The crypto market is a volatile one, with many coins and tokens experiencing huge fluctuations in price. One of the most popular coins on the market right now is Cardano (ADA). Cardano was launched in 2015 and has experienced an increase in value of more than 30x, but is Cardano a good investment?
Many investors consider Cardano a good investment because it’s built with an innovative blockchain technology that solves many of the problems other coins face, like scalability and interoperability. And it has a strong team behind it, led by Charles Hoskinson – one of Ethereum’s co-founders.
If you want to invest in cryptocurrency but don’t know where to start, this article will help you understand more about Cardano, its fundamentals, and whether or not it might be worth investing your time and money into.
Why Should You Invest in Cardano?
Any project is as good as its approach to solving real-world problems. Analyzing the utility of the project gives you an idea of its potential. As for utility, Cardano is a step ahead when it comes to solving existing blockchain roadblocks.
Cardano Is Secure
Cardano platform is built using the Haskell language. For those of you who don’t know, Haskell is a programming language used in bank security systems and military networks. The use of Haskell makes ADA one of the most secure and valuable cryptocurrencies.
Cardano Is Scalable
Bitcoin can process 4-7 transactions per second (TPS), whereas Ethereum 2.0 promises 100,000 TPS. For blockchain platforms to be at par with traditional payment channels, they need to boost scalability. Ethereum 2.0 has indeed promising TPS rates.
Cardano aims to solve the scalability issue with its unique Ouroboros proof-of-stake consensus algorithm. With their updated version of Ouroboros Hydra, Cardano can theoretically handle up to 1 million transactions per second.
Ouroboros consensus mechanism also saves on electricity as it does not adopt the competitive mining approach. Instead, the algorithm divides mining load into specific timeframes called epochs. Further, each epoch contains several 20-second slots. The algorithm then randomly elects slot leaders to mine blocks in that slot. These slot leaders are selected based on their stake.
The unique consensus mechanism allows Cardano to possess transactions in parallel, thereby increasing scalability.
Cardano Solves The Bandwidth And Storage Issues
In a blockchain ecosystem, each full node is required to download a copy of every transaction to stay updated. However, as the network scales, storing a large number of transactions becomes a scalability roadblock. This is because the nodes require greater bandwidth to store such massive data.
Cardano solves the bandwidth issue by dividing its blockchain into sub-networks using Recursive InterNetwork Architecture (RINA). This way, each node stores data respective to their network instead of storing the entire blockchain.
Regarding storage issues, Cardano implements techniques like pruning, compression, and partitioning to efficiently store large sums of data.
Cardano Unlocks Interoperability
Another pain point in mass blockchain adoption is interoperability. You can easily send value from one bank to another. However, blockchains are built on separate protocols and thus non-interoperable. For instance, sending BTC on the Ethereum network is currently not possible.
Cardano solves the interoperability issue by establishing communication between different blockchain protocols.
Moreover, Cardano is also interoperable with traditional banking systems. Unlike blockchain networks, banks require metadata like sender and receiver’s identity. Cardano allows you to add metadata to your transactions to transact with traditional banks. Nevertheless, this is completely optional, you may choose not to unmask your metadata and not transact with banks.
Cardano Is Upgradable
Blockchain projects often run out of their ICO funds and fail to upgrade their projects over time. To combat this upgradability issue, Cardano has set up a treasury fund to incentivize developers for pushing updates. A small fee from all transaction fees is deposited in the treasury at regular intervals. This mechanism in the long-run will make Cardano self-sustainable and not at the mercy of a company, investors, or founders.
How to Buy Cardano
There are two exchanges where you can buy Cardano. The main centralized exchange where you can buy is Binance exchange. The main decentralized exchange where you can buy Cardano is the Coinswitch Exchange.
One of the biggest benefits of buying tokens from a decentralized exchange such as Coinswitch is that there is no need to register or verify yourself unless you are purchasing fiat with a debit or credit card. Here is an easy-to-follow guide on using the Coinswitch Exchange.
Cardano (ADA) Tokenomics And ADA Overview
The value of ADA is loosely tied to the Cardano platform as the cryptocurrency is native to the platform. In simple words, the more the value of the Cardano ecosystem the higher the value of ADA. Tokenomics play a key role in determining price performance over the long run, lets look at that now:
|Token Supply||Total supply – 45 billion ADA|
Current circulating supply – 31 billion ADA
2.5 billion ADA – IOHK
2.1 billion ADA – Emurgo (Founding entity of Cardano)
648 million ADA – Cardano Foundation
Overall, 16% of the total supply was distributed to the founders and the remaining 84% was split among investors
|On-Chain Governance||Cardano allows anyone in the Cardano community to submit a proposal on how to improve the platform|
To participate in treasury voting, you should stake the required ADA tokens. You have the option to vote or delegate your vote to an expert.
|Inflation||Inflation distribution is rather complex in Cardano. Here the inflation is equal to the reward rate. |
Say, if there are 33 million ADA for staking rewards, then the protocol distributes this amount equally amongst all stakeholders. However, if less than 100% of ADA tokens are staked, then the tokens meant for non-staking holders are sent back to the reserve.
|BNB Token Overview|
|Price per token||$1.18|
|Market Cap||$38.17 billion|
|24-hour trading volume||$2.07billion|
|All-Time High||$1.48 (February 27, 2021)|
A Closer Look at the Technology
Cardano is an open-source blockchain platform that allows smart contracts to be created. Cardano uses a layered approach, separating accounting and computation into different layers. The first layer is the settlement layer which handles transactions with ADA as well as information stored on the network.
The second layer, called the control layer, handles smart contract execution and invocation of external systems in order to make sure that all data goes through validation before being committed to ensure security and reliability.
Bitcoin is referred to as the first-generation blockchain. Similarly, Ethereum is the second-generation blockchain with unique smart contract functionality. Cardano is labeled as the third-generation blockchain, thanks to its unique approach to solving scalability and security issues. The platform indeed draws inspiration from Bitcoin and Ethereum. However, Cardano is built from scratch instead of copying code from Bitcoin and Ethereum.
Moreover, it is the world’s first blockchain-based on peer-reviewed research papers. Academicians and scientists from several universities, including the University of Edinburgh and Tokyo Institute of Technology, reviewed its protocols before release.
An experienced team is essential to bring life to any project. Unlike other crypto projects who have 5-10 full-time developers, Cardano has a massive team of 250 full-time developers/researchers. As discussed, Cardano was launched after a thorough review by top researchers. It became the first platform to be built using peer-reviewed research papers.
Cardano also has robust leadership. The project is headed by Charles Hoskinson. Charles is one of the founding members of Ethereum, the world’s second-largest cryptocurrency. He is also the CEO of IOHK, a company that builds cryptocurrencies and blockchains.
Cardano has adopted an extensive research-oriented approach, which has helped the network reach where it is today. The fact that ADA, Cardano’s native cryptocurrency, is currently the fifth-largest indicates a positive market sentiment. Considering that Cardano was launched in 2017, it is a huge feat.