What is Cardano, and how does ada work?
Cardano is a proof-of-stake blockchain built around peer-reviewed research and upgraded in named stages. Its currency, ada, pays fees, is delegated to stake pools and now gives holders a vote on how the network changes.
Education only, not investment, tax or legal advice. Crypto-assets are high-risk — risk disclosure.
ADAThe short answer
Cardano is a proof-of-stake blockchain whose mainnet launched on September 23, 2017; ada is its currency. Holders delegate ada to stake pools, which are picked to produce blocks in proportion to stake. The protocol caps ada at 45 billion, and holders now vote on upgrades and treasury spending.
Key takeaways
- Cardano is an open-source proof-of-stake blockchain project begun in 2015; its mainnet and the ada currency launched on September 23, 2017.
- Consensus runs on Ouroboros: ada holders delegate to stake pools, and block producers are picked by a mix of randomness and stake.
- The protocol caps ada at 45 billion. New ada comes from a reserve that releases 0.3% per five-day epoch, with 20% of each epoch's pot going to a treasury.
- Since the Chang (2024) and Plomin (2025) upgrades, ada holders, stake pool operators and a constitutional committee share decisions on changes.
What is Cardano, and who builds it?
Cardano describes itself as a decentralized, third-generation proof-of-stake blockchain and the home of the ada cryptocurrency9. The open-source project began in 2015. Its core software is written in Haskell, a programming language favoured for safety, and its developers use formal methods, a mathematical way of checking that code does what it claims1.
The currency is named after Ada Lovelace, the 19th-century mathematician often called the first computer programmer8. No single company owns Cardano. The official site lists the Cardano Foundation, Input Output (IOG), EMURGO and Intersect among the independent organisations that work on it10. Intersect, a not-for-profit incorporated in Wyoming, supports the on-chain governance system7.
Five Cardano terms to know
| Term | Meaning |
|---|---|
| ada | The network's currency, used for fees, deposits and rewards6 |
| lovelace | The smallest unit: 1 ada = 1,000,000 lovelace6 |
| Stake pool | A server run by an operator, to which holders delegate their stake5 |
| Epoch | A period of 432,000 one-second slots, or five days2 |
| DRep | A delegated representative who votes on governance actions7 |
How does Cardano reach consensus?
Cardano runs on Ouroboros, which its documentation calls the first blockchain consensus protocol developed through peer-reviewed research5. Instead of miners competing with computing power, the right to add the next block is assigned by a combination of random selection and how much stake each participant controls5.
Most holders do not run servers. They delegate their ada to a stake pool, a server run by an operator, so the pool can produce blocks on behalf of all its delegators5. Time is split into one-second slots grouped into five-day epochs2, and rewards are paid in ada6. In 2020 the network moved from a federated version of the protocol (Ouroboros BFT) to Ouroboros Praos, as part of the Shelley upgrade that introduced staking113.
Figure · The Cardano staking cycle
- 01Holder delegatesassigns stake to a pool
- 02Pool gains stakecombined from delegators
- 03Chosen for slotsrandom, weighted by stake
- 04Blocks producedfees collected
- 05Epoch rewardspaid in ada
↻ then back to step 01
For how this compares with mining, see our explainer on proof of work and proof of stake.
How much ada can ever exist?
The mainnet configuration sets the maximum supply at 45,000,000,000,000,000 lovelace, which is 45 billion ada26. Ada that is not yet in circulation sits in a reserve.
Each epoch, a fixed share of the remaining reserve, called rho and set at 0.3%, is added to that epoch's transaction fees to form a reward pot. A share called tau, set at 20%, goes to the community treasury, and the rest pays epoch rewards42. Because 0.3% of a shrinking reserve is a shrinking amount, new issuance falls over time; the documentation says the rate was chosen to give the reserve a half-life of four to five years4.
Worked example
One epoch, simplified (illustrative numbers)
Suppose the reserve held 10 billion ada. 0.3% of that is 30 million ada. 20% of the pot, or 6 million ada, would go to the treasury and 24 million ada, plus fees, would fund rewards. The full reward calculation has further details, so treat this only as a picture of the rule.
What is ada used for?
- Payments: sending value without a middleman8.
- Fees and deposits on the network6.
- Staking: delegating to a pool, or running one8.
- Governance: voting directly or through a DRep87.
- Decentralized applications built with smart contracts, available since the Alonzo upgrade in 20213.
Since the Mary upgrade, users can also create their own tokens directly on Cardano3. Our explainer on smart contracts covers what these programs can and cannot do.
How has Cardano changed since launch?
Cardano upgrades through named hard forks, planned changes to the rules that every node adopts. The table and timeline below come from the official upgrade history3.
Figure · Cardano's major upgrades
- Sep 2017Byron: mainnet live
- Jul 2020Shelley: staking
- Mar 2021Mary: native tokens
- Sep 2021Alonzo: Plutus
- Sep 2022Vasil: performance
- Sep 2024Chang: governance I
- Jan 2025Plomin: governance II
- Jul 2026van Rossem
What the main upgrades added Source: [3]
| Upgrade | What changed |
|---|---|
| Shelley | Staking and the move from a federated to a decentralized network |
| Allegra (Dec 16, 2020) | Token locking, a step towards smart contracts |
| Alonzo | Smart contracts written with Plutus |
| Valentine (Feb 14, 2023) | Further Plutus and performance improvements |
| Chang and Plomin | On-chain governance, including the DRep role |
| van Rossem | Ledger rule and Plutus performance improvements |
Governance now follows a proposal called CIP-1694. Delegated representatives, stake pool operators and a constitutional committee review governance actions, such as hard forks, parameter changes and treasury withdrawals, and each needs approval from at least two of the three groups7. A written constitution sets the rules they work under7.
What are the specific risks of Cardano?
- Governance risk. Holders and their representatives can approve hard forks, parameter changes and treasury withdrawals7. Rules you rely on today can be changed by vote.
- Falling issuance. New ada from the reserve shrinks over time4, so staking rewards funded by it are not fixed.
- Smart-contract risk. Applications built on Cardano can contain bugs, like apps on any programmable chain.
- Platform risk. The SEC has warned that crypto platforms may lack the protections of regulated markets12.
Risk warning
Staking rewards are not interest
Rewards are not a fixed rate: they come from a shrinking reserve plus fees4, and they are paid in ada, whose value can fall sharply. The SEC calls crypto asset securities potentially exceptionally volatile and speculative12. See our risk disclosure.
What mistakes do beginners make with Cardano?
Common beginner mistakes
Mixing up ada and lovelace
Some tools show amounts in lovelace. 1,000,000 lovelace is just 1 ada6, so check the unit before you send.
Expecting a fixed staking yield
Rewards come from a shrinking reserve plus fees4, so they change from epoch to epoch.
Picking a stake pool blindly
Pools are run by independent operators5. Look at their fees and track record, and avoid concentrating everyone's stake in a few pools.
Ignoring governance votes
Holders can now vote or delegate to a DRep7. Not choosing means others decide changes for you.
Wallet safety matters more than any of these: read our guide to wallets and keys before staking.
Frequently asked questions
Does delegating ada mean giving it to someone else?
Delegation assigns your stake to a stake pool so the pool can produce blocks on your behalf5. Use a wallet you control and follow its own delegation steps.
Is there a maximum supply of ada?
What is the Cardano treasury?
Who is Ada Lovelace?
A 19th-century mathematician, daughter of the poet Lord Byron, widely recognised as the first computer programmer. The currency is named after her8.
When did smart contracts arrive on Cardano?
With the Alonzo hard fork on September 12, 2021, which added Plutus smart contracts3.
The bottom line
Cardano is a research-led proof-of-stake network in which ada holders delegate to stake pools, a reserve releases new ada at a falling rate up to a 45 billion cap, and holders now vote on upgrades and treasury spending. That design spreads decisions widely but also means the rules can change by vote. Learn the units, choose pools with care and treat staking rewards as variable, not as interest.
Sources
- Cardano design rationale — Cardano Docs Primary source
- Mainnet Shelley genesis configuration (shelley-genesis.json) — Cardano Operations Book Primary source
- Cardano Hard Forks, Network Upgrade History — cardano.org Primary source
- Monetary policy — Cardano Docs Primary source
- Proof of stake — Cardano Docs Primary source
- What is a cryptocurrency? — Cardano Docs Primary source
- Governance overview — Cardano Docs Primary source
- What is ada? — cardano.org Primary source
- Introduction — Cardano Docs Primary source
- Entities — cardano.org Primary source
- About hard forks — Cardano Docs Primary source
- Exercise Caution with Crypto Asset Securities: Investor Alert — Investor.gov, U.S. Securities and Exchange Commission, 2023 Primary source
How we checked this page: every figure above links to the numbered source it came from. Spotted an error? Tell the desk — see our editorial policy.
Logos are trademarks of their respective owners, shown for identification only. Bitfolio is not affiliated with or endorsed by them.
Read next
Tech · ExplainerProof of work vs proof of stake: how do blockchains agree on the next block?Every public blockchain needs a way for strangers to agree on one history. Proof of work spends electricity to do it; proof of stake puts money up as collateral. Here is how each works and what the trade-offs are.
Tech · ExplainerWhat is a smart contract, and what can go wrong with one?A smart contract is a program that lives on a blockchain and runs exactly as written. That makes it powerful, and it is also why a single bug can be so costly.
Tech · ExplainerWhat are token standards like ERC-20 and ERC-721, and why do they matter?Many different tokens can sit in the same wallet and trade on the same apps because they follow a handful of shared rulebooks. Here is what those rulebooks say.
Tech · ExplainerHow do crypto wallets and private keys work, and what happens if you lose them?A crypto wallet does not hold coins. It holds the secret that proves you control them. Understanding that one idea explains almost every way people keep, and lose, crypto.
Finance · ExplainerWhat is inflation, and why does it shrink the value of your money?Inflation is the slow rise in the general price level that makes each dollar, euro or pound buy a little less every year. Understanding how it is measured makes headlines, savings rates and central bank decisions much easier to read.
Assets · ProfileWhat is Ethereum, and what is ether actually for?Ethereum is a shared computer as much as a payment network. This profile explains how it runs, how ether is created and destroyed, and where things have gone wrong.