Beginner's Guide: What Is Cardano & How Does It Work?

Cardano is a proof-of-stake blockchain platform that uses the ADA cryptocurrency. It was created by IOHK, a leading blockchain and smart contract development company, and launched in September 2017. As one of the top three largest distributed ledger technologies (DLT) platforms in the world, Cardano stands out due to its unique combination of features and benefits.

This beginner’s guide will provide a comprehensive overview of Cardano, explaining its two-layer architecture, scientific approach to development, as well as its advantages and disadvantages when compared to other blockchain platforms such as Ethereum, Bitcoin, and Polkadot. We will also discuss how it interacts with other technologies such as smart contracts, decentralized finance (DeFi), and more. By the end of this article, you will have a better understanding of what Cardano is and how it works.

Introduction to Cardano

Cardano is a decentralized public blockchain network and cryptocurrency, often referred to as the third generation of blockchain. It was created in order to provide a more secure and scalable platform for the development and deployment of decentralized applications (dApps) and smart contracts. Cardano is powered by its native cryptocurrency, ADA, which was launched in 2017.

Unlike Bitcoin, Ethereum and other blockchain networks, Cardano uses a unique consensus model known as Ouroboros that is based on Proof of Stake (PoS). This allows users to validate transactions without expending large amounts of energy. The PoS algorithm also helps reduce the risk of malicious attacks by incentivizing validators to act in the best interest of the network. With PoS, participants are responsible for validating transactions and maintaining the security of the network.

In addition to Ouroboros PoS, Cardano also employs an academic-led approach to research and development - making it one of the most advanced blockchains available today. This approach involves rigorous peer review led by researchers from leading universities around the world before protocol upgrades are implemented on the mainnet. By combining academic rigor with commercial flexibility, Cardano has created a well-rounded platform that is both secure and powerful enough for enterprise use cases.

Cardano’s Two-Layer Architecture

The Cardano ecosystem is built as a third-generation blockchain platform consisting of two layers — a settlement layer (CSL) and a computation layer (CCL) that serve as the fundamental components of every transaction.

Cardano Settlement Layer (CSL)

Cardano’s developers wanted to build a system that separates the value of a transaction from its computational data.

The Cardano Settlement Layer is designed to manage the movement of the value (or the currency) between the sender and the receiver. In other words, the settlement layer is the routing layer for all the control layers and systems.

The CSL uses two dedicated scripting languages — Plutus and Marlowe — for moving the value and enhancing support for overlay network protocol.

Cardano Computation Layer (CCL)

The Cardano Computation Layer helps Cardano to replicate the Bitcoin (BTC) ecosystem’s smart contract platform, Rootstock (RSK blockchain). The reasoning behind CCL’s implementation lies in its ability to help scale specialized protocols over the years. This involves adding hardware security modules (HSM) to the existing stack of protocols as technology advances.

The two layers of the Cardano blockchain allow the ecosystem to proactively implement changes to support faster and more secure transactions while eliminating any user metadata that proves to be irrelevant to the process.

Exploring Cardano’s Innovations and Advantages

Cardano stands out from other blockchain networks with its scientific approach to development, innovative two-layer architecture, and efficient proof-of-stake consensus mechanism. This combination of features makes Cardano a very promising platform for building decentralized applications that are secure, scalable, and energy-efficient.

Scientific Approach

With its focus on peer-reviewed research and collaboration among the leading academics and experts in the blockchain space, Cardano strives to develop a reliable platform that meets the security requirements of the 21st century. Additionally, this approach helps to ensure that the network remains flexible and can evolve as needed to meet user needs and expectations.

Two Layer Architecture

One of Cardano’s most unique features is its two-layer architecture - a settlement layer used to transfer value (through its ADA cryptocurrency) as well as a control layer used for smart contracts and decentralized applications. By separating these two components, both layers can be upgraded independently without disrupting the operations of the other. This allows for faster development times and greater flexibility compared to other blockchain networks such as Ethereum and Bitcoin.

Advantages Over Other Platforms

Cardano has several advantages over other blockchain networks such as Ethereum, Bitcoin, or Polkadot:

  • Its proof-of-stake consensus mechanism is more energy efficient than proof-of-work networks like Bitcoin.
  • It is also more scalable due to its two layer architecture which allows transactions to be processed faster than on single layered chains like Ethereum.
  • It offers improved privacy by using zero knowledge proofs in order to verify transactions while keeping their contents hidden.

Overall, Cardano is an impressive blockchain network with many useful features that make it a

Comparing Cardano to Other Blockchain Platforms

When compared to other blockchain platforms, Cardano stands out due to its scientific approach and two-layer architecture. Ethereum, Bitcoin, Polkadot and other chains use a single layer of consensus and are primarily proof-of-work based. Cardano’s two-layer architecture is not limited to just proof-of-stake, but also features a second layer which facilitates the development and deployment of smart contracts and decentralized applications.

The advantages offered by Cardano include its scalability and energy efficiency compared to other chains such as Ethereum. As Cardano is based on a proof-of-stake consensus mechanism rather than on mining (i.e., proof-of-work), it is more energy efficient and can process transactions faster than many of its competitors. Moreover, since the smart contracts on Cardano are written in programming languages such as Plutus and Marlow, it provides developers with the ability to create complex applications that are secure, reliable, and highly customizable for unique use cases.

At the same time, there are certain downsides associated with Cardano that must be taken into consideration. Most notably, due to its larger size when compared to other chains such as Bitcoin or NEO, it requires more bandwidth in order for transactions to be processed quickly. Additionally, since the platform is still relatively new, there is still a lot of work that needs to be done in order for it to reach maturity with regards to new features/functionality being added over time.

Disadvantages of Cardano

Cardano also has a few disadvantages that should be considered. First, the platform is still relatively new and thus the technology may be less mature than its competitors. Additionally, the development process for Cardano can be slow due to its scientific approach to research and development. Furthermore, because of Cardano’s two-layer architecture (the settlement layer and the control layer), developers may encounter more challenges in building more complex decentralized applications on this platform. Lastly, while Cardano’s proof-of-stake consensus mechanism is more energy-efficient than other consensus mechanisms such as proof-of-work, it generally requires higher upfront costs for users looking to become stakeholders in the network.

Summary of the Benefits of Using Cardano

Cardano is a unique and innovative blockchain platform that has the potential to revolutionize how decentralized applications are built and how value is transferred and stored. It provides a secure and energy-efficient platform that is highly scalable, making it an ideal choice for developers looking to build applications.

One of the main advantages of Cardano is its scientific approach to development. By utilizing advanced mathematical models, Cardano has been able to create a proof-of-stake consensus mechanism that is highly secure while also being energy-efficient. This ensures that the platform can remain secure and reliable while also allowing for faster transaction speeds, lower fees, and more scalability than other blockchain networks.

In addition, Cardano’s two-layer architecture makes it easier for developers to create decentralized applications on the network without having to worry about the underlying protocol being too complex or prone to errors. This makes it much easier for developers to create robust applications without having to worry about needing extensive technical knowledge or relying on third-party code libraries.

Overall, Cardano provides a unique combination of features that make it an attractive platform for developers looking to build powerful decentralized applications quickly and securely.


All in all, Cardano is a unique blockchain platform that provides a novel approach to distributed ledger technology. The two-layer architecture allows for flexibility and scalability and ensures that the system is more robust than other blockchain platforms. The platform also has a scientific approach to development that ensures that its code is thoroughly tested, secure, and reliable. While Cardano also has its weaknesses, such as limited scalability and speed, it is clear Cardano has strong potential as a platform for businesses and developers.

In addition, Cardano uses an “Ouroboros” proof-of-stake consensus algorithm, which means users can become stakeholders in the network by staking their coins. This incentivizes users, and drives more people to adopt the platform. Staking also safeguards the network against malicious actors and centralization of the coins, as it gives users an incentive to become active in the network without having to mine for coins.

Finally, Cardano also offers a ‘smart contract calculator’ which enables developers to easily and quickly create and deploy custom smart contracts. This makes it easier and faster to develop applications on the platform, reducing the time and effort required to launch a successful project.

Overall, Cardano has many advantages and can be an attractive option for developers looking to build powerful and secure decentralized applications. Its scientific approach to development, two-layer architecture, staking mechanism, and smart contract calculator make it particularly appealing, as they offer developers more control and flexibility than other blockchain networks. With its potential to revolutionize the way decentralized applications are built and how value is transferred and stored, Cardano is certainly worth considering for any developers looking to build applications on the blockchain.

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