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What is Ada? Pt. 2


 

In part one, we used a story about a guy named Joe as an example of how ada could be used in the real world. In that story we hinted at some details of how ada works as well as some key differences in how using ada to pay for a haircut would be different. Let's take another look at the story with ada being used as a digital currency instead of a physical form of currency.


The Haircut

It has been another month since Joe's last haircut, so he calls his barber to schedule an appointment. While scheduling, his barber states that they are now accepting ada as a form of payment. Joe acknowledges this and carries on his day. When it comes time to head to his appointment, Joe jumps in his car and drives straight to the barber shop. No need to stop at an ATM this time! He has plenty of ada in his wallet already. Joe sits through his haircut and approves of it when asked by the barber. With the haircut finished, it's time to pay. "That will be 15 ada," states the barber as he pulls out his phone. Joe takes his out as well and opens his cryptocurrency wallet. He scans the QR code displayed on the barber's screen, enters the number 15 for the amount of ada to send and approves the transaction. Seconds later, the barber smiles and shakes Joe's hand before Joe heads out the door with his fresh new cut.


The Break Down

There are a lot of differences between the story in part one and this one. Let's look at each difference and explain what's happening.


First, Joe didn't have to stop at the ATM. Granted, the only reason he had to stop at one in the first story was because he chose to use cash. He could just as easily have used a debit or credit card and skipped the trip. However, there is a key difference to remember. In part one, Joe's ada was held in a bank. His main options were to withdraw his ada from an ATM, use a debit card, or use a credit card. All of these require a third party in order to complete a transaction. In part two, his ada was held in his cryptocurrency wallet, making him fully responsible for storing his ada and making no third party necessary.


That leads us to the second difference. Both Joe and his barber had cryptocurrency wallets. In later articles we'll go into more detail of different types of wallets, however, for the sake of this story what we need to know is that the cryptocurrency wallet is accessed through a mobile app. The wallet gives you the option to store, send or receive ada. In this case, Joe chose to send his ada to the barber by scanning the QR code which contained the barber's wallet address. Each wallet has its own, unique address.


The third difference was not specifically called out in the story. If you remember in part one, we briefly mentioned that there are transaction fees when sending/receiving ada. In this case, when Joe sent his ada to the barber, there was a small fee added to the transaction. In part one, Joe had to pay a transaction fee when withdrawing from the ATM. That fee covered the operating costs of the ATM as well as the infrastructure needed for it to function as intended. In a later article we'll explain where the fee added during an ada transaction goes and why it exists.


The final difference is how and where these transactions were recorded. In part one, there was a record of Joe using the ATM to withdraw ada. That transaction would be recorded by the bank. However, there was no record of the transfer of ada from Joe to the barber. In part two, the transaction would be recorded and stored on the Cardano blockchain platform.


That's it! In this series, we've now covered what a decentralized blockchain platform is and exactly how ada can be utilized. We are also starting to see how the two are related. Stay tuned as we dive deeper and explore even more real world scenarios.

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