Have you heard of Cardano crypto in the news or in trading feeds? This is because the cryptocurrency is one of the most popular right now having exploded onto the scene in 2021. Cardano is currently the 7th most popular crypto, according to CoinMarketCap.
However, the popular crypto is leading the market lower losing nearly 20% in the past week. Several factors are pushing the Cardano crypto to a yearly low below $1.
Is it time to buy? Let’s see what Cardano is and what to expect next.
The start of something big
Like Bitcoin (BTC) and Ethereum (ETH), Cardano is a blockchain platform. In fact, Cardano founder Charles Hoskinson is also a co-creator of the Ethereum blockchain.
With this in mind, Charles is one of the most influential figures in the crypto ecosystem. After being introduced to bitcoin in its early days, Charles compared it to the web browser when the internet first appeared. He explains how Bitcoin is limited in its capabilities: no smart contracts, no cold payments, etc.
Then, what Charles calls a “second generation” crypto, Ethereum, also has its limitations. For one, it can be very expensive to scale. The more users that join the system, the more resources are needed.
We see this for example with the cost of NFTs. Many NFTs are traded on the Ethereum network. As NFTs grow in popularity, “gas fees,” or payments for network usage, also increase significantly.
So Charles set out to find a durable option that could safely handle heavy workloads. Although there is a problem, the system must remain decentralized without a single governing body.
On top of that, the system will always need maintenance and upgrades, so how will that be paid for? This is where Cardano comes in…
What makes Cardano Crypto unique
Charles calls Cardano a “third generation” crypto. It takes the best from previous generations and builds on them.
The popular network was launched in 2017 with ADA as its primary token. With digital payments (like Bitcoin) and smart contracts (like Ethereum), Cardano goes one step further. That said, Cardano offers users the ability to:
- To exchange: Users can send and receive cryptos or transfer them to another currency.
- Run smart contracts: Cardano gives users the ability to execute smart contracts. Or, in other words, a digital binding agreement written in code.
- Evolve sustainably: One of the main advantages of Cardano is its ability to scale without using huge amounts of resources.
- Staking: Cardano’s biggest fame is its “Proof-of-Stake” method, encouraging users to verify transactions. More on that below.
Externally, Cardano may look like any other cryptocurrency. But the difference is in the blockchain and the protocols that power it.
That said, Cardano uses a Proof-of-Stake (POS) protocol called “Ouroboros”. The protocol helps secure the network while enabling participation-based incentives. This differs from proof of work (POW), which other major cryptos, including Bitcoin, use.
Proof of participation against proof of work
POS and POW are the two main ways to verify transactions and add new data (blocks) to the blockchain. Bitcoin and Ethereum, the two biggest cryptos, both use POW. Yet the point of sale is being used by a new generation to solve problems with legacy cryptography. Both are means of verifying transactions between participants.
That said, they work similarly, but have a few major differences you should be aware of.
- Proof of work: POW uses a competitive method in which participants race to be the first to verify data. To be first, users need more computing power, which leads to higher power consumption.
- Proof of entry: POS, on the other hand, allows users to “stake” their crypto, using it as security. As a result, users with a stake will vote on the transaction, earning newly minted crypto.
If you’re new to crypto, this might seem like a lot to consider. But think of it this way. Suppose you buy something with bitcoin, the transaction needs to be verified or someone can spend it again, which defeats the purpose.
Thus, participants in the Bitcoin network compete with each other to verify these transactions. Once verified, the block (data) is added to the blockchain and the verifying user receives the BTC in return.
Participants in the Cardano network will offer their coins in a “staking pool”, allowing them to earn a reward. Users are required to wager a certain amount and are randomly selected, reducing the need for increased computing power.
Cardano’s roadmap to success
The cryptocurrency hopes to solve many of the challenges facing the crypto industry. Not only that, but also solving global issues such as access to financial and educational services.
Cardano divides its roadmap into five phases, each representing new features:
- Smart contracts
So far, Cardano is perfecting its smart contracts while working to scale the project. The team is making Cardano usable for those without a technical background to expand its market.
What to expect next from Cardano Crypto
Since hitting an all-time high of over $3.00 in September, Cardano has had a tough few months. After losing more than a third of its value, Cardano (ADA) is now worth less than $1.00.
At the same time, much of the selloff is due to a broader selloff in the crypto market. That said, Bitcoin is down 44% against its ATH, Ethereum is down 46%. In fact, the fallout does not only affect cryptocurrencies. Most global financial markets have fallen over the past 3-6 months.
Still, Cardano is down 71% against its ATH, more than most peers. One of the reasons for this is that Cardano is not yet fully developed and still poses a risk.
When markets are fragile, traders look for more stability. With this in mind, stablecoins outperform the market with more value on offer.
Cardano is still in development and will continue to see price fluctuations as the network improves. But, in the long term, Cardano crypto has a chance to become a true competitor to Bitcoin and Ethereum.
In fact, a new report from Morgan Stanely suggests that Ethereum may be losing market share to cheaper and faster alternatives such as Cardano. At an all-time low, keep an eye out for rising crypto going forward. It might turn out to be the most functional platform yet. Again, he still has a lot to prove to deserve this title.
As the world moves towards a sustainable future, research Cardano to stay relevant.
Pete Johnson is an experienced financial writer and content creator specializing in equity and derivatives research. He has over ten years of personal investment experience. Digging through Forms 10-K and finding hidden treasures is his favorite pastime. When Pete isn’t doing stock research or writing, you can find him enjoying the outdoors or exercising.