Glossary: Cardano Explained

Portrait of Ada Lovelace with scientific diagrams and formulae

Crypto

Crypto refers to a new class of financial assets, specifically cryptocurrencies.  Cryptocurrencies, otherwise known as Digital Assets, are decentralised currencies that operate in a purely peer-to-peer way without any controlling parties.  They are based on software which can be downloaded from the Internet by anybody and thus they offer open participation without imposing barriers on anyone.  Cardano (ADA) is one such cryptocurrency.

Cardano

Bitcoin (BTC), launched in 2009, was the first cryptocurrency.  Since then many hundreds of new cryptocurrencies have been created.  Although they are all different to varying degrees, very few of them are able to differentiate themselves in a meaningful way.  Cardano (ADA) is a cryptocurrency that distinguishes itself based on extremely thorough scientific and engineering methods.  This has already led to the publication of many research papers in collaboration with various universities.  All of the Cardano research papers go through a strict peer review process.  Formal verification techniques ensure the production of high-assurance code that will execute exactly as desired.  Correct-by-construction programming is implemented in the Haskell programming language, which allows for mathematically provable security.  These are methods usually reserved for such things as aeroplane design, where proper functioning is crucial.  This is what sets Cardano apart from most other projects.

Shelley

The Shelley Release of Cardano is an update which will be applied to the Cardano network in October 2019.  As cryptocurrencies are based on software, they are in essence 'upgradable money' meaning that new features can be added as time passes.  Most cryptocurrencies are built out in small steps, moving in a slow and deliberate way to make sure that everyone's money stays safe.  Shelley is a particularly significant update to the software because it will allow users to participate in Cardano staking for the first time, including a feature that allows users to delegate their stake to a stake pool.

ADA

The network is called Cardano but the cryptocurrency that people can use on it is called ADA.  This is named after Ada Lovelace (1815-1852) who worked on the Analytical Engine and was the world's first computer programmer.  Users of Cardano can keep their ADA totally under their own control in the Daedalus wallet which you run on your own computer.  Other things to do with ADA are to spend it, send it to another user or use it to take part in Cardano staking.

Daedalus Wallet

Daedalus is the name of the main wallet currently used in the Cardano network.  It was made by the Cardano developers and is the strongest and most feature-complete wallet for storing your ADA.  Once Shelley is released, users will be able to choose to delegate their ADA to a stake pool simply by selecting a stake pool in the interface of this wallet.  You can download it here:  https://daedaluswallet.io/

Staking

When a user decides to participate in Cardano staking they actually help to secure the Cardano network  through a complex protocol known as PoS (Proof of Stake).  Staking is the Cardano equivalent of mining in Bitcoin.  PoS all happens in the background so that the user does not have to worry about it and the wallet interface is quite simple.  While ADA staking helps the network function, it also offers the user the chance of winning a financial reward.  Each ADA staked acts somewhat like a lottery ticket.

Tranquil natural pool with waterfall

Stake Pool

As cryptocurrencies grow in size it can become very unlikely for a modest user to ever win the staking 'lottery', even if they waited for centuries.  This is due to the sheer amount of other competing users and money that gets involved.  What normally occurs is that the majority of users join together in stake pools, where they put all of their stakes together in order to have a much higher chance of winning a reward.  Then, the stake pool divides the rewards equally between all of the users, hence giving every person a little piece of (much more reliable) reward at more regular intervals.  Cardano staking has been specifically designed in the expectation of stake pools.  When the Shelley update is released, users will be able to join any stake pool that they want, easily (with a couple of clicks), from their Daedalus wallet.

Stakeholder

A stakeholder is a user who has chosen to delegate some of their ADA to a stake pool.  A stakeholder does not need to send any ADA (or any other money) to the stake pool.  The Cardano network allows users to delegate their 'ADA staking rights' to a pool without losing any control over their ADA and doing this automatically qualifies the stakeholder for a share of the stake pool rewards.  That means that the act of joining a Cardano stake pool does not bring any financial risk for the stakeholder.  Any user who wishes to participate in Cardano staking must have the Daedalus wallet to do so.

Pool Parameters

The owner of the stake pool is able to select a few parameters that govern how the stake pool functions.  These are transparent in that users will be able to see these parameters directly in their Daedalus wallet.  In the case of Generous, we have carefully selected the parameters that will provide a consistent and generous return to the stakeholders.  Margin and cost are two of the most important parameters in Cardano explained in the next sections.

Cost

Costs represent the cost to the stake pool owners, that is the amount of money that they have spent out of their own pocket to make the stake pool a reality.  This can involve the rental of computers and the costs of setting up a website, amongst others.  The cost parameter returns a set amount of ADA to the pool owners before the pool rewards are shared amongst the stakeholders.  The Cardano network uses Game Theory to reward pool owners who minimise their pool costs, hence there is an incentive to be honest about it.

Margin

Profit margin is a commission (in ADA) that the owners  take from the total stake pool rewards after subtracting costs, but before the rewards are shared amongst the stakeholders.  The idea behind the margin parameter is to compensate the stake pool owners for the hard work and personal time that they put into building and maintaining the Cardano stake pool.

The Generous Promise

Generous Stake Pool will always return 97% of the pool rewards to the pool members.  Whereas other pools might play with their margins to always squeeze the most out of people, we will always keep ours dependably stable and we promise to never change this parameter.  ADA staking with Generous is guaranteed to be a stress free way to maximise your ADA.  Always.