August has seen a bloodbath in the crypto market with the nascent industry shedding more than $500 million in a severe bear season. Bitcoin, Ethereum, and Solana have not been spared with the trio dropping 17.3%, 29.2%, and 21.5%, respectively in the past week. While the general market sentiment has been bearish, savvy investors know this is the best time to stockpile digital coins at a discount.
Bitcoin and Ethereum remain in the sight of several investors but peer-reviewed blockchain Cardano is also one to look out for in this bearish season. In this article, I answer the most crucial question on the back of every long-term investors’ mind, “Is Cardano a good investment?”
Here are some details to consider.
History of Cardano’s Background
Charles Hoskinson, a co-creator of Ethereum, is the founder of Cardano. Hoskinson launched the project in 2015 to resolve some of the issues associated with the Bitcoin and Ethereum's proof-of-work (PoW) consensus methodology.
The Cardano settlement layer—the value ledger—was established in 2017 and raised $63 million through an initial coin offering (ICO). This layer was designed to settle peer-to-peer payments, while the computation layer was designed for smart contracts. In September 2021, after the Alonso hard fork, smart contract functionality was deployed on Cardano.
The protocol has multiple processing levels for settlements and calculations, a proof-of-stake consensus, and the possibility to upgrade its network quickly in the future, among other features.
Cardano is named after Gerolamo Cardano, while its utility token—ADA—is named after Ada Lovelace. Over 70% of ADA tokens have been staked for network validation. So many ADA tokens were staked because of the blockchain’s initial lack of decentralised applications (dApps).
Cardano's Development Since Launch
Is Cardano good? How has the blockchain performed since its launch? Cardano has completed over half of its five-phase development process.
Byron, the network's first phase, was named after Lord Byron—a poet and Ada Lovelace's father. The basic architecture of the network was created during this phase. In addition, Cardano implemented its basic functionality in this phase to ensure the network and core technology's flawless operation.
During the Byron phase, the Cardano ecosystem also received the Daedalus wallet, IOHK's official desktop client for ADA, and Yoroi, a light wallet from IOHK's sister company Emurgo, for day-to-day use and efficient transaction execution.
The Shelley era developed a more considerable degree of decentralisation on the platform. In the Shelley phase, Cardano migrated from the federated Byron period—toward a greater reliance on community-run nodes—with the launch of Cardano's mainnet. Delegation and incentive plans were also introduced during this period.
In the Goguen phase, Cardano introduced smart contracts. This feature enables developers to build decentralised applications on the network using Plutus, Cardano's smart contract development language. Cardano also implemented a multi-currency ledger to make it easier to create new tokens that are natively supported.
The blockchain network will be scaled in the fourth era (Basho era); it will integrate solutions to improve its performance and stability. Cardano will also introduce interoperable sidechains, which will significantly aid Cardano's capacity to handle larger throughput levels. Interoperable sidechains will also support parallel accounting methods, allowing for greater Cardano and application compatibility.
Voltaire is Cardano's final development phase. In this phase, Cardano will hand over operations to the community after creating a self-contained, decentralised network. Instead of a centralised institution like the Cardano Foundation handling development and maintenance, the community will be responsible for the network's upkeep. This phase is already in progress.
Cardano An Ethereum Killer: How True is that?
Cardano considers itself the third generation of blockchain technology and was created to address the scalability and lack of functionality the Bitcoin network was plagued with and Ethereum’s growing centralised outlook with its PoS system. Its scientific approach towards solving these issues led it to being labelled an ‘Ethereum killer.”
Is it really though?
Well, Cardano's technological framework is a promising start.
For one, Cardano is the most decentralised blockchain network ever. In an Edinburgh Decentralisation Index (EDI) result, the science-based blockchain scored the highest (58) on the Nakamoto co-efficient. Bitcoin and Ethereum only managed 2 points. Decentralisation is a critical component of the blockchain ecosystem as it ensures no single entity will have complete control over the network state and impact activities negatively.
Bitcoin and Ethereum scored so low due to both network’s reliance on economic prowess to secure them. Bitcoin requires hundreds of expensive ASIC mining machines run by financially buoyant individuals due to climbing hashing difficulty to remain decentralised. Ethereum on its part, tends to be centralised as its strict 32 ETH staking requirement can only be afforded by highly liquid individuals. Cardano provides a middle ground and with the full launch of its Voltaire phase in the coming months, all community members will play a crucial role in its continued operation and censorship-resistance.
Secondly, Cardano is future-proof. This is due to the fact that all network upgrades are scientifically measured out with the possible impacts foreseen beforehand. This forward thinking strategy makes it possible for network upgrades or hardforks to impact the network very little, ensuring that Cardano users can execute their transactions seamlessly. This is not the case for several other smart contract enabling networks who often suffer a network downtime during upgrades or lead to a split into two separate chains.
Another key metric that stands in Cardano’s stead is that it has never suffered a network downtime since its launch. It has enjoyed 100% uptime in the last half decade plus and is still running smoothly till this moment. This is a key metric more users are looking out for when selecting a DeFi-facing network they can rely on. Cardano’s historic uptime builds trust for users who intend playing a role in the decentralised economy.
Lastly, the DeFi ecosystem is still a promising arena investors and users alike are paying close attention to. Cardano is building out a strong moat in this space with over 1,000 decentralised applications (dApps) calling it home.
While Cardano might not become the second most valuable crypto asset, it is slowly building a strong moat to become a quintessential part of the new decentralised economy.
Cardano's Offerings
Thinking, should I invest in Cardano? Here are benefits and features to consider:
Proof-of-Stake Consensus
Proof-of-stake (PoS) is a consensus mechanism or protocol that determines consensus based on the amount of stake (or value) retained in the system. A consensus protocol is, in essence, what governs the laws and parameters that regulate the behaviour of blockchains. PoS benefits investors and the cryptocurrency involved: investors can earn from staking their assets and the blockchain is secured. Transactions are also processed quickly and at affordable rates.
Smart Contracts
Cardano has launched the long-awaited Alonzo update. As a result of the upgrade, the blockchain network now supports a wide range of crypto applications, including non-fungible tokens (NFTs) and smart contracts. Over 1,000 dApps are operating on the peer-reviewed protocol.
Smart contracts are digital agreements between two parties; these contracts act as guarantees. The outputs (or transactions) are only implemented when the prerequisite requirements (or inputs) outlined in the agreements are met. Transactions are executed automatically once the conditions are met. These transactions will be permanently stored on the Cardano blockchain along with their information.
Partnerships
Cardano has already formed relationships with several significant colleges, governments, and corporations, including the University of Illinois. Snoop Dogg, the American hip-hop icon, advanced his cryptocurrency journey by investing in Cardano.
Additionally, Hoskinson ensured that Cardano's potential was realised in Africa, where he believes blockchain technology can significantly influence. This is because a considerable segment of Africa's population does not have access to financial services.
Environmental Sustainability
Thanks to Ouroboros, Cardano can scale to global needs with minimum energy use. Cardano does not require more energy to boost performance and add blocks like other blockchains. According to ADAN's analysis, Cardano’s energy uses about 6 GWh of energy annually—around the same amount as two power plants. Various unique technologies, including multi-ledger, side chains, and parallel transaction processing over multi-party state channels, accomplish this performance-sustainability balance.
Wave Financial LLC (Wave), an SEC-regulated digital asset investment management company, has launched the Wave ADA Yield Fund. This fund offers liquidity in the form of millions of dollars to support new decentralised finance (DeFi) platforms developed in the Cardano ecosystem. The initial investment was $100 million. Wave intends to encourage outstanding entrepreneurs in the crypto sector and foster greater innovation in the overall crypto ecosystem.
Is Cardano a Good Investment?
With a lot of momentum and solid fundamentals, Cardano is one of the most exciting applications in the blockchain industry. The protocol has smart contract capabilities, which enable the creation of decentralised apps (dApps) on the blockchain. This is crucial, as dApps have real-world applications from business to games.
The speed of cryptocurrency transactions has largely been an issue, especially for businesses that rely on high-performance legacy transaction processing technologies. However, Cardano processes transactions swiftly. The blockchain processes 250 transactions per second (TPS)—way higher than Ethereum’s average of 18 TPS.
Ouroboros Hydra, Cardano's off-chain scalability option, significantly increases the blockchain's scalability and processing times while requiring less storage space on the network's nodes. In addition, Ouroboros enables the completion of micropayments, voting systems, and the support of insurance contracts.
Furthermore, Cardano is subjected to multiple peer reviews before implementing changes or updates. Although this may slow things down, it reduces the likelihood of future problems.
With these impressive futures, ADA—Cardano’s utility token—will likely remain relevant for a long time. This means that the digital asset will remain in constant demand. And high asset demand typically leads to steady or bullish price movements.
Conclusion
Why is Cardano good? Its proof-of-stake mechanism, ADA token, and low-energy usage strategy are attracting massive approval in the cryptocurrency market. The blockchain also has a lot of scalability options. And although the digital coin presently has an impressive transaction rate of 250 transactions per second, it intends to achieve 1 million transactions per second in the next few years.
Is ADA a good investment? The value of ADA will rise in the coming years as it becomes more widely used. Although it is unclear whether ADA's market capitalisation will grow, one thing is certain: Cardano is a good long-term investment.
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