Cardano is number 3 behind Bitcoin and Ethereum: this is what you need to know

Photo: Unsplash

Chances are, you’ve never heard of Bitcoin. Ethereum must also sound familiar to you now that one copy is worth almost $4000. But have you ever heard of Cardano (ADA)? With a record price of 3 dollars last week, the currency is not yet close to the big boys. But as number three in the world, you can’t ignore Cardano either.

What is special about this coin? And why should or should you not invest in Cardano?

What is Cardano (ADA)?

We start at the beginning: what is Cardano? So you can compare the digital currency with other cryptocurrencies such as Bitcoin and Ethereum. The project is popular because several advantages of other cryptocurrencies are combined in Cardano. The coin has, among other things, the secure storage value of Bitcoin, the low transaction costs of Litecoin and the ‘smart contracts’ of Ethereum. More about those ‘smart contracts’ later.

Last Thursday, the rate of crypto coin Cardano was announced for the first time rose above three dollars† As a result, the digital currency has a market value of almost 100 billion. Cardano is the second largest cryptocurrency in the world after Bitcoin and Ethereum.

To invest in Cardano or not?

What makes Cardano different from other cryptocurrencies like Bitcoin?

Fast transactions

Cardano’s blockchain technology consists of two layers† In the first layer, all transactions are stored and you can see how much has to go from one wallet to another. Example: Thomas has to pay Linda 500 ADAs. In the second layer, all ‘smart contracts’ are stored.

A smart contract is a digital protocol that ensures that a contract is automatically executed if certain criteria are met. For example, that a webshop payment is only sent when the PostNL deliverer has delivered the package. No financial institutions such as banks or notaries need to be involved here.

Ethereum also has ‘smart contracts’, but there they are kept on the same layer, so that transactions are processed less quickly. You understand that the digital currency of the future must be able to handle many transactions per second if you want to be a global means of payment. There are therefore those who believe that Cardano will catch up with Ethereum at some point.

Due to the two different layers, Cardano also offers extra security compared to cryptos with only one blockchain.

More sustainable alternative to Bitcoin

There is a lot to do about Bitcoin these days, because the currency is the opposite of environmentally friendly and consumes energy. Cardano uses the so-called Proof of Stake concept. This is said to be four million times more energy efficient. You can somewhat compare the size of the energy difference with the energy consumption of a household (Cardano) and of a small country (Bitcoin).

According to founder Charles Hoskinson (who previously founded Ethereum), the entire network uses only 6 gigawatt hours of power per year. In comparison, research from the University of Cambridge shows that Bitcoin’s network consumes about 121.36 terawatt hours per year.

Lots of care

What is striking about Cardano is also how much work is put into the coin. There are three organizations that are working full-time on developing the coin. This ensures that the coin is one of the most active projects in the field of development.

In addition, Cardano’s source code has been fully vetted by experts, researchers, and scientists for errors or bugs. This is unique in the blockchain world. Cardano wants to create a high standard for cryptocurrencies.

Popular, but not worth much yet

With a price fluctuating around three dollars, you can not yet compare Cardano with the popularity of Bitcoin and Ethereum. But if you’re bummed that you didn’t get into those two coins sooner, Cardano (or another relatively unknown coin) could be an interesting choice.

Bitcoin consumes ‘more electrical energy than the Netherlands’ every year

Tessa Ham is an editor at WorkJuice.nl and writes for Metro about career and money.