Cardano is one of many projects that people like to call Ethereum Killers because it does share some similar functions with the Ethereum Network.
For a start, Cardano was founded by an ex-Ethereum developer and co-founder – Charles Hoskinson. In this respect, many refer to Cardano as a breakout network from the Ethereum just like Polkadot, so co-founders of Ethereum are branching out and starting their own projects that introduce new features and solutions to the many network-related issues, most notably, that of scaling – something that Ethereum has struggled with all along.
Cardano was created to allow decentralised applications and contracts to be built and executed in a low-cost, secure and scalable way,
The Cardano project openly addresses the need for regulatory oversight whilst maintaining consumer privacy and protections through an innovative software architecture. The protocol features a layered blockchain software stack that is flexible and scalable, and it took it a few years to advance to where it is today but especially after the very successful Alonzo hard fork (upgrade ) last year, it now supports building of smart contracts and entered the DeFi and NFT sectors, which is where all the focus and money is concentrated right now. These two sectors have seen immense growth since 2020 and have become the gateway for many first-timers to get into crypto, so a lot of media and consumers attention is paid to projects that operate in these areas, which is a very friendly environment for Cardano in my opinion.
Watch my video about Cardano here:
Cardano’s native token ADA is currently the 7th largest cryptocurrency by market capitalization. It was developed in 2015 and publicly released in 2017, and it’s what they call a Third generation blockchain network, meaning it builds up on all the lessons learned from other cryptocurrencies to create a distributed computing platform and has a strong focus on security. As I explained in my book – Learn Crypto, Bitcoin and many other blockchain networks operate as money – or at least as a store of value and unit of exchange, which is what we call first generation cryptocurrencies, then we have Ethereum, and smart contracts being second gen, and the networks like Cardano come third, further improving on the predecessors with greater scalability and interoperability.
They emphasize on their plan to work on three major issues in the blockchain industry which are:
- Scalability – this means being a faster network, with much higher number of transactions per second, despite the influx of people into the network.
- Interoperability – communicating with other blockchains and different platforms or networks.
- Sustainability – building a long-lasting ecosystem.
It’s also important to point out here, that one major difference between Ethereum and Cardano is that while Ethereum is still operating on Proof Of Work model and still preparing for a possible future move to Proof Of Stake, Cardano operates on Proof Of Stake already.
Proof Of Work is a type of mining where for every successfully mined block of data, the miner gets rewarded – in this case in Ether, for the Ethereum miners. It’s a high-energy consuming method, but it’s still the most robust when it comes to security and so far, its proven to be the most reliable. Proof Of Stake on the other hand, means that if a person wants to mine or validate transactions on that blockchain they have to have a stake – be a holder of the ADA coin, implying that the more coins owned by a miner the more the mining power they might have. On one hand, this ensures that the miners are the same people who have a vested interest that the network operates successfully, on the other hand, critiques of Proof Of Stake are quick to point out that this way there’s a risk of high-stake dominance and less decentralization. Invariably this can be seen from the point of view that the more ADA owned by a miner the more stake they have in determining what goes on in the platform.
Despite this critique, Cardano fans claim it is the most decentralized network – a notion that has been discussed a lot in the past year. As the number of holders and stakers of ADA continues to grow, the supply gets more evenly spread out.
Staking the Cardano token is in fact very popular, compared to all staking projects, Cardano holds the second place as the most staked, only falling behind Solana and largely surpassing the likes of BNB, Polkadot, Atom or Pancake Swap with its 50% annual staking reward for comparison, ADA brings about 5% annual return while BNB, DOT and ATOM stand at around 13% APY – that’s more than twice the annual return of Cardano. Yet, Cardano’s community is indeed much stronger and more devoted and it shows.
Compared to Ethereum, Cardano’s network is faster – currently at 250 transactions per second and with the potential of carrying out up to a million transactions per second once it is fully developed, while the Ethereum network is much slower. I mean – really much slower – 15-45 transactions per second – which is one of the reasons why transactions fees have jumped so much in the past 2 years with DeFi and NFT sectors requiring hundreds of thousands of transactions every day. These congest the network and we end up with a huge backlog which subsequently results in higher fees – because people compete to get their transaction approved faster – such is the nature of this free market. This happened to Bitcoin back in 2017 but since the Segwit upgrade we haven’t seen too many problems and although still kinda expensive, Bitcoin transaction fees are much more reasonable than those of Ethereum. But taking a closer look at Cardano’s fees, it becomes apparent that they’re not immune to this problem. As the price of the ADA token has jumped a lot in recent years, so has the price of the average fee you pay for sending or transacting with the token. In fact, it seems there has been a whopping 1500% spike on the fees in the past couple of years – kinda going hand in hand with the token price appreciation – last year it hit more than 640% ROI and the year before another 400%+ but the fees are calculated following parameters that were set 4 years ago, back when the token was priced just above 1 cent.
The current average transaction fee is $0.47 which may seem on the low end, but what happens if the price of ADA hits $10? What about $100? Whenever that is, even if it takes years to get there, who would be glad to be using a network with such high fees? Isn’t the whole goal to provide a cheap service, fees should be less than 10 cents if we look at it this way. Well, it seems that Charles Hoskinson doesn’t see this as a problem. He has addressed this issue by saying that token holders can vote on proposals to lower fees when the time comes.
There have been a few upgrades to the protocol so far, most notably, the Alonzo upgrade that I reported about many times on this channel – this upgrade introduced smart contract capabilities to Cardano and we are bound to see new applications come out on Cardano. DeFi and NFTs being the main focus of course as these two sectors are where all the money is right now.
One such project making the news around the Cardano platform is the MELD PROJECT
which has huge growth potential, MELD is typically a DeFi lending protocol that is similar to Aave, built on Cardano that facilitates users to decentralized financial services such as lending/borrowing and liquidity providing. Users can deposit their crypto assets to borrow fiat currency while they have to pay the interest to lenders and the Meld platform. This project is said to be the future of DeFi banking.
Also, another news surrounding the Cardano ecosystem has been the recent announcement of partnerships between TINGO ( Africa’s largest Agric Fintech) and MELD, and it’s also interesting that Tingo International holdings are a majority shareholder in Tingo Mobile PLC in Africa.
Some say that the Cardano network shows a potential in the future of outrunning the Ethereum network in terms of users adoption but I don’t see this happening any time soon, not only Ethereum has nearly half a million applications built on its blockchain, but also there are now many competitors and Cardano can only take a share of this market, but to dominate it, it will take a lot of innovative developments and community participation. I don’t see it happening, but that’s not to say that there aren’t developments and new updates on Cardano – another major one was the release of SUNDAESWAP Decentralised exchange (DEX) on the Cardano blockchain, having just launched on the public testnet.
This was the first project that leveraged Cardano smart contracts to exchange tokens successfully on the public testnet. This project alone has gotten a mass adoption of over 200,000 users already.
Again, the Cardano network as a young enterprise hasn’t failed to encounter some challenges and setbacks. There are some big potential stumbling blocks, Nevertheless, Cardano will have to clear those stumbling blocks to getting to where its investors believe it can go or should go.
We can’t ignore that smart contracts on Cardano hit a huge technical roadblock soon after being launched in September 2021 with the Alonzo hard fork.
The developers working on Cardano reported problems with achieving concurrency due a technical glitch or a programming error, I’m not sure, but Concurrency means multiple computations are happening at the same time. It’s the ability for multiple parties to interact with the smart contract simultaneously.
At the same time one of the initial teams working on another decentralized exchange, called MinSwap, on Cardano testnet, failed to achieve token swap functionality. Following this, Minswap as well other teams—including SundaeSwap—stated that Cardano DApps needed scaling solutions to mitigate concurrency problems. Such hiccups occur to any new network with upgrades that have not been tested well enough, or, are too ambitious for the capabilities of the network and the way these are getting resolved will give us better idea on the longevity of this project too, so it’s always imperative to keep up to date with all news concerning the projects you invest in – and this is not investment advice, I’m merely stating what’s common sense. If you’re investing or thinking of investing in cardano and this is why you’re watching this video, take notice of what I’m saying here: you have to know about the assets you’re buying – in the case of cryptocurrencies, these are all projects with teams and no matter how decentralized, the development is led by a team and you should know what they’re releasing or plan to release, what upgrades are due, what problems they face and most importantly, how they resolve such problems – any project can falter at any point and if not resolved smoothly, the results can be dire to the market value of their coin, so I’m glad you’re doing some digging into Cardano with this video, but keep an eye on their announcements and always read what the haters have to say too – those who have negative views can also help you spot the weaknesses and at least be aware of them, I’m not saying you have to follow what every nay-sayer will tell you, but be alert.
For example, many have criticized IOHK – the company behind the development of Cardano for the fact that after 5 years, there’s very little built on Cardano and not a single popular application has been deployed yet.
In theory, the platform is enormously attractive. In practice, there simply isn’t much there yet. So 2022 could be the year when we see smart contracts finally being deployed on Cardano – something that everyone in their community has been eager about for quite a while.
In terms of market performance, ADA did really well throughout the past year, it hit new All Time Highs in the run up to its Alonzo hard fork and even after that for a short time kept the momentum but has since dropped as it’s going through a correction that finds it at the 7th place in marketcap ranking, with a $38 billion market capitalization and around 61% drop from its all time high of $3 dollars, reached in September of 2021.
In Conclusion
Cardano had a tremendous couple of years and still looks really promising with much potential in the near future, at least until Ethereum 2.0 kicks in – this could put a shadow on all competition for some time, but that’s not going to happen very soon, so if you’re getting into Cardano, you probably have plenty of time to ride its next wave of bull runs that are to come – for more details and technical analysis, make sure you’re subscribed, I look at the charts of various top coins every week and analyse the ones that are most popular, so Cardano is often featured in my videos as I trade this token actively.
Whether you’re looking into investing for short or long-term, Cardano can be a decent choice, although, it has yet to prove that it deserves all the hype that surrounds it and that’s the risk really – there are challenges ahead of it but overcoming these, will surely push its token ADA into new highs, huge profit for the token holders but just as well, failing to do so, could mean a massive sell-off from disappointed users and a price collapse, so the risk is there. As always, there’s no gain without a risk and I am a risk-taker, but that’s me and I am trading this token at the bigger market moves – I do not hold it for the long term. As you know, I like to jump out of altcoins once they start correcting from all time highs and this is when I exited my ADA positions. I am now re-accumulating on the dips and preparing for the next wave – the market goes in cycles and knowing how to ride these cycles can mean life-changing money, so check out my eBook Learn Crypto – the ultimate beginner’s guide to investing in cryptocurrencies where I share with you some strategies and some of my biggest mistakes for the past 5 years, so hopefully this will help you avoid making these, and I invite you to join my Crypto Newsletter – twice a month, on 1st and 15th of each month, I send out my latest market analysis, news, updates and other precious crypto content, so grab this link and jump-in on my email list: http://www.ojjordan.com/crypto-corner
Crypto-Corner 