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What Are the 3 Things People Get Wrong About Cardano (ADA)?

In order to understand why people consistently misunderstand what ADA is, it is important to first understand ADA. ADA is the cryptocurrency coin that fuels the Cardano blockchain. Cardano is a third-generation, decentralized, proof of stake blockchain platform. Its founder, Charles Hoskinson, founded it after leaving the Ethereum blockchain project in 2014.

Cardano was founded in 2017 and is designed to solve the three biggest issues impacting blockchains long term growth.

  • Scalability – Block size and the frequency of minting new blocks can create a bottleneck for the transactions being processed. The more users on a blockchain the slower it will become as only a limited number of transactions can be processed within each block.
  • Interoperability – How to bridge the thousands of blockchain projects to each other.
  • Sustainability – How to guarantee that the blockchain remains functioning and improved upon.

There are a number of misconceptions about ADA and we’re going to dig into three of the most common today.


1) ADA is the Ethereum killer

Ethereum is a behemoth in the cryptocurrency industry. As the first cryptocurrency to introduce smart contracts to blockchain technology it has become the most recognizable and utilized blockchain in the world, second only to Bitcoin. It boasts around 3,000 different dapps currently being run on its blockchain with more being added every day. So why then, is Cardano being labeled the Ethereum killer? There are two main reasons why people get this wrong about Cardano.

The first is the underlying scalability issue that Ethereum has been trying to solve for the last couple of years. Currently, Ethereum is plagued by its slow transactions per second speed (15 – 45). This leads to slow, expensive transactions for users. Until they migrate to Ethereum 2.0 with its proof of stake sharding protocol, this issue doesn’t look like it will go away. In comparison, Cardano can currently process around 250 transactions per second, and in theory, will be able to scale up to 1,000,000 through their own proof of stake protocol.

The second reason Cardano has received this mantle is that people completely overlook one of the very issues Cardano seeks to solve. Interoperability. Cardano does not need to cannibalize Ethereum to be successful, there is no one blockchain to rule them all in Cardano’s philosophy. Competition is of course essential to innovation, and the blockchain industry is a highly innovative industry. Nevertheless, Cardano is trying to create a blockchain that allows for cross-chain transfers without intermediaries.

The Cardano KMZ sidechain is the first protocol that seeks to solve this. It will allow for funds (coins and tokens) to move securely across its computational layer to any other blockchain that uses the same protocol without the need for a third-party intermediary.

2) ADA is a New Version of Ethereum

The comparisons between Cardano and Ethereum will always be there. Whether it is because they are both layer-one blockchain platforms, or because the founders Vitalik Buterin and Charles Hoskinson are both early industry pioneers who used to work together. The reality is that these two platforms could not be more different.  Everything from their road map (or lack thereof) to their whole philosophy on how they approach the adoption and development of their ecosystems.

Ethereum has been more focused on the private sector development of dapps and applications for Ethereum, particularly in developed nations. Cardano’s approach has focused largely on the developing world’s governments and public sectors to prove the utility of its blockchain technology. Hoskinson’s approach to mass adoption of a smart contract cryptocurrency blockchain is that it can only be achieved through a decentralized digital identity solution. Cardano achieves this by separating the blockchain into 2 layers.

The first layer is called the Cardano Settlement Layer (CSL) and acts as a balance ledger. The second layer is called the Cardano Computational Layer (CPL) and allows for the addition of information or smart contracts to the blockchain. The second layer is what is significant for governments and public sectors who need to record public records securely and immutably.

Cardano’s second layer use of Atala PRISM as its decentralized identity solution is an aspect that separates it from Ethereum. Ethereum’s approach simply does not require the same degree of a second layer identity solution for private sector development. This comparison is something that people consistently get wrong about ADA.

3) ADA is Being Left Behind by New Crypto Projects

In a hypergrowth industry like blockchain technology, it is imperative for survival to keep up with the pack. This misconception on ADA being left behind by other cryptocurrencies is one of the most prevalent misconceptions around. For instance, ADA has only grown in popularity since Solana’s (SOL) launch in March 2020.

The misconception is based on the scalability problem. Specifically, how many transactions per second each platform will be able to handle and how much gas fees it will cost a user. For context, Visa is able to process 65,000 transactions per second, Ethereum 15 – 45, with Ethereum 2.0 having the potential for up to 100,000 with its proof of stake sharding protocol.

Cardano currently has around 250 transactions per second with Solana currently running around 50,000. The current levels have Solana overtaking Cardano in adoption with each transaction costing on average $0.00025. Solana’s massive popularity is evident by the number of dapps being developed on its platform and the amount migrating away from the Ethereum network.

This misconception is developed from a wrong comparison on which issue Cardano is trying to ultimately solve. The comparison people are making is between the scalability rather than the sustainability problem. Where most of the industry uses a more hands-on approach to research and development, Cardano has adopted an alternative road map.  One where every improvement and component of its functionality is rigorously tested and peer reviewed by experts in blockchain technology. Cardano uses a traditional educational model to test its models similar to how academics are peer-reviewed before publishing their work.

Cardano funds their research through the creation of a treasury. The treasury is funded through an allocation of ADA from their ICO and a partial reward from successfully minted blocks. This has resulted in Cardano being a self-sustaining blockchain. This process is time-consuming and labour intensive but will ultimately make Cardano more resilient in the long term. Additionally, when Cardano does start to scale as more dapps are developed and other blockchains are bridged, its Ouroboros proof of stake protocol has the potential for 1,000,000 transactions per second.


In a hypergrowth industry that is highly competitive and constantly evolving, Cardano fundamentally understands its mission.

It self identifies itself as the third generation of blockchain technology and attempts to solve the three biggest issues plaguing blockchains to date. They have a very methodical and deliberate approach to how they tackle these challenges. Their fundamental framework and foresight to develop a treasury fund for continued improvements allows them the sustainability to go at their own pace.

The developers behind Cardano have found themselves in a tortoise and hare metaphor competing against newer, faster crypto projects who are attempting to accomplish the same results. It will be interesting to see how the story plays out.

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Iain Taylor

About the Author

Iain Taylor

Iain Taylor grew up in Northern Ireland, and is currently living in Halifax, NS. He has quadruple citizenship status, and has been involved in cryptocurrency since the end of 2020. He completed a study in Bitcoin, Blockchain Technology, and Cryptocurrencies at Dalhousie in 2021, and has been writing on the industry since September 2021.

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