What is blockchain technology? How does it work?

Cardano (ADA): What It Is, How It Differs From Bitcoin

Cardano (ADA) is a decentralized proof of stake (PoS) blockchain designed to be a more efficient alternative to proof of work (PoW) networks. It is intended to evolve into a system with multiple use cases, governed by those who have staked their cryptocurrency.

Cardano’s cryptocurrency is named Ada after Augusta Ada King, Countess of Lovelace (1815–1852), commonly regarded as the first computer programmer. Ada is used in the blockchain’s PoS consensus mechanism. It is given as a reward for work done for the blockchain or can be purchased on exchanges.

Charles Hoskinson, an Ethereum co-founder, began developing Cardano in 2015 and launched the platform in 2017. Cardano has positioned itself as an alternative to Ethereum. Both platforms are used for similar applications, such as smart contracts, and aim to build a connected and decentralized system.

Cardano considers itself an updated version of Ethereum and has anointed itself a “third-generation” platform compared with Ethereum’s “second-generation” credentials. The blockchain platform also has a goal of providing banking services to the world’s unbanked.

There are several key differences between Bitcoin and Cardano. Bitcoin was developed to be a peer-to-peer payment system. Cardano is an ecosystem that allows other developers to create tokens, decentralized applications (dApps), or any other uses a scalable blockchain network can host.

The Cardano platform runs on the Ouroboros consensus protocol. Ouroboros, created by Cardano in its foundation phase, was the first proof of stake (PoS) protocol designed to reduce the energy expenditure required by proof of work (PoW) mining. It does this by eliminating the massive computing resources that the proof of work algorithm uses.

Cardano doesn’t reward its cryptocurrency as an incentive in a competitive mining process like Bitcoin. This reduces the energy and waste footprints by not requiring large amounts of electricity to power computers specifically designed for mining. Cardano users can install compatible wallet software on their computers or devices, stake their Ada, and begin earning rewards for participating.

Ada is Cardano’s digital currency, named after Augusta Ada Lovelace, a 19th-century countess and English mathematician recognized as the first computer programmer.

In Cardano’s PoS system, staking determines a node’s capability to open blocks on the blockchain. A node’s stake is equal to the amount of Ada it holds over the long term. A stake is an interest a pool participant holds, secured with Ada that is pledged. Pledged Ada cannot be used or spent by the holder because it is held as collateral for honest validation behavior. Users with pledged Ada are given rewards based on the amount of Ada they have staked.

Users join or create staking pools—groups of Ada holders who have pledged their coins—and work together to update the ledger, open new blocks, and earn rewards.

Cardano uses the PoS consensus mechanism, in which users “stake” a coin for the opportunity to become a validator. Users can participate in the staking and validation process in two ways: You can stake your Ada in a pool or create your own. Stake pools are trusted server nodes that conduct the work of validating transactions. These pools can be either public or private. Public pools distribute rewards to members based on how much Ada they have staked. Private pools, as the name suggests, give rewards to the owner(s).

A stake pool must be run by an operator with the knowledge and skills to maintain the stake pool by renting servers, monitoring the node, holding the pool key, and conducting other pool administration tasks.

Cardano implemented smart contract support in 2021 with its Alonzo update. This testnet update was the first iteration of bringing the promised scalability and use cases to users. This update allowed users to create smart contracts and non-fungible tokens (NFTs) and manage multiple assets. Future releases and forks will bring more capabilities to the mainnet.

There are several staking pools you can choose from to stake your Ada. It’s essential to thoroughly read through a pool’s website, user reviews, complaints, or issues to be sure that you’re joining a reputable pool.

You can also use the community-built tools ADApools.org, Cardanoscan.io, Pool.pm, Poolstats.org, or Pooltool.io to help you select a pool. You can also use the Yoroi, Exodus, or Binance wallets to stake your Ada. You can also use Daedalus, a full desktop application developed by IOHK that downloads a copy of the blockchain. Daedalus is a full node that acts as a wallet that verifies all transactions in its history and lets you choose a pool to join.

Cardano is designed to be developed in “eras” named after notable figures in poetry and computer science history: Byron, Shelley, Goguen, Basho, and Voltaire. Basho is the era of scaling and optimization, intended to bring more capabilities to Cardano. As of 2023, Cardano is anticipating the transition from Basho to Voltaire.

Voltaire is the final era for Cardano development, intended to bring voting and treasury management of the blockchain and network through previously introduced smart contract functionality and system improvements. When Voltaire is complete, IOHK’s goal is to release the blockchain and network to the community, as it will be fully decentralized and able to be developed, maintained, and kept secure.

Cardano cannot be mined in the way that other cryptocurrencies can. Instead, it must be purchased on a cryptocurrency exchange or earned.

Cardano is a decentralized PoS blockchain founded in 2015 and launched in 2017. It has positioned itself as an alternative to PoW blockchains like Bitcoin because it is more energy-efficient and scalable.

The plans behind Cardano’s development are ambitious. Its developers see Cardano as eventually becoming fully decentralized when voting and treasury management of blockchain are added to its capabilities in the future.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author does not own cryptocurrency.

Can blockchain help Baltimore with its vacant property problem?

Time has long been the enemy of those doing battle with Baltimore’s thousands of vacant properties.

In the past, it was not uncommon for two to three years to elapse as city officials waded through the legally arduous process of foreclosing on a vacant home. Today, officials hope they have shortened that window to four to five months with the help of expedited in rem foreclosures.

Still more time passes, however, as Baltimore awaits title searches, a process needed to make sure a property’s ownership history is clear and to satisfy title insurance companies. In the case of Baltimore’s thousands of vacant homes, multiple title searches are needed for every house — one for each step in the process of acquiring, rehabbing and selling.

The time consumed by those searches is something Baltimore’s residents can scarcely afford. Each passing day attracts more crime, vermin and hazardous conditions in vacant homes.

Now, however, Baltimore officials are hopeful that they have a solution to recuperate some of that time lost, too.

This month, the city’s spending board agreed to a $225,000 contract to kick off an effort to use blockchain technology to record the city’s vacant properties. Over the three-year pilot, Medici Land Governance will input records for the city’s roughly 13,600 vacant properties into a blockchain, building a database more secure than the system currently used by the city and also more efficient.

The system will contain an immutable record of the chain of custody for each property, eliminating the need for subsequent title searches, explained Ebony Thompson, Baltimore’s solicitor and self-appointed blockchain specialist. With fewer title searches needed, Baltimore’s most demanding properties can zip much more quickly through changes in ownership, getting into the hands of the developers needed to rehabilitate them and eventually the city’s residents.

“We could certify it much quicker,” Thompson said. “That’s music to my ears.”

Baltimore’s foray into blockchain began on Thompson’s first day on the job. It was Jan. 31, 2022, and days earlier, the city had been devastated by the loss of three firefighters. The three were killed when a vacant home that they entered to fight a fire collapsed violently inward. Scott held a news conference that day to announce Baltimore would undertake a review of efforts to mitigate the stubborn vacant problem.

Thompson, who had joined the city from private practice Venable, already had an idea in mind. During her time at the firm, she had taken a class at Massachusetts Institute of Technology on the use of blockchain. The intersection of the technology with the world of real estate had piqued her interest, in particular the possibilities for speeding up and securing the transfer of properties.

“What I heard was the illiquidity of real estate is the biggest problem,” Thompson said. “Even if you’re good at it, it takes too long.”

Potential buyers of real estate face numerous barriers from intermediaries, Thompson said. People are shut out of purchasing because they don’t qualify for loans offered by banks. Baltimore has a notorious history of redlining, the racially motivated denial of loans and other services to communities considered less desirable. The city is routinely referred to as the birthplace of redlining.

“I started thinking about how blockchain could remove some of those intermediaries, make it more efficient, make it more liquid and make it more accessible to people who have been shut out,” Thompson said.

Other cities like New York City, where the demand for property is high, have experimented with blockchain as a means to prevent people from fraudulently claiming ownership of properties. Baltimore would be the first to use the technology to specifically target unwanted properties.

“What if as the birthplace of redlining, this could also be the birthplace for allowing the people that had to suffer through that, giving them the accessibility to actually revitalize and have a part of revitalizing their own neighborhoods?” Thompson added.

Synonymous with cryptocurrency, blockchain is a broader technology that can be used to decentralize data and allow secure transactions.

Here’s how Johns Hopkins University Magazine described it: Blockchain is a system of validation and encryption for a digital token (a block). Each block has its own unique fingerprint (a hash). Once someone makes a change to the information contained within the original block — say, to add the transaction of a sale — a new, unique block is created and receives its own hash. These blocks are linked to one another, forming a chain, allowing users to review how and by whom the information was edited along the way.

Because the information contained within the blockchain is decentralized, that makes it much more difficult to hack than traditional databases. Blockchains have multiple nodes. Even if a hacker gains access to the database via one of the nodes, it can’t be changed. Alterations would be immediately recognizable when compared to all other copies of the chain and rejected.

While the technology was designed to record financial transactions, its use has grown in other fields such as real estate where data storage and tracking assets are required. Baltimore’s pilot, led by contractor Medici Land Governance, will use blockchain to record the transaction histories of its vacant properties.

When any property is sold, a title search of public records is conducted to confirm its rightful owner. The searches reveal any claims or liens against a property that could impact its purchase. That information is provided to title insurance companies, that secure an owner’s rights to a property. While title insurance isn’t required, it’s best practice, and lenders like to see it to ensure they’re making secure investments.

For Baltimore, title searches have been time-consuming and, in some cases, take months, Thompson said. Worse, the search has to be repeated each time a property changes hands.

With the blockchain technology, however, the city will create an “immutable” ledger of each vacant property’s history. Based on conversations Medici has had with large title insurance companies, that record would be enough to satisfy the title search requirement moving forward, CEO Ali El Husseini told the Board of Estimates recently.

Insurance companies have also said the cost of title insurance could be lowered as a result, he said. Reduced costs will benefit not just the city but the eventual buyers of homes, making them more attractive to developers and people who will live in them.

“Blockchain is the first step,” El Husseini said. “The second step … is making the ability and the purpose of the blockchain to be useful.”

Katherine Pinkard, the president of Pinkard Properties, has studied the intersection of blockchain and real estate. Baltimore’s proposal has potential to increase transparency for the city and other users of the system. Plans call for Baltimore’s database to be public-facing, but it will have a private layer so that only the city can add to it.

“It creates a level of efficiency that we’ve not had before,” she said. “You would be able to pull up a piece of property and very clearly see through these blocks on the chain when it has changed hands and with whom and why and at what cost. All that data and information is there stored in one place.”

Still, Pinkard warned, blockchain is not a panacea. It’s only as strong as the data input into the system, she said.

Thompson said the city will continue to use traditional title searches to compile the information for the database. Information from those searches is already honored by title insurance companies, and it’s the most reliable option, she said.

The blockchain will run parallel to the Maryland Department of Assessments and Taxation’s digital SDAT system, which the city will continue to use, Thompson said.

The blockchain system offers the added benefit of improved security against a cybersecurity attack, a threat that is still fresh on the minds of Baltimore officials in the wake of a 2019 ransomware attack. Although the city’s property records were not damaged during the attack, property sales were completely halted for a period that year as the city struggled to regain access to its mainframe system. Other data was permanently lost.

Construction of the blockchain will begin early next year and is expected to take three years. If successful, the possibilities for expanding Baltimore’s use of blockchain are numerous. Thompson said she sees potential for a citywide property database, but also using the technology for smart contracts that would automatically award payments to subcontractors when primary vendors are paid.

Pinkard said there’s potential for the “tokenization” of real estate, allowing fractional ownership shares of properties. City residents who perhaps couldn’t qualify for a mortgage outright would have the potential to buy a fractional share of their home or apartment building. The system would allow owners to maintain their shares both when buying and selling.

“Having the city take the lead, I think is the lynchpin that’s going to help make that happen,” Pinkard said. “If the city creates a supportive environment around experimenting with blockchain, that I think is the first domino that needed to fall.”