Namaste Yogis. Welcome to the Blockchain & AI Forum, where your questions are answered, mostly correct! Here no question is too mundane. As a bonus, a proverb is also included. Today’s question is from Bhante Chandra from Kandy, Sri Lanka, and he wants to know what monetary system does the Cardano Blockchain use?
Bhante, you came to the right place. Let’s start first with explaining Cardano. Cardano is a decentralized, open source blockchain network that burst onto the scene in 2017. Charles Hoskinson, Cardano’s founder, created Cardano as a third generation blockchain. Bitcoin and Ethereum were generations one and two, respectively. Of course, Bitcoin was released by an anonymous developer (Satoshi Nakamura) in 2008, and Ethereum by a team, including Hoskinson, in 2015.
Cardano is recognized for its research-based approach. Cardano technology is based on nearly 200 peer reviewed academic research reports. Critics say Cardano is slow to the market; Cardano proponents acknowledge the critique. However, Cardano advocates say they are oven cooking not microwaving. Fair point! First and second generation blockchains were energy gluttons because they were constructed with proof of work consensus systems; Cardano was built using a proof of stake consensus system making it extremely energy efficient. Love a green blockchain!
Cardano is focused on solving the blockchain trilemma problem of balancing speed, scalability, and security. Essentially, the trilemma problem in blockchain says the more one or two issues are solved the worse off are the remaining. Holy no way out, Batman! Cardano also is recognized for its smart contract capabilities. Smart contracts facilitate the transfer of value from peer to peer without intermediaries. Now about the monetary system.
The Cardano network uses crypto currency to pay for transactions. Cardano currency is known as ADA, named after the famous British female mathematician and computer programmer, Ada Lovelace. Smaller denominations of ADAs are called Lovelace and they go out six decimal places, .000006. Bust out the calculator!
Cardano began with a total supply of 45B ADA. However, not all were release upon inception; that would be irresponsible. Instead, Cardano has phased in ADA distribution. Cardano is de-inflationary by design, meaning the supply of ADA decreases with time.
Let’s talk about the Cardano treasury and your personal Cardano treasury. Cardano’s treasury has three revenue sources: minting; donations; and taxation from block rewards. Great! Now, how does an individual grow their personal Cardano treasury? Here too there are multiple avenues. You could, for example, purchase ADA on an exchange, such as Coinbase. Suppose you purchased ADA, what next? Well, you could earn additional ADA by “staking it”. Staking is blockchain/crypto jargon for earning rewards. Think of it as interest payments for locking up and “lending” your ADA. Or you can operate your own stake pool and earn ADA directly. Operating a skating pool requires technical computer skills; learn and earn!
Once you have a bag of ADA, where to keep the stash is the question. Here again you have options. You can store your ADA on a centralized exchange, e.g., Coinbase. There are pros and cons to centralized exchanges, that go beyond this post. Or you can self-custody your stack; that too comes with advantages and disadvantages. Several self-custody wallets are available, including Typhon Wallet, Flint Wallet, or Yoroi Wallet.
A special thanks to Cardano and Emurgo Academy for supplying the information for today’s post. Time to go, but not before sharing an Egyptian proverb: “You can tell whether a man is clever by his answers. You can tell a man is wise by his questions.
Until next time,
Yogi Nelson
Blockchain & AI Forum 