Proof-of-Stake cryptocurrencies are growing in popularity. Ethereum is the largest proof-of-stake platform, but Cardano is quickly emerging as a front-runner due to its enhanced technology.
Let’s explain how to buy Cardano, and discuss whether or not it’s the right cryptocurrency for you to invest in.
What is Cardano?
Cardano is a blockchain platform that’s designed to power decentralized applications and systems. These are programs designed to run outside of a centralized network of servers, making them more cost-effective and secure. Decentralized applications may be used to provide important digital services for developing countries.
Cardano has an emphasis on sustainability. Many cryptocurrencies have been criticized for producing far too much carbon and for consuming too much electricity. Since blockchains are powered by a global network of individual computers, these computers collectively use a large amount of energy.
Cardano was designed to power large blockchain systems with less energy. It uses a proof-of-stake protocol to run the blockchain, which is different from the traditional proof-of-work protocol that earlier cryptocurrencies have used. Proof-of-stake is built to facilitate faster transactions with less reliance on power-intensive mining pools.
ADA is the cryptocurrency that Cardano uses. It’s named after mathematician Ada Lovelace, who is recognized as the world’s first computer programmer.
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History of Cardano
Cardano was developed in 2015 by Charles Hoskinson, the co-founder of Ethereum. Like Ethereum, Cardano provides developers with a blockchain that can power decentralized applications (dApps).
What are dApps used for?
dApps are software programs that run on a blockchain network instead of a centralized network of servers. Blockchain-based programs are beneficial because of their speed, scalability, and cost-efficiency. They can also provide essential services to regions with little digital or financial infrastructure (for example, rural or undeveloped areas that do not use banks).
Cardano had a more rigorous development process than many other cryptocurrencies. Early cryptocurrencies like Bitcoin and Litecoin set the benchmark, but they now use protocols that are outdated and less efficient.
Cardano, on the other hand, was built using the most up-to-date blockchain technology and theories. IOHK is a software firm that built Cardano, and it operates a research arm that actively works to improve the long-term scalability of Cardano by using peer-reviewed research to recommend updates. Of all the cryptocurrencies on the market, Cardano seems the most intent on building out the most powerful and efficient blockchain possible. In fact, Cardano has a clear development initiative that consists of five phases:
Cryptocurrencies are under scrutiny by governments all around the globe. Many cryptocurrencies cannot be traded in the US, while some, like XRP, have been delisted by crypto exchanges due to federal lawsuits—even after they were tolerated for several years.
Cardano works hard to keep ahead of regulations. The platform is overseen by the Cardano Foundation, which strives to:
Explain the benefits of Cardano to policymakers
Ensure Cardano complies with regulations around the globe
Works with researchers to develop blockchain-related studies
That doesn’t mean that Cardano is immune to future regulations. But it may be reassuring to investors that Cardano is committed to outreach.
Every blockchain uses a unique algorithm for creating blocks and validating transactions. Most cryptocurrencies use a proof-of-work protocol, in which the miner with the most computing power will validate the transaction first and earn crypto as a reward.
The problem with proof-of-work is that it’s been abused by mining pools, which are large concentrations of computers run by one or more miners. Mining pools generate a huge amount of computing power which individual miners can’t beat out. They also incentivize a nearly endless amount of computers to consume energy trying to validate transactions.
Cardano uses a proof-of-stake protocol. Under proof-of-stake, miners will stake their own cryptocurrency to enter a lottery. Your chances of winning the lottery increase as you stake more crypto. If you win, then you’ll get to validate the transactions and earn crypto.
This is a better system because it eliminates excessive computer usage (the winner of the lottery is the only person who needs to do processing). It also provides faster transaction times because miners won’t be wasting their time trying to validate transactions they might not even solve first. Plus, Cardano effectively eliminates mining pools.
How To Buy Cardano (ADA) in 5 Steps
You can buy Cardano in 5 easy steps:
Find an exchange selling Cardano
Create an account
Verify your identity
Strategize your investment
1. Find An Exchange Selling Cardano
You can purchase Cardano through a crypto exchange platform. A crypto platform works like an online brokerage, but instead of placing orders for stocks and other securities, you can trade various cryptocurrencies.
Here are a few of the most popular crypto platforms that sell Cardano:
Coinbase is the largest crypto platform and is geared toward beginning investors, so it’s a good place to start if you’re investing in crypto for the first time.
2. Create An Account
Once you’ve picked a crypto exchange, you’ll have to set up an account before you begin trading. Most crypto exchanges have a website or mobile app where you can set up an account. Usually, you’ll have to provide your:
The crypto exchange may also require or recommend that you set up two-factor authentication, in which you’ll have to go through two security steps. Most platforms require a password and biometric identification or a code that’s sent to one of your devices.
Even if two-factor authentication is not required, you should definitely enable it so your account will be better protected.
3. Verify Your Identity
Most crypto exchanges also require you to submit proof of your identity. This is how they prevent fraud. Some crypto exchanges allow you to send a photograph or scan of a government ID (a state ID, driver’s license, or passport).
You may also need to provide your:
Date of birth
Social security number
You should only trade on crypto platforms that require identity verification. Otherwise, you’ll be at greater risk of participating in fraudulent transactions.
4. Strategize Your Investment
Cryptocurrency is a high-risk investment. It’s a volatile asset that can experience major price fluctuations over a short period, and it also has no intrinsic value. For most investors, cryptocurrencies are a short-term investment. Investors buy when the price falls and sell when the price rises.
Some investors have earned a significant return on investment by holding cryptocurrency over a long period. But since cryptocurrency has no intrinsic value and is facing greater scrutiny and government regulations, there’s little reason to believe that it will grow steadily over 10 years or more. In fact, some economists have predicted that a cryptocurrency bubble will eventually cause a recession.
Before you buy Cardano, consider the following questions:
Why Am I Investing? If you want to save for retirement, you might consider opting for an IRA or index fund. A cryptocurrency is more suitable for those investors who already have a diverse investment portfolio and are now trying to generate high returns.
When Will You Sell? When will you sell your holdings of Cardano? Will you wait until a certain amount of time has passed? Or will you sell when the price hits a certain high or low?
What’s Your Risk Tolerance? A cryptocurrency is only a good investment if you’re willing to risk a little money in the pursuit of high returns. If you’re not comfortable losing most, if not all of your investment, it’s better to invest in low-risk investments, like a bond or mutual fund.
5. Buy Cardano
Once you’ve formulated your investment strategy, you can purchase your first ADA! Crypto exchanges provide a few different ways to make a purchase:
ACH bank transfers
Debit and credit cards
PayPal (not supported by all crypto exchanges)
Some crypto exchanges may even allow you to swap your existing coins for Cardano.
Most exchanges don’t require you to buy a full coin. You may be able to purchase whatever dollar amount of a coin that you wish (in which case you’ll own just a percentage of a coin). Once you’ve made the transaction, you can store the private keys for the coin in your crypto wallet.
Pros & Cons of Cardano
Like any other cryptocurrency, Cardano has unique strengths and weaknesses.
Credentials: Cardano works hard to incorporate peer-reviewed research and generate positive visibility for the platform.
Eco-Friendly: Cardano requires less energy than proof-of-work cryptocurrencies, so it’s much better for the environment.
Applications: Since Cardano is built for dApp developers, it has more real-world applications than Bitcoin.
Scalable: Cardano was built to be easily scalable to avoid losing performance capabilities as it grows.
Young Cryptocurrency: Cardano is a relatively new cryptocurrency, so it’s bound to face growing pains—especially as it grows more popular.
Some Competitors: There are plenty of competitors that are trying to emulate Cardano’s approach. Ethereum is a key competitor to Cardano, and it has a much higher market cap and greater visibility.
Cardano is a cryptocurrency that was designed to provide blockchain infrastructure for developers of decentralized applications. Cardano was built to be faster, more secure, and more eco-friendly than earlier cryptocurrencies. It uses a proof-of-stake protocol that eliminates energy-consuming mining pools and facilitates a more efficient network of miners. The drawback to Cardano is that it’s a new cryptocurrency, so it may face growing pains and regulatory challenges. You can buy Cardano on most major crypto exchanges.
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The information presented is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing provided shall constitute financial, tax, legal, or accounting advice or individually tailored investment advice. This information is for educational purposes only.