ADA is the native cryptocurrency that runs on the Cardano blockchain, a first-of-its-kind decentralized network, based completely on scientific and mathematical principles, and designed by expert cryptographers and engineers with a peer-to-peer review system. It is also interesting to note that Cardano was created by American entrepreneur Charles Hoskinson, who in fact was also a co-founder of Ethereum.
It is often said by Cardano and the crypto community that ADA is the first 3rd generation cryptocurrency. Similar to Ethereum, the Cardano blockchain can be used to build smart contracts, and in turn, create decentralized applications and protocols. But the key difference here is that Cardano aims to solve the various pain points Ethereum faces in terms of scalability, interoperability & sustainability.
A week ago we spoke about 2 fundamental blockchain models Proof of Work & Proof of Stake. Cardano as a blockchain operates on the PoS model, which makes it consume less power, more decentralised & scalable. It uses a specially designed consensus protocol called Ouroboros to secure & validate ADA. More on Ouroboros below.
Unlike Bitcoin, ADA cannot be mined. Since it works on the PoS system, validates validate each block of ADA in return for being rewarded in ADA! In this system validators, are chosen by the network depending on how much ADA currency they currently own.
Ouroboros is Cardano’s defining algorithm, the first blockchain protocol to be based on peer-reviewed research, and an integral element to proof-of-stake. It is a consensus protocol that allows ADA to be sent and received easily and securely at all times, while also ensuring the safety of smart contracts on the Cardano blockchain. At the same time, as a PoS consensus mechanism, Ouroboros provides rewards to token holders who stake their ADA to the network and help ensure network consensus.