Cardano (ADA): A Veteran Layer 1 Blockchain
Cardano is a third-generation proof-of-stake (PoS) blockchain platform launched in 2017. It was created by Input Output Global (IOG, formerly IOHK) under the leadership of Charles Hoskinson (a co-founder of Ethereum) with a vision to address key challenges faced by earlier blockchains: scalability, interoperability, and sustainability . Unlike many projects that iterate quickly, Cardano’s development emphasizes peer-reviewed academic research and high-assurance formal methods . All core components are built from the ground up, rather than forking existing protocols, and research papers underpinning Cardano (such as the Ouroboros consensus protocol) have been published through top-tier conferences . The blockchain is maintained collaboratively by IOG (technology development), the Cardano Foundation (oversight and promotion), and EMURGO (commercial adoption) . Cardano’s native cryptocurrency ADA fuels the network – it’s used for transaction fees and staking rewards . Overall, Cardano aims to provide a secure and scalable platform for decentralized applications (DApps) and critical financial infrastructure, while gradually transitioning control to its community through on-chain governance .
Cardano’s evolution is structured into five eras – Byron, Shelley, Goguen, Basho, and Voltaire – each focusing on a set of major features . Notably, development of these eras happens in parallel (research and coding overlaps), even though they are delivered sequentially via protocol upgrades . This section outlines each era, its key achievements, and the progressive decentralization of Cardano’s network.
Byron Era (Foundation Phase)
The Byron era established the foundational network and launched Cardano’s first mainnet. Development began in 2015 with rigorous study and thousands of GitHub commits, culminating in the official launch in September 2017 . Byron introduced ADA to the world – allowing users to transact the ADA currency on a federated network of nodes – and implemented the first version of Cardano’s consensus protocol, Ouroboros . Ouroboros was groundbreaking as the first provably secure PoS protocol based on peer-reviewed research, offering security guarantees comparable to Bitcoin’s proof-of-work . This era also delivered essential infrastructure: the Daedalus desktop wallet (IOG’s full-node wallet) and Yoroi light wallet (from EMURGO) for day-to-day use . In Byron, all block production was done by federated core nodes operated by the Cardano entities, while the community began to grow around the project . By the end of this phase, Cardano had demonstrated a stable network and built an enthusiastic community, setting the stage for decentralization in the next era.
Shelley Era (Decentralization Phase)
The Shelley era transitioned Cardano from a federated network to a decentralized one run by the community. Unlike Byron’s hard cut-over launch, Shelley’s activation was done via a smooth, low-risk transition to avoid interruptions . During Shelley (mid-2020 onward), Cardano introduced the concept of stake pools and staking delegation. Users could delegate their ADA stake to stake pools – community-operated nodes – and earn rewards, incentivizing widespread participation in securing the network . The incentive scheme was designed with game theory to encourage the creation of around k=1000 optimal pools, making Cardano “50–100 times more decentralized” than other large blockchains where under 10 mining pools might control consensus . Indeed, by relying on Ouroboros PoS instead of energy-intensive mining, Cardano’s entire network operates on a tiny fraction of the power of proof-of-work chains (comparable to a single home’s electricity vs. a small country) . This era marked Cardano’s maturation – the community took over block production (as more than half of active nodes became community-run) and the network achieved greater security and robustness through decentralization .
Advancements in Consensus Research (Shelley)
Shelley was coupled with major advancements in Cardano’s consensus protocols, extending Ouroboros to enhance security in a fully decentralized setting. Ouroboros Praos was introduced as an improved PoS algorithm providing resilience against adaptive attackers and harsher network conditions . Praos uses private leader selection and key-evolving signatures so that adversaries cannot predict or target the next block producer, mitigating targeted denial-of-service attacks . It also tolerates nodes going offline and coming back (dynamic availability) while maintaining security as long as an honest majority of stake exists . Following Praos, Ouroboros Genesis was researched as the next evolution, allowing new or returning nodes to bootstrap from the genesis block alone (no trusted checkpoints), thus protecting against long-range attacks . In early 2019, an interim upgrade called Ouroboros BFT (OBFT) was deployed as Cardano 1.5, simplifying the Byron-to-Shelley switch . These protocol refinements – from Ouroboros Classic to BFT to Praos (and the ideas in Genesis) – provided Cardano with a formally secure and future-proof consensus as the backbone of its decentralized network . The result is that Cardano’s PoS can match the security of PoW systems while enabling the flexibility of dynamic participation and delegation .
Goguen Era (Smart Contract Phase)
The Goguen era brought smart contract functionality to Cardano, transforming it from a transfers-only ledger into a platform for decentralized applications. A cornerstone of Goguen was the adoption of the Extended UTXO (eUTXO) model, an extension of Bitcoin’s UTXO ledger that supports expressive smart contracts. In Cardano’s eUTXO model, transaction outputs can carry not only value but also attached scripts and arbitrary data (datums), enabling advanced validation logic while retaining the concurrency and determinism benefits of UTXO . One major advantage of eUTXO over Ethereum’s account model is that transactions are deterministic – one can know off-chain exactly if a transaction will succeed or fail (and its effects) before submitting it . This eliminates surprises and wasted fees due to concurrency issues or state changes by other transactions, a problem common in account-based chains . Additionally, the eUTXO model naturally supports parallel processing of transactions, since independent UTXOs can be consumed simultaneously, offering scalability through parallelism . These design choices reflect Cardano’s “quality-first” approach to smart contracts, aiming for secure and predictable execution .
Plutus Smart Contract Platform
With Goguen, Cardano launched Plutus, its native smart contract programming language and execution platform. Plutus is a Turing-complete functional language built on Haskell, chosen for its strong emphasis on correctness and security . Smart contracts in Cardano are typically written in Plutus (a Haskell-based DSL) and then compiled to Plutus Core, which runs on-chain. This approach allows developers to use Haskell’s rich type system and formal verification techniques to minimize bugs. Plutus programs are divided into on-chain code (which executes during transaction validation) and off-chain code (running on a user’s machine to construct transactions). By using Haskell and Plutus, Cardano provides a high-assurance development environment – the same language can be used end-to-end, and pure functional programming ensures that given the same inputs, contracts behave deterministically . Plutus’s design explicitly forbids contracts from making non-deterministic calls or accessing external data during on-chain execution, which makes them much easier to analyze and verify than imperative smart contracts . The trade-off is a steeper learning curve, but it yields smart contracts that are less prone to critical failures. In summary, Plutus provides Cardano a secure and robust smart contract layer based on well-understood functional programming principles, distinguishing it from EVM-based platforms.
Multi-Asset Support (Native Tokens)
Goguen also introduced multi-asset support on Cardano, enabling the creation and use of user-defined tokens natively on the blockchain. In March 2021, the Mary protocol upgrade transformed Cardano’s ledger into a multi-asset ledger . Users can mint and transact custom tokens (fungible or non-fungible) directly on Cardano without writing smart contracts . This native token functionality treats new assets as “first-class citizens” alongside ADA. The ledger’s accounting system was extended so that transactions can carry multiple asset types simultaneously . Because token logic is handled by the blockchain itself, no bespoke contract (like ERC-20) is needed for each token, reducing complexity and potential errors . Minting and burning of tokens are governed by user-defined monetary policy scripts (which can impose conditions like time locks or signatures), but once minted, tokens move natively. This design yields significant efficiency gains – fees are lower and more predictable than on Ethereum, since you don’t pay for executing token contract code on each transfer . The Mary era unlocked a wave of activity: projects could issue stablecoins, utility tokens, NFTs and more directly on Cardano . This upgrade was a critical step in growing Cardano’s economy, as it allowed a flourishing of tokens (over 70,000 native tokens were created within months of launch) and set the stage for a diverse DeFi and NFT ecosystem without overburdening the network.
Rise of Cardano’s Ecosystem (DeFi, NFTs, and dApps)
With smart contracts (via the Alonzo hard fork in Sept 2021) and native assets in place, Cardano’s ecosystem finally had the tools to grow a vibrant DeFi and dApp community. The period following Alonzo saw Cardano shed its “ghost chain” label – previously critics had noted that Cardano was a smart contract platform with no smart contracts – as developers deployed the first wave of DApps . Decentralized exchanges (DEXs) like Minswap and SundaeSwap, lending protocols like Lenfi (Liqwid), stablecoins (e.g. DJED), NFT marketplaces (CNFT.io, jpg.store), and dozens of other applications launched on Cardano through 2022–2023. Developer activity on Cardano surged after Alonzo; in fact, Cardano often ranked #1 in GitHub commits among blockchain projects in 2022 . By mid-2022, Cardano reportedly had over 1,000 decentralized applications either running or under development , and network usage metrics climbed. For example, the Cardano network surpassed 3.5 million active wallets, growing by ~30k new wallets per week in 2022 . NFT activity on Cardano boomed as well – the main NFT marketplace (JPG Store) reached over $200 million in lifetime trading volume . Despite starting later, Cardano’s DeFi Total Value Locked (TVL) began to build up; however, it still trails far behind Ethereum’s. As of late 2023, Cardano’s DeFi TVL was on the order of a couple hundred million USD, only a fraction of Ethereum’s tens of billions . This reflects that Cardano’s ecosystem, while growing (especially in areas like lending, NFTs, and gaming dApps), is still in an early stage compared to Ethereum’s. Nonetheless, the Goguen era proved that Cardano’s research-driven approach could deliver a functional smart contract platform, and it laid the groundwork for the next focus: scaling those dApps to high throughput.
Basho Era (Scalability Phase)
The Basho era focuses on scaling and optimizing Cardano for high throughput and interoperability. As usage grows, the base layer needs to handle more transactions without sacrificing decentralization. One major component of Basho is layer-2 scaling via Hydra, alongside efforts to support sidechains and interoperability with other networks. Basho also includes ongoing improvements to the core protocol (for example, the Vasil hard fork in 2022 introduced pipelined propagation and reference inputs to improve throughput on L1). The overarching goal is to ensure Cardano can scale to millions of users and an internet of blockchains.
Hydra (Layer-2 Scaling Solution)
Hydra is Cardano’s flagship Layer-2 solution, designed as a family of protocols to massively increase throughput via off-chain processing. The first protocol, Hydra Head, is essentially an isomorphic state channel implementation: it operates as an off-chain mini-ledger shared by a small group of participants, but uses the same transaction representation as the main chain (hence “isomorphic”) . Participants in a Hydra Head can perform high-speed transactions off-chain among themselves, with the Head periodically settling on the main chain. This allows most transactions to be processed off-chain at near-instant finality and minimal cost, while the main chain provides security and arbitration. Hydra is rooted in peer-reviewed research (the Hydra papers were published by IOG) and is expected to achieve high throughput (potentially thousands of TPS per Hydra Head) as well as low latency . Importantly, Hydra maintains Cardano’s security assumptions – opening or closing a Hydra Head is secured by on-chain transactions, and if disputes arise, the state can be resolved on L1. Because Hydra Heads are parallelizable, Cardano can scale by spawning many heads (e.g., for different dApps or user clusters) – theoretically multiplying total throughput. Early Hydra implementations have demonstrated hundreds of TPS per head in tests . In 2023, the Hydra team released a mainnet Beta, and some Cardano projects began experimenting with Hydra for use cases like fast microtransactions and even gaming. In summary, Hydra provides Cardano a path to scale horizontally via Layer-2, ensuring that as demand grows, the network can handle it without congestion or high fees .
Sidechains and Interoperability
Another pillar of Basho is the sidechain framework, which enhances Cardano’s extensibility and interoperability. A sidechain is an independent blockchain that runs in parallel to the main Cardano chain (the “main chain”) and is connected via a two-way bridge. Cardano’s design allows sidechains to use their own consensus algorithms and features, while relying on the main chain for security (for example, using the main chain’s stake for checkpointing) . In 2023, IOG released a Sidechain Toolkit to make it easier for anyone to build custom sidechains that leverage Cardano’s infrastructure . As a proof of concept, IOG built an EVM-compatible sidechain (sometimes called “Milkomeda C1” by a partner project) that lets developers deploy Ethereum-style smart contracts but still settle transactions back to Cardano . The motivation is to allow different virtual machines or specialized chains (for identity, privacy, etc.) to coexist with Cardano, broadening the network’s capabilities. For example, Midnight is an upcoming privacy-oriented sidechain for Cardano, and sidechains could also connect Cardano with Cosmos (via IBC) or other ecosystems . Interoperability is further enhanced by Cardano joining standards efforts (Cardano joined the Blockchain Transmission Protocol and is exploring bridges to Bitcoin and Ethereum). By offloading experimental features or heavy workloads to sidechains, Cardano’s main chain can remain lean and secure, while still offering a diversity of services through its ecosystem. This approach aims to solve blockchain’s “one size doesn’t fit all” problem: each sidechain can be tailored (for higher throughput, or specialized hardware, or regulatory compliance) without bloating the L1 protocol . In short, sidechains make Cardano more scalable and flexible – new innovations can be tried on sidechains without risking the mainnet, and value can flow between Cardano and other networks, fostering a more interoperable multi-chain future .
Voltaire Era and Plomin Hard Fork (Governance Phase)
The Voltaire era is Cardano’s final development phase, focused on implementing a fully decentralized governance system and a self-sustaining treasury. The goal is to turn Cardano into a truly community-governed protocol – often described as a self-evolving blockchain, where ADA holders can propose and decide on upgrades or spending of treasury funds without requiring central control. Key components of Voltaire include CIP-1694, which defines Cardano’s on-chain governance framework, the creation of a Cardano Constitution, and a series of protocol upgrades (notably the Chang and Plomin hard forks) that transfer governance power to the community. By the end of Voltaire, Cardano is intended to function as a DAO (decentralized autonomous organization) governed by its users, achieving the original vision of a blockchain run “by the people, for the people.”
CIP-1694: Foundation of Cardano’s Governance Framework
CIP-1694 (named after the birth year of philosopher Voltaire) is the Cardano Improvement Proposal that established the foundations for on-chain governance in Cardano . Unlike typical CIPs, 1694 is expansive – about 2,000 lines of specification – covering new governance roles, voting procedures, and constitutional concepts. It was developed through extensive community input: first drafted in early 2023 at an IOG workshop, then refined via dozens of community workshops worldwide in mid-2023 . CIP-1694 introduces a “tricameral” governance model with three main bodies of voters: (1) the Constitutional Committee, a small, expert-appointed group that checks if actions align with the constitution; (2) Stake Pool Operators (SPOs); and (3) Delegated Representatives (DReps), who represent ADA holders that delegate their voting power . In the model, any ADA holder can submit a governance action (proposal) on-chain by placing a deposit . An action (which could be a protocol parameter change, spending from the treasury, initiating a hard fork, etc.) then goes through a voting period where the Committee, SPOs, and DReps vote yes/no/abstain. A proposal is ratified if it meets specified thresholds of yes-votes among each group by the deadline . The default principle is one ada = one vote (stake-weighted voting power), whether cast directly or via a DRep . CIP-1694 essentially lays out a minimum viable governance: it doesn’t immediately decentralize everything, but provides the framework to do so. It also requires the creation of a Constitution (more below) and sets up mechanisms like no-confidence votes (to replace a committee that oversteps) . This CIP is considered historic for Cardano – “probably the most important in Cardano’s history” – because it transfers ultimate control from the founding entities to the ADA holders through on-chain processes .
Cardano Constitution Development
As part of Voltaire, Cardano is defining a Constitution – a set of fundamental principles and rules that guide governance. CIP-1694 mandates that “There must be a constitution”, initially an off-chain document, which the community will later ratify on-chain . In mid-2024, an Interim Cardano Constitution was released by Intersect (a Cardano governance-focused entity) to serve as a bridge during the transition . This interim constitution was included by hash in the Cardano node software (v.9.0.0) during the first governance upgrade, anchoring it on-chain as a reference . The interim document provides guiding values and interim rules so that early governance actions have context. The plan is for the community to debate and draft the permanent Constitution through events like the Cardano Constitutional Convention (scheduled for late 2024) . Once a draft is agreed upon, the first major on-chain vote of the ADA community will be to ratify the Constitution . The Constitution will likely cover Cardano’s purpose, core principles (like openness, security, gradual evolution), and constraints on governance (e.g., things the blockchain should not do). Having a constitution helps coordinate the community’s decisions and provides a benchmark for the Constitutional Committee – the Committee’s role is to veto any governance action that is blatantly unconstitutional . In essence, the Constitution is the social contract of Cardano’s governance, ensuring that as on-chain democracy kicks in, it stays aligned with the values the community holds. Cardano’s approach here mirrors that of a decentralized government: establishing a constitution, elected or appointed representatives (DReps and committee), and checks-and-balances to steer the blockchain’s future responsibly.
Phases of the Voltaire Era
The rollout of Voltaire is happening in phases, via successive hard fork events. The transition began with the Conway era (named for mathematician John Conway) and Chang upgrade, and is concluding with the Plomin hard fork. In July 2024, the first part of the Chang hard fork was initiated . This Chang Phase 1 upgrade did two critical things: (1) it