: 2.46 billion ADA
2. Cardano Foundation: 648 million ADA
3. EMURGO: 2.07 billion ADA

Utility

• Utility, staking and governance.

Inflation

• According to a Messari report (Q3-2023) it has 2.6% inflation.

Token Details

• The smallest unit of ADA (1/1,000,000 ADA) is called a Lovelace. This is in tribute to the first recognized computer programmer, Ada Lovelace.
• From a commissioned Messari report (27-12-2022):

"On blockchains with account-based transaction models (e.g., EVM chains), the blockchain’s sole native token (e.g., Ether on Ethereum) has different functionalities from all other tokens (fungible and non-fungible).

With Cardano’s multi-asset support, this isn’t the case. All fungible tokens (FTs) and non-fungible tokens (NFTs) are native tokens and share almost all the functionality that ADA has. The main differences are that gas fees are still always paid in ADA and that only native tokens can be created and destroyed.

Tokens on Cardano don't need to be deployed via smart contracts. As such, they are not vulnerable to exploits to the same degree as ERC-20s or ERC-721s and do not require a smart contract execution to be transferred. Because they are not created with heterogeneous smart contracts, dapp developers can integrate all Cardano native tokens in the same way. Additionally, the eUTXO model allows for multiple tokens of different types to be transferred together in a single transaction."

Stablecoin

• From a commissioned Messari report (18-4-2023):

"DJED, by Djed, launched in Q1 2023 and had $1.8 million minted on the first day. Stablecoin growth was led by IUSD and DJED, which had 72% and 27% dominance, respectively. RUSD, despite being the oldest, had less than 1% dominance."

• From a commissioned Messari report (17-3-2023):

"At the Cardano Summit in November, EMURGO announced plans to launch USDA, which is set to be the first USD-backed stablecoin on Cardano. The summit also announced plans for another stablecoin: Djed. Powered by COTI and built by IOG, Djed is algorithmic rather than governed.. Djed stablecoin launched on Jan. 31, 2023). Stablecoins are a glaring hole in the Cardano ecosystem; they have a combined market cap of over $130 billion on all chains combined but only ~$2 million on Cardano as of Q4 2022.

Ardana Labs, which aspired to build the first stablecoin on Cardano before Indigo’s iUSD took the title, halted development of Ardana in November 2022. Ardana claimed its budget issues prevented it from completing this highly anticipated tool, but it is hoping for another team to pick up their open-source code where it left off. cFund, a Cardano ecosystem venture fund, helped the project raise millions in 2021."

• From Decrypt (31-8-2020):

"IOHK partnered with Emrugo to launch an algorithmic stablecoin that will "be significantly better than MakerDAO.""

Coin Distribution

• From Bitcoin.com (23-6-2023):

"Cardano (ADA) currently has 3,577,963 unique addresses holding ADA. Among them, the top 10 wallets hold 9.38% of the supply, while the top 50 ADA wallets command 15.57%. Additionally, the top 100 wallets hold 20.61% of ADA’s supply as of June 22. Notably, none of the top 10 ADA wallets are labeled as exchange platforms, according to coincarp.com metrics."

• From a commissioned Messari report (17-3-2023):

"The top-100 ADA holders hold ~8 billion ADA out of the ~35 billion in circulation, or ~23%."

• From Bitcoin.com (28-1-2022):

"According to stats, there are 325,604 cardano (ADA) holders on January 28, 2022. Intotheblock.com metrics show that ADA’s concentration by large holders data today is 17%. Data shows that the top 10 addresses hold 4.36% of the ADA supply, while the top 20 own 5.86% of the supply. The number one richest ADA wallet currently possesses 1.37% of the ADA supply. 100 ADA holders hold 16.76% of the 34,186,794,009 ADA in circulation today."

• From this post (27-1-2019):

"IOHK has publicly shared its ADA address and that one third of the 2,463,071,701 ADA they received (of which ~97.5% is still there) is available immediately, one third is made available on June 1st, 2018 and the final third on June 1st, 2019. While the Cardano Foundation and Emurgo haven’t publicly shared their ADA address, it is believed that Emurgo originally held 2,074,165,643 ADA in this address and the Cardano Foundation originally held 648,176,763 ADA in this address, as the sum of these amounts adds up exactly to the original total. Finally, the remaining 13,887,515,354 ADA of the 45 billion ADA that will ever exist (maximum supply) will be minted as block rewards."

"On 21–1–2019, Binance is the largest ADA holder, despite only one of its addresses being listed here. The ADA addresses of IOHK and the Cardano Foundation are also labelled and visible in the top-5. Based on the number of transactions, it is likely the #4 and #7 listed addresses are also exchanges. On this day, these top-10 ADA holders hold 30% of Cardano’s current supply. If we zoom out using the next two chart-pies, we see that on 21–1–2019, the top 1.34% of all ADA addresses (although keep in mind that this total includes a large number of ‘dust’ addresses as well) hold 22,434,630,873 ADA, which is 72.1% of the current supply."

• Cardano's UTxO distribution can be viewed here. And the Rich List can be viewed here.

Tech

• Whitepaper can be found here.
• Code can be viewed [insert here].*Consensus mechanism: PoS / DPoS. From a commissioned Messari report (17-3-2023):

"According to Electric Capital’s 2022 developer report, Cardano has 163 monthly full-time developers and 465 total developers, ranking ninth in terms of full-time developers (this report excludes pull requests, forked commits, and other indirect or copied activity). Electric Capital shows a slight ~3% dip in developers and commits over Q4 but a slight gain through 2022 as a whole. Some popular dapps, such as Minswap, are not open-sourced."

• Algorithm: Ouroboros
• Virtual Machine: Plutus
• Has two node implementations; Jorgmudr and cardano-node (5-7-2022).
• Development language used: Built in the Haskell programming language (according to someone in their Telegram chat (14-1-2020), Haskell testnet 'almost live'), which works well for mission-critical code. They are now also working on a Rust project. Update: their Rust was launched 2-10-2018. Plutus, created by IOHK, is a language based on Haskell; it has additional features to support blockchain use cases and smart contracts.
• Has talked about multiple different smart contract languages through the years. One of these was Simon (28-12-2017).
• From the website of Cardano:

"Plutus is a purpose-built development and execution platform using the functional programming language Haskell. Designed to enable the creation of smart contracts on Cardano, Plutus brings the inherent benefits of functional programming – such as reduced ambiguity and easier testing – to smart contracts. During the Goguen era, Plutus will set the stage for smart contracts that are capable of modeling enterprise-level business and finance scenarios. Not only that, but Plutus and Haskell enable the use of the same codebase both on and off-chain, whereas other smart contract implementations often require developers to use two or more different languages, reducing efficiency and increasing the likelihood of costly mistakes."

Transaction Details

• Capacity (TPS): Cardano’s average transaction throughput is 10-15 transactions per second. This is comparable to Ethereum. Charles Hoskinson has claimed that Ouroboros (click for more info) can perform at more than 200 transactions per second in a lab unsharded. Also claims it is much more secure then Ethereum's Casper
• Latency:

How it works

• Consensus Algorithm: Ouroboros. It works with delegated stake pools. "Research continues (9-2019) following the initial paper and Byron era implementation, with new variants of the protocol developed and published gradually."
• From a commissioned Messari report (27-12-2022):

"Ouroboros divides time into epochs of five days and further divides each epoch into 21,600 slots of an average of 20 seconds each. Each node uses a verifiable random function (VRF) to generate a random number. If the VRF number is under a certain threshold, that node gets to be the slot leader and proposes a block. If multiple nodes achieve this, they all produce blocks and the next selected slot leader builds upon the lowest VRF number of the bunch. The threshold depends on the amount of ADA, favoring larger staking pools.

There have been many versions of Ouroboros since it was first developed for the network, and it is still being iterated. Ouroboros Classic was the first version that went live at launch in 2017. Ouroboros Genesis came in 2018 and solved the bootstrap problem analytically.

Ouroboros Praos is the current consensus mechanism in place. In Praos, stake pool operators / validators are aware of which slots they lead ahead of time, but other validators are not. Additionally, no users know in advance how many slot leaders each slot will have. This adds a layer of security as it prevents DDOS attacks on slot leaders. In previous versions of Ouroboros, slot leaders were known publicly ahead of time, and only a single slot leader corresponded to a single slot.

• From this Store of Value blog:

"Ouroboros is a provably secure proof of stake algorithm developed by a team of IOHK scientists led by Prof. Aggelos Kiayias. The algorithm is backed by a peer reviewed paper. According to Charles Hoskinson, the founder of Cardano, Ouroboros’s paper was rewritten 8 times."

The name Ouroboros comes from the name of an ancient symbol depicting a serpent or dragon eating its own tail. The symbol originated in ancient Egyptian iconography. The name is fitting for this algorithm, since Ouroboros operates in epochs.

Each Ouroboros epoch contains a fixed number of slots. Each slot represents a new block. The slot leader is an account staking ADA that is responsible for creating the block. Epochs last for 5 days. Slot leaders for an epoch are chosen during the previous epoch. An account’s chance of being chosen is directly tied to the amount of ADA it’s staking.

An account can only participate in staking if it has at least 1% of the total supply of ADA. For the accounts that don’t meet that criteria, staking pools will exist so everyone is compensated for owning ADA. This high minimum staking requirement gives rise to concerns of centralization. An account can only participate in staking if it has at least 1% of the total supply of ADA. At the current market cap of $13 billion, one needs to have $130 million worth of ADA to participate in staking. If you assume Cardano will be successful, this number will be significantly higher. Who will be able to afford $130 million worth of ADA? Sure there will be staking pools but even staking pools encourage the centralization of wealth. Those participating in the pools will most likely have to pay fees to the pool owner.

This minimum balance requirement also means that at most 100 accounts can participate in staking and because of the power law, it will be much less than 100 accounts that will be staking. There will most certainly be a few entities with exponentially large balances of ADA and the minimum balance requirement will only serve to consolidate their power and control.

Ouroboros will initially provide both newly minted ADA and transaction fees as block rewards. When the total supply of ADA reaches 45,000,000,000 block rewards will consist only of transaction fees.

According to IOHK/Cardano Foundation, Ouroboros is the first provably secure proof of stake algorithm. The team behind Cardano has mathematically proven that the algorithm is safe from all the known proof of stake attack methods including grinding attacks, nothing-at-stake attacks, and long range attacks. This safety and security should be a very powerful enterprise selling point for Cardano.

Ouroboros Praos is an initiative to upgrade Ouroboros. Praos is semi-synchronous, doesn’t require a heavy MPC protocol for randomness and encourages the adoption of a quantum resistant signature scheme for input endorsers and slot leaders. Praos allows for shorter block times.

Ouroboros Hydra is another upgrade to Ouroboros that introduces sharding. Sharding allows multiple Ouroboros epochs to run at the same time which significantly increases Cardano’s throughput. One of the hardest things to figure out for sharding is inter-shard communication.

• From this article (28-12-2017):

"The design of the Cardano Computation Layer (CCL), Cardano’s smart contracts platform, is heavily focused on making it easier to provide guarantees that a smart contract behaves as designed without hidden vulnerabilities. The CCL consists of two layers: a formally specified virtual machine and language framework, and formally specified languages that facilitate automated verification of human readable smart contract code.

The lowest layer, called IELE, provides a virtual machine designed to make building formal verification tools easy, and a universal language framework for translating smart contracts from higher-level languages into executable instructions. Research and development of IELE is funded by IOHK and led by UIUC Professor and founder of Runtime Verification, Grigore Rosu. Rosu and team are applying insights from their research on KEVM, a formal semantics in the K framework for the Ethereum Virtual Machine, and KLLVM, a formal semantics in K for LLVM, to build a more secure and efficient virtual machine.

Unlike the EVM, which is a stack-based machine, IELE will be a register-based machine, like LLVM. IELE will have an unbounded number of registers and will also support unbounded integers. Avoiding the use of a bounded stack and not having to worry about stack or arithmetic overflow will make specification and verification of smart contracts significantly easier. Like Ethereum, IELE will use gas to limit resource usage and prevent DoS attacks. This presents some challenges to formal verification that are considered “tricky but manageable” by the research team. IELE leverages the K framework to simplify the development of automated tools that verify smart contracts match specifications. This allows IELE to support smart contracts written in any programming language that has a formal semantics in K."

Fees

• From a commissioned Messari report (8-2023):

"Each transaction on the network is accompanied by a fee for processing actions and storage costs. Fees are calculated by a minimum payable fee in addition to transaction size."

• From a commissioned Messari report (27-12-2022):

"A fixed 20% of transaction fees goes into the treasury rather than being fully distributed to stakers."

Upgrades

Voltaire

• From a commissioned Messari report (17-3-2023):

"The first Cardano Improvement Proposal (CIP) for the Voltaire era is live, and the Cardano network is now actively moving toward its self-sustainability and governance goals."

Vasil

• Got deployed (23-9-2022).
• From Bitcoin.com (29-8-2022):

"Hoskinson told the public that while “extensive testing” is still being conducted, the Vasil hard fork could take place in mid-September. Cardano’s hard fork was postponed at the end of June. The Vasil hard fork aims to add four Cardano Improvement Proposals (CIPs) into the mix. The CIPs include CIP-31 (Reference Inputs), CIP-32 (Inline Datums), CIP-33 (Reference Scripts), and CIP-40 (Collateral Outputs)."

Alonzo

• From Crypto Briefing (26-3-2021):

"The official roadmap of the upcoming Alonzo upgrade. The new protocol update will come in the form of a hard fork around July or August, bringing smart contracts to the Cardano blockchain." Some noted that this meant more delays, since Q2 had been the target.

• Cardano has successfully carried out a hard fork (16-7-2021) and upgraded its testnet from Alonzo Blue to Alonzo White. The final part of the Alonzo upgrade will take place in September 2021.

Mary

• From Decrypt (2-3-2021):

"“Mary”—named after Frankenstein author Mary Shelley—Cardano’s newest upgrade, goes live at  21:44:51 UTC today. Mary’s main purpose is to transform Cardano into a multi-asset network similar to Ethereum but with some advantages. According to IOHK, the protocol’s developers, users can transact with tokens, but without the need for smart contracts. This means sending a token on Cardano won't be more expensive than sending its native token ADA (unlike with Ethereum). It’s payable in ADA, which is sent alongside the tokens and multiple native tokens can be bundled and sent in one transaction. "

Shelley

• From Crypto Briefing (30-7-2020):

"This upgrade introduces staking, which allows users to invest their ADA cryptocurrency and earn interest. With staking complete, Cardano must now introduce governance features, custom tokens, and applications. Cardano's Shelley mainnet has attracted over 400 pool operators with whom users can stake their funds."

Ouroboros Hydra

• From this article (27-3-2020):

"After working on the project for five years, Cardano finally launched Ouroboros Hydra – its off-chain scalability solution. Using Hydra, developers can build dapps that require low fees or instant transactions."

Staking

• From a commissioned Messari report (27-12-2022):

"ADA holders delegate their ADA tokens to a stake pool operator (validator) to receive a share of block rewards while still retaining ownership of the ADA. They can use or withdraw their ADA at any time. Stake becomes active after two epochs, and the distribution of rewards begins after the third. Any changes to operator pool parameters take two epochs to take effect, protecting delegators from sudden changes. Staking rewards are optimal when all staked ADA is uniformly distributed amongst an arbitrary amount of staking pools. The K parameter refers to the desired number of pools: originally 250 before being updated to 500, with talk of increasing to 1000 for more decentralization. Pools with too much stake experience diminishing returns to incentivize decentralization between more pools. Cardano does not require slashing thanks to the incentives in its reward-sharing scheme."

Staking stats

• From a commissioned Messari report (27-12-2022):

"Cardano’s active stake is at an all-time high of almost 25.5 billion ADA. Engaged stake has increased QoQ and YoY, suggesting that the ADA issued to pool operators and delegators is being staked after it’s received. Engaged stake has peaked at the end of Q4 at nearly 74%. The k parameter dictates the optimal size of a stake pool, encouraging stake pool operators and delegators to adjust to the amount desired by Cardano’s entities and community via economic incentives: better staking rewards. However, of the ~3,000 current stake pools, over 90% of them don’t have half of the optimal amount of ADA staked."

• From a commissioned Messari report (27-12-2022):

"Initially, IOHK was the sole block producer, but now there are over 2,900 stake pool validators with 71% of all ADA delegated to them. As of March 2021, those stake pool operators have been exclusively responsible for block production."

Scaling

• From a commissioned Messari report (17-3-2023):

"Sidechains [Midnight], off-chain L2s [Hydra], and light clients [Mithril] are the scaling strategies being explored by IOG and other Cardano developers.

Milkomeda, Cardano’s first sidechain launched in early 2022, brings EVM compatibility to Cardano. Milkomeda C1 is primarily maintained by dcSpark.

Midnight, Hydra, and Mithril were announced as part of Basho’s scaling efforts. Midnight is a data protection-based sidechain of the Cardano blockchain. By leveraging zero-knowledge cryptography and other computation resources, Midnight will enable users to choose which data they wish to reveal publicly or keep private. Unlike Milkomeda, Midnight will have its own token: DUST.

Mithril is a stake-based signature scheme in development that creates a lightweight, efficient experience for users. By not requiring users to download the current state, clients can become thin enough for laptops, smartphones, and browsers. Mithril takes snapshots from the Cardano network to resolve chain synchronization, state bootstrapping, and chain validation."

• From a commissioned Messari report (27-12-2022):

"IOG released the Cardano EVM Sidechain in alpha in June 2022, which allows Solidity developers to easily port applications into the Cardano ecosystem.

Hydra is a class of L2s based on isomorphic state channels and optimistic settlement. Ouroboros Hydra is a new version of Cardano’s consensus mechanism, being designed by IOG. It will help enable faster transaction speeds, increased throughput, and lower transaction costs for Hydra protocols. Hydra was announced years before smart contracts were enabled, and it is now quickly approaching V1.0, currently in beta V0.8. Hydra Heads is set to be the first Hydra protocol to launch."

• From Decrypt (2-4-2021):

"Cardano will tackle scaling through an architecture dubbed Hydra. It features protocols with multiple heads, with each potentially able to process an impressive 1,000 transactions per second."

Hydra

• From a commissioned Messari report (18-4-2023):

"Hydra is a family of scaling protocols, mostly L2s based on state channels. Hydra Head, the first solution from the set, is an off-chain mini ledger working between a small group of participants, not unlike other popular state channels such as Lightning. Hydra leverages the eUTXO model for a more efficient and flexible transfer from L1 to L2 and back, allowing for the isomorphic transfer of data.

The first Head on the Cardano mainnet, also known as a channel, was opened in a limited form on March 2023. Right now, the protocol can be considered to be in a “public beta.” Until the protocol is more thoroughly tested, the quantity of ADA committed is limited for user safety. Heads can be used for a variety of use cases, from making P2P payments to moving dapp activity off chain onto cheaper Head channels. In Q4 2022, SundaeSwap Labs demoed an instance of the SundaeSwap DEX on Hydra on testnet. MLabs and IOG plan to leverage Hydra Head channels to execute auctions that will be higher throughput, faster, and cheaper than if they were on L1."

Sidechains

• From a commissioned Messari report (8-2023):

"IOG launched a toolkit for building custom sidechains for Cardano. The toolkit currently includes a technical specification for developing sidechains on Cardano, a chain follower, and was showcased alongside the announced proof-of-concept EVM testnet. In the future, it will entail templates for mainnet smart contracts and a sidechain module to interpret mainnet data.

Sidechains built with this toolkit will be validated by any participating Cardano SPOs, which will be incentivized by additional rewards offered by the sidechain’s tokenomic model. The shared security model for Cardano mainnet and its sidechains bears some similarities to EigenLayer’s restaking model with Ethereum validators."

Interoperability

• From a commissioned Messari report (27-12-2022):

"Overlay networks such as Mithril and Mamba are supported by a subset of Cardano stake pools and can solve specialized needs such as EVM compatibility."

Other implementations

• From a commissioned Messari report (27-12-2022):

"Other networks, such as Polkadot and Mina, have chosen to adopt Ouroboros and adapt it to their needs."

Other Details

• Uses the Deadalus (is on mainnet, 24-4-2020) and Icarus wallet.
• "Just like Ethereum has different clients based on Go, Rust, Java, Scala, the same way Cardano has Rust and Haskell based clients. Daedalus uses Haskell node in its back-end, Yoroi uses Rust node in its back-end, because Rust client has Icarus library for light wallets.
• From this reddit thread:

"Enterprise accounts (exchanges) will have special wallets that do not allow staking, thus also removing the ability to vote."

Testnet Rewards

From this article (18-1-2020):

"The rewards generation is directly dependent on the percentage of network participation.

In case of 50% participation = Annual return for delegation = 7-8%

In case of < 50% participation = Annual return for delegation = 13-15%

For more accurate answers please refer to the rewards calculator on Incentivized Testnet website.

In case of 50% participation = Return Rate for stake pool operators = 10%

(In case 10,000,00 ADA is pledged)

Return Rate for stake pool delegators = 12-13%

According to reports, ADA worth 3.8 million will be distributed as a reward per era."

Oracle Method

• Cardano has partnered with Chainlink (26-9-2021). It has 3 integrations live (7-2-2023).

Roadmap

• Can be found [Insert link here].
• Charles Hoskinson announced (12-1-2020) that he was 'very optimistic' about Shelly, Goguen and Voltaire to 'be ready within 2020', and parts of Basho as well. In the same video he also said he made the team have 'Identity' as a main priority, to create 'first class citizens'. Also mentioned wanting to create a DEX and stablecoin.
• From Decrypt (28-5-2020)

"Charles Hoskinson today announced the launch of Shelley, the latest update for Cardano. It will start rolling out the network between June 30 and July 7. Speaking on a crowdcast update, he provided 11 dates for the release of Shelley. "Guys wanna know when Shelley is? Let's tell ya," he said today. "June 9, this is when it opens up to everybody. The next date we have for you is June 16, that's when we start putting things together end-to-end.""

• The roadmap been upgraded to Mainnet 1.5 with Ouroboros (click for more info) running. With the release of Cardano 1.5 and OBFT, "the process of preparing the network for gradual decentralization can begin."

2020 Outlook

• From this article (18-1-2020):

"In early 2018, Hoskinson claimed that by 2019 project Cardano would be:

1. Fully Decentralized;
2. Will have smart contracts;
3. Lots of liquidity;
4. Multisig paper wallets;
5. And Hardware Wallet support.

Its 2020 and the project is yet to fulfil all these promises. Nonetheless, it managed to achieve a couple of milestones.

Unarguably, the launch of its incentivized testnet was a tremendous success. Within 24 hours of the testnet going live, 5 billion ADA coins stood staked. And at press time it has already launched over 500 stake pools.

According to the roadmaps and Charles latest tweet, the 2020 focus for the team is:

1. Smart contracts;
2. Scalability;
3. Decentralization;
4. High assurance;
5. and Governance."

Old roadmap

• Cardano used to (2018) lay out three eras in its timeline: the Testnet Era, Bootstrap Era, and Reward Era. The Testnet Era is pretty self-explanatory, Cardano is deployed on a test net. However it has now (9-2019) pivoted to a roadmap of five phases.
• In the old roadmap Bootstrap Era is when Cardano SL is deployed on the mainnet BUT it is centralized in order to maintain security. Only a fixed, predefined set of users have control over the system. The assumption is that security is poor in this era since people are slow to redeem their ADA coins. For the first few months, stakeholders who jointly possess the majority of the ADA stake are mostly not online yet. The blockchain can be easily attacked if only a small amount of ADA is staked. As consolation to the community, Ouroboros will not provide any block rewards.
• The Reward Era is when the network is in a completely decentralized and trustless mode. According to Cardano’s website, “the system will receive regular software updates moving forward, and a massive amount of new features will be released” in this era. These features would include upgrades to Ouroboros, Cardano’s consensus algorithm, an implementation of Cardano’s control layer, and sidechains.

New roadmap

• As of 9-2019 Cardano has a roadmap has been organized into five eras: Byron (2017 untill Q1 of 2019), Shelley (2017-2019), Goguen (2017 until Q1 of 2020), Basho (2019 until Q3 of 2020), and Voltaire (from Q2 of 2018 untill Q4 of 2020). Each era is centered around a set of functionalities that will be delivered across multiple code releases. As of 1-2023, Basho and Voltaire are still in progress.

Main components of these five era's are:

1. Bryon: Testnet, the Ouroboros proof-of-stake consensus protocol, ADA cryptocurrency, block explorer, wallets.
2. Shelley: Stake Pools, Ouroboros Praos (an upgrade), Ouroboros Genesis, Ouroboros-BFT (which they claim is a milestone ahead), hierarchical deterministic (HD) wallets, multi-sig,
3. Goguen: Plutus, Plutus Core Cardano’s smart contract virtual machine, a multi-currency ledger (ERC20 like), the IELE virtual machine (which as of 9-2019 has been paused) and the KEVM Virtual Machine (which as of 9-2019 has been paused).
4. Basho: "Scaling" through sidechains as a sharding mechanism. "Sidechains can be used as a sharding mechanism by off-loading work from the main chain onto a sidechain to increase the capacity of the network." Which actually sounds like no actual sharding is happening.
5. Voltaire: introduction of a voting and treasury system; "To fund the future development of the network, Voltaire will also see the addition of a treasury system, whereby a fraction of all transaction fees will be pooled to provide funds for development activities undertaken following the voting process."

• From CoinDesk (5-12-2020):

"Cardano, said it is set to launch a hard fork in December as part of the transition to the third development phase of the protocol. Dubbed “Goguen,” the third phase will be focused on the protocol’s integration of smart contracts after building Cardano’s foundation and decentralizing its system in the first two phases. 

The hard fork will introduce the token-locking mechanism, one of its most significant new functions, to the mainnet. It will enable the network’s smart contracts to support certain conditions such as making users hold tokens for a fixed period of time in order to complete a contract. In addition, the upgrade will bring custom tokens into the network besides its native ADA token, Hammond said."

Revenue

• Got some uptick, now $1.32M in Q1 2024, up from $0.71M in Q1 2023. Back down to $0.74M in Q2 2024.
• Revenue is between 6 and $15k per day during the last year (8-2023).
• From a commissioned Messari report (17-3-2023):

"Declining fees on the network, down 36.6% QoQ and 71.9% YoY. Revenue fell 28.3% QoQ and 80.7% YoY, remaining tightly coupled with fees as they are the source of revenue. Currently, the treasury holds over 1.1 billion ADA ($290 million as of December 31)"

Usage

• TVL (USD) surpassed $500 million in March, setting an all-time high. Several new protocols launched or are nearing production, such as Axo and USDM, while incumbents continued to grow, such as Indigo and Minswap (11-6-2024).
• Cardano’s TVL was flat QoQ (11-2023) but was up 198% YTD. Cardano’s TVL ranking among all networks increased from 34th at the beginning of 2023 to 15th.
• From a commissioned Messari report (17-3-2023):

"Cardano totaled $40.5 million in NFT sales volume in Q4, making it the fourth largest NFT chain by sales volume over the entire quarter and the third largest over certain weeks in the quarter.

Daily transactions increased 13%, and dapp transactions increased 16%, despite daily active addresses decreasing 24%. While some users were less active or left the ecosystem – something that is to be expected in a bear market – the users that stayed were much more active and dedicated to the ecosystem."

• From a commissioned Messari report (27-12-2022):

"Cardano experienced a surge in Q1 2022 in the form of DeFi activity. During the bear market, daily transactions took a decline through Q2 and settled out at about 60,000 in Q3. At this level of activity, Cardano averages roughly 0.75 transactions per second (TPS). It’s important to note that eUTXO TPS is not directly equivalent to account-based TPS, as multiple assets and multiple recipients are often involved in a single eUTXO transaction.

Cardano’s TVL is ranked 30th. Minswap, WingRiders, and SundaeSwap are carrying the DeFi ecosystem with 52%, 20%, and 19% of market share dominance, respectively."

• From Bankless (26-11-2022):

"When it comes down to DeFi dapps, the Cardano ecosystem is still in its infancy. However, the dapps that are currently deployed are far relatively more developed considering that smart contracts have only been possible on Cardano for just over a year. Both SundaeSwap and Minswap have been able to perform very well despite how small Cardano is compared to other lending platforms in other L1 and L2 blockchains. Not to mention that due to the Vasil hardfork, transaction speeds make transactions seem as if they are going at the speed of light so any transaction that happens near instantaneously.

Other notable mentions include AADA which is a lending protocol that isn’t like most other lending protocols. Instead of functioning like a traditional DeFi lending dapp that you see on other chains such as Ethereum which instantly lend and receive rewards, AADA is going for a more manual approach towards lending meaning everything is set at a fixed rate compared to a floating rate that you would see on other lending platforms."

• From Decrypt (2-3-2021):

"The protocol has an average of 220 monthly active core developers, he said, and Cardano has 37,327 commits to its code, compared to 42,457 for Ethereum."

• From Into The Block (26-11-2019):

"Large Transactions have been steady this year

The large transactions (greater than $100k) are always a solid indicator of the health of a crypto asset. The ITB’s large transaction analysis for Cardano shows a relatively “steady” pattern YTD, except for a peak during April, following a bull run in March in which the price reached $0.09.

The Cardano network is growing slowly but it’s active

ITB’s Addresses Metrics indicator shows that 49% of the addresses in the Cardano network are active. Also, during this year, the ratio of new addresses entering the network vs the addresses leaving the network has been slightly positive, but with the launch of Shelley can increase that ratio even more.

Large investors in Cardano are “Hodling”

IITB’s Ownership indicators provide a view of a crypto asset’s “capital stack” according to the concentration of the asset. Looking inside Cardano, we can see that there are 42 addresses that hold roughly 40% of the circulating supply.

The interesting thing is, that only 3 of these addresses are actively trading, which means that the other addresses have less than 300 transactions since their creation and plans to hold the token for the long term.

Cardano is more popular in “the West”

At first glance, you may think that Cardano has a global predominance, but ITB’s East vs West analysis shows that the token is slightly more popular in the West."

Projects that use or built on it

• From Paradigm (15-4-2021):

"The Cardano Foundation announces the live release of a supply chain traceability and anti-counterfeit solution together with Scantrust."

• There are only a few apps by some estimates (16-7-2021).
• Chainlink has partnered with Cardano (26-9-2021).
• Dish Network; "TV and wireless service provider that will integrate the Cardano blockchain into its telecom business and help provide digital identity services to Dish customers." (26-9-2021).
• MELD — A lending protocol that uses an on-chain reserve system to reserve UTXOs from users and then execute them as a batch against the pool UTXO.
• SundaeSwap — A DEX that uses Scoopers, third-party aggregators licensed by a DAO, to execute batches as single transactions.

Pros and Cons

Cons

• Had a sketchy ICO targeted at Japanese retired folks.
• From Crypto Briefing (7-6-2020):

"It should be noted, that Cardano developments have been slow to materialize with the team, often delaying many of its deadlines. For now, Plutus and the Cardano-based smart contract platform are still expected for this year."

• From this article (28-12-2017):

"[The] structure of economic rewards enables the protocol authors to develop several proofs about properties of the system, which has led IOHK to proclaim Ouroboros the “first provably secure proof of stake algorithm.” The safety and liveness proofs presented are based on assumptions of a partially synchronous network with an honest majority and an upper limit on how long honest nodes may be offline. These assumptions may work well for permissioned blockchains and the commercial applications envisioned by Emurgo, but perhaps not as well for a permissionless world computer. The assumptions underpinning Ouroboros security have been criticized as “unrealistic”, “impractical for a global blockchain”, and “way too convenient”."

Competition

• EOS/Ethereum competitor. There is a long history between Dan Larimer (EOS) and Charles Hoskinson (Cardano). In fact, before Ethereum, Hoskinson actually worked with Larimer on Bitshares but also left on bad terms. Check out this post by Larimer on the flaws of Cardano. Also check out Hoskinson’s rebuttal.
• From a commissioned Messari report (27-12-2022):

Cardano uses a novel version of UTXO called the extended UTXO (eUTXO). eUTXOs include a datum and a script, allowing for arbitrary logic and metadata to be attached to each individual transaction.

eUTXO includes two features over the classic UTXO:

1. Scripts: Arbitrary logic that references the eUTXO itself and its data to determine if it can be used as an input for a new transaction.
2. Datums: Metadata or a smart contract in Plutus. It gives instructions to the transaction builder on what to do with the eUTXO.

Compared to the account-based model, the eUTXO model:

1. Has cheaper transaction verification — no fees are needed for the memory cost of tracking the accumulated chain state.
2. Has lower node requirements in terms of data storage — a state tree of all account balances does not need to be kept as it does with an account-based model (same reasoning as above).
3. Is deterministic — transaction outputs rely on outputs from previous transactions, forcing a level of atomicity. The cost and validity of transactions can be predicted prior to execution. Fees can also be predicted as there is no arbitrary ordering based on a gas variable.
4. Is scalable — transactions can be processed in parallel.
5. Is less familiar for developers — the majority of Web3 developers are accustomed to account-based transactions.
6. Has concurrency risks — dapp developers must find ways to batch transactions to allow simultaneous UTXO interactions within the same block.

Dapps on Cardano must account for the eUTXO model and structure themselves to avoid concurrency problems. Given that each UTXO can only be spent once, protocols cannot make a user’s UTXO available to multiple users at the same time."

• Cardano is built as a layered blockchain. The Cardano Settlement Layer (SL) is where account balances and transactions are managed. It uses the UTXO model and is supposed to be the most secure part of the blockchain. The SL is kept apart from the computational layer where smart contracts are executed. This layered architecture gives the system the flexibility to be more easily maintained and allow for upgrades by way of soft forks. In Ethereum, the settlement layer and the computational layer are intertwined.
• From this article (28-12-2017):

"In contrast to Cardano’s approach, Casper TFG is designed to address the faults that are likely to occur on an open public blockchain, rather than make assumptions that may only hold for permissioned chains.

Whereas Ouroboros and Casper TFG both employ economic rewards to achieve safety and liveness, Casper TFG also incorporates penalties based on fault attribution. Casper TFG is proven safe without any synchrony assumptions and it’s likely to be proven live under partial-synchrony. Moreover Casper TFG assumes no bounds on being offline and addresses attacks from majority coalitions. The design of Casper TFG takes into account faults that are likely to occur on an open public blockchain, rather than making assumptions that may only hold for permissioned chains. Neither Ouroboros nor Casper TFG has been deployed on an open public blockchain with significant assets at stake."

Cardano vs. Ethereum 2.0

• In contrast to Ethereum 2.0, Cardano will ultimately operate an on-chain governance model. 
• From a commissioned Messari report (27-12-2022):

"On blockchains with account-based transaction models (e.g., EVM chains), the blockchain’s sole native token (e.g., Ether on Ethereum) has different functionalities from all other tokens (fungible and non-fungible).

With Cardano’s multi-asset support, this isn’t the case. All fungible tokens (FTs) and non-fungible tokens (NFTs) are native tokens and share almost all the functionality that ADA has. The main differences are that gas fees are still always paid in ADA and that only native tokens can be created and destroyed.

Tokens on Cardano don't need to be deployed via smart contracts. As such, they are not vulnerable to exploits to the same degree as ERC-20s or ERC-721s and do not require a smart contract execution to be transferred. Because they are not created with heterogeneous smart contracts, dapp developers can integrate all Cardano native tokens in the same way. Additionally, the eUTXO model allows for multiple tokens of different types to be transferred together in a single transaction."

Team, investors, partners

Team

• From a commissioned Messari report (27-12-2022):

"Cardano is supported by three entities:

1. Input Output Global (IOG) [fka IOHK]— A blockchain research and development company founded by Charles Hoskinson and Jeremy Wood. This is the development arm.
2. The Cardano Foundation — A non-profit organization focused on core development and ecosystem growth. It owns the Cardano brand and drives adoption.
3. EMURGO — A venture capital firm that is the for-profit arm of Cardano. EMURGO facilitates integrations for Web2 business partners and incubates business opportunities."

• Charles Hoskinson; founder

Funding

• From a commissioned Messari report (27-12-2022):

"EMURGO announced a $200 million ecosystem fund."

Partners

• Decided to partner up with Ripple and NEM creating Blockchain in Europe
• BP has said it will use/built upon Cardano among other chains.
• From this article (18-1-2020): "Last year Cardano entered into a strategic partnership with Sportswear giant New Balance. And it also signed an MOU with Ethiopia to build a cryptocurrency for the nation."
• From CoinDesk (14-2-2020):

"IOHK has established a research center at the University of Wyoming (UW) after making a $500,000 donation in the ADA cryptocurrency. As part of its collaboration with UW, IOHK has also provided a $500,000 grant in ADA to fund research and development into new blockchain applications, including new traceability tools and supply chain management."

Cardano Foundation

Basics

• "An independent standards body based in Switzerland with core responsibilities to support the community of Cardano users and to work with authorities on regulatory and commercial matters."

Team

• Parsons, Michael; Chairman (not on the website anymore as of 9-2019)
• Nathan Kaiser; Chairperson and general counsel of IOHK (on the website as of 9-2019)
• Domino Burki; Council Member and Treasurer (on the website as of 9-2019)
• Manmeet Singh; Council Member and Vice Chairperson (on the website as of 9-2019) also CIO of Emurgo
• O’connor, John ; head of communications (not on the website anymore as of 9-2019)
• Kelly, Tom; Marketing & Community (not on the website anymore as of 9-2019)
• McDowall, Bob; special advisor, a former Member of the States of Alderney, one of the Channel Islands (not on the website anymore as of 9-2019)
• Wagendorp, Steve; delivery assurance manager, "Steve joined the Cardano Foundation having recently managed operations for an asset manager in Zurich focusing on fund administration, compliance, regulatory matters and IT. As a technology enthusiast, he developed a natural interest in blockchain technology and decentralised application development. Steve graduated from the university of Cape Town with a degree in Geomatics engineering" (still on the website as of 9-2019)
• "Pascal Schmid has resigned from the Cardano Foundation Council at his own will – effective immediately. He joined the Council in June 2018 as its Member, a position he held for a year until his resignation."

cFund

• cFund, the Cardano ecosystem venture fund.
• Project Catalyst Fund10 was completed (11-2023), funding 192 projects from the Cardano Treasury from a fund pool of 50 million ADA.
• From Paradigm (15-4-2021): Announced its first VC investment in COTI

 (:

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