Cardano: proof-of-stake, governance shared by three organizations, and a launch where one company made every block

Using proof of stake for a cryptocurrency is a hotly debated design choice, however because it adds a mechanism to introduce secure voting, has more capacity to scale, and permits more exotic incentive schemes, we decided to embrace it.

Cardano’s own design documentation says that about itself. Naming a choice as contested and then making it anyway is not the usual way a monetary design introduces its own consensus mechanism.

The same project turned that contested choice into a running mainnet on July 29, 2020. For its first two weeks every block on it still came from the company’s own servers, and it took eight months for the share made by its core nodes to fall to zero.

What the design documents say Bitcoin got wrong

The same design documentation goes on to name two further departures from Bitcoin, and names them as departures rather than as accidents. The first is architecture: the project separates the ledger that moves value from the layer that runs contract logic:

Thus, we have chosen the position that the accounting of value should be separated from the story behind why the value was moved.

A settlement layer moves the value, and a separate computation layer runs the contract logic: the accounting and the story of why the value moved sit on different layers from the start.

The second, and sharper, is over identity, and the documentation is unusually blunt about naming Bitcoin as the thing it declined to inherit:

In the effort to anonymize and disintermediate central actors, Bitcoin and its contemporaries have also discarded the need for stable identities, metadata and reputation in commercial transactions.

Bitcoin’s refusal of a stable identity layer is not framed here as a limitation waiting on an engineering fix. It is named as a property Cardano chose not to carry forward. Supply is the one axis where the two chains agree — the fixed-supply comparison puts Cardano in the hard-cap cluster alongside Bitcoin and Litecoin. The split runs through consensus and identity, not through scarcity.

Ouroboros: how the lottery actually runs

Cardano’s consensus lives inside a family of protocols called Ouroboros, and the family itself changed shape once. At the 2017 launch, Byron ran on Ouroboros BFT — a federated design in which a small number of IOHK-operated core nodes reached agreement synchronously. Byron gave way to Ouroboros Praos, a stake-weighted, peer-reviewed protocol published at EUROCRYPT 2018, at the July 2020 Shelley mainnet launch — the same launch that opened block production to the public.

The mechanism itself resembles a lottery more than a schedule. Time is divided into one-second slots, and 432,000 of them make up an epoch — about five days of wall-clock time. At the start of each epoch, the blocks accumulated so far hash together into a fresh random seed. Each stake pool operator feeds that seed, their own private key, and the number of the slot they are testing into a verifiable random function. If the output falls under a threshold set by their share of total stake, they win the right to produce a block in that slot. More stake raises the threshold, and with it the odds, but no operator — not even the winning one — can know in advance which slots they will win. A new block arrives roughly every 20 seconds on average.

The same lottery, set beside Bitcoin’s hash-power lottery and scored on electricity, finality and the Nakamoto coefficient, is in the proof-of-work versus proof-of-stake comparison; Cardano’s coefficient there is 15.

A second number governs who bothers to run a pool at all: the saturation point, set by a parameter called k. A pool’s rewards grow with the stake delegated to it only up to that point; delegation past it dilutes the reward rather than growing it.

The row worth noticing is the one where k does not move and the saturation point does anyway. Saturation is set roughly by (the 45 billion cap minus the reserve still unspent) divided by k. Staking rewards are paid out of that reserve every epoch, so the reserve shrinks year over year even without touching k — which is exactly why the same k=500 produced a lower saturation point in December 2020 than it did in October 2022. Raising k itself, from 150 to 500 that December, cut the saturation point to less than a third in one step — a different kind of change from the drift the table’s other rows show.

Where k sits next is now decided by vote rather than by IOHK alone, and who gets to vote is the other layer of this design, described below.

A forty-five-billion cap, a four-stage sale, and eight months to retire the company’s core nodes

The supply caps at 45 billion ADA — on the scarcity axis, the twelve-chain design comparison places Cardano on the same side of the ledger as Bitcoin. The road to that cap looked nothing alike.

Between October 2015 and January 2017, Cardano ran a public voucher sale in four stages across Asia, selling just over 25.9 billion ADA. Of that total, 5,185,414,108 ADA — 20% — went to IOHK, EMURGO, and the Cardano Foundation. The founder described the sale in different terms:

There was no Cardano ICO. There was an airdrop onto a distribution and then thousands of people who never met each other traded Ada on exchanges and used Cardano for their projects.

Whether “airdrop” is the right word for a sale is a dispute about vocabulary. The allocation underneath the dispute is not contested at all — Cardano publishes the number itself.

Consensus told the same story from a different angle. IOG’s own account of the Shelley launch names the parameter that measured it: at d=1, decentralization is zero.

When d=1, all blocks are produced by IOG core nodes, running in Ouroboros Byzantine Fault Tolerance (OBFT) mode.

Shelley launched at d=1 in July 2020. Community stake pools began sharing block production on August 13, 2020, when d first dropped below 1, and Cardano reached d=0 — no blocks from IOG’s core nodes at all — in March 2021, eight months later.

Authority over the protocol’s own rules took far longer to leave the same three organizations that had received the 20% allocation. IOHK, EMURGO, and the Cardano Foundation held the keys to Cardano’s hard forks for the chain’s entire history until the Chang hard fork went live on September 1, 2024, activating a framework called CIP-1694. It created three new governing bodies — a constitutional committee, delegated representatives (DReps), and the stake pool operators themselves — and moved hard-fork authority from the three founding organizations to on-chain votes among the new bodies. The Cardano Foundation’s own CTO called it the biggest event in the chain’s history. The voting mechanics underneath it trace back further, to Project Catalyst, a community-funding experiment that opened its first public round in September 2020.

The governance overhaul was not the only test Cardano faced. In June 2023, the SEC named ADA among the assets it alleged were unregistered securities in its actions against Binance and Coinbase — the same actions that named SOL, Solana’s currency overview records, with the same eventual outcome: the agency later moved to drop the Binance case’s SOL and ADA claims, and the Coinbase case was dismissed in February 2025. IOG rejected the characterization from the outset.

What the founder said about Bitcoin

Charles Hoskinson led this design, and for twelve years he has said what he thinks of the chain it was built against — in public, at length, from a position that kept moving. In an interview during the StartEngine Summit, he put the objection and the credit in a single answer:

If you look at hashrate and who has control, less than 10 percent of the actors are in charge of the hashrate power of the bitcoin network. How can you say that is decentralized? Satoshi did something completely magical and wonderful. It’s worth a Turing prize. It’s an amazing thing.

That objection is also the argument for replacing proof-of-work in the first place: if control concentrates under mining anyway, swapping the mechanism is a correction, not a shortcut.

In the same interview he told a story from a conference in Toronto in April 2014. At a barbecue restaurant that accepted bitcoin, his companion said, when the bill came, that he expected bitcoin to go up and would use his credit card instead. His conclusion:

It became clear to me — this is not money. It’s a commodity or a store of value.

The assessment had turned over completely.

The industry doesn’t need Bitcoin anymore to survive.

It’s a religion, not an ecosystem.

The reversal does not hold its shape for long. Hoskinson’s biography tracks the fuller record, including a November 2024 livestream in which he called Bitcoin the internet’s store of value — the 2018 position restated, six months after burying it.

Cardano’s approach toward its own cap, plotted against Bitcoin and ten other currencies on one normalized index:

Significance to Bitcoin

Cardano’s design answers questions Bitcoin’s own design leaves closed on purpose: a lottery among staked capital instead of a lottery among burned electricity, an identity layer Bitcoin refused to build, an amendment process routed through named governing bodies instead of rough consensus among anonymous node operators. None of that inherits from Bitcoin’s source code — Ouroboros descends from academic proof-of-stake research, which is why Cardano sits outside the technical lineage the fork-and-altcoin genealogy traces.

The founder who said that fewer than 10% of participants control Bitcoin’s hashrate led a chain that opened its own mainnet at the maximum reading of that same scale: one company, all the blocks. The two-layer decentralization framework that separates a chain’s technical layer from the people and organizations running it treats these as different axes for a reason — Ouroboros satisfied the technical layer from the day it replaced Byron’s federated nodes, while the people-and-organizations layer took until 2024’s Chang hard fork to loosen its grip, and even then handed authority to a constitutional committee rather than to no one. Bitcoin’s own departure from both axes happened at once, from a founder who left and never came back. Cardano’s departure from the second axis is dated, documented, and took years — which makes it the rarer kind of evidence: a competing design’s own record of how long decentralization actually takes when it is not there from the first block.