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Is Cardano a Good Investment Long-Term?




Cardano is one of the top names in the decentralized economy. Dubbing itself the ‘third generation of blockchain tech,’ it seeks to address the infamous blockchain trilemma of security, scalability, and decentralization that the Bitcoin and Ethereum networks have been unable to optimize for. Besides looking to disrupt the industry, it runs on a PoS and peer-reviewed framework (more on that later).


The protocol is highly adaptable, energy-efficient, and resolves transactions at light speed. The end product is a properly tuned decentralized value machine that is both fast and inexpensive. Despite this, one lingering question on the mind of investors remains, ‘is Cardano a good long-term investment to buy into?’ This article sets out to address this and delves into its rich history, strong arguments, and reasons why Cardano is the sleeping DeFi giant the world is waiting for. 


History of Cardano’s Background

Charles Hoskinson, a co-creator of Ethereum, is the founder of Cardano. Hoskinson created the project in 2015 to resolve some of the issues associated with Ethereum and Bitcoin'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, a top Renaissance scientist. 


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 decentralized applications (dApps). 




Cardano's Development Since Launch

Is Cardano any 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 launched the Daedalus wallet, IOG's official desktop client for ADA, and Yoroi, a light wallet from IOG's sister company Emurgo, for day-to-day use and efficient transaction execution.

 

The Shelley era developed a more considerable degree of decentralization 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 decentralized applications (or dApps for short) 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, decentralized network. Instead of a centralized institution like the Cardano Foundation handling development and maintenance, the community will be responsible for the network's upkeep.

Cardano An Ethereum Killer: How True is that?


Following the similar niche it operates with Ethereum, Cardano has earned the name of the ‘Ethereum killer.’ An Ethereum killer is basically a term meant to capture competing base-layer protocols that seek to upend the market relevance of the foremost smart contract network.


As per the nomenclature, Cardano is not the only competing smart contract platform. It is in the race alongside names like Avalanche, Solana, BNB Chain, amongst others. However, is it properly poised to serve as a competitor or become the successor to the DeFi throne occupied by the Ethereum protocol?


A few crucial features seem to say so. 


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 behavior of blockchain nodes operating within a crypto network. 


PoS consensus algorithm is a breakaway validation system from the proof-of-work (PoW) methodology introduced by the Bitcoin network. Besides being far more efficient at garnering consensus from all participating validation nodes, PoS is far more energy-efficient (it requires little energy to validate transactions), cheaper, and faster. 


This is because there is the absence of complex cryptographic puzzles for validators to solve as they only need to stake their network tokens to ensure good behavior. 


Also, it benefits investors and the cryptocurrency involved: investors can earn from staking their assets and the blockchain is secured. 


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. 


Peer-reviewed

Another crucial metric that separates Cardano from several platforms is the scientific methodology it adopts. An open-source blockchain project, each development circle goes through a peer-review process. What this means is that every development circle is meticulously scrutinized and vetted by scientists, engineers, and specialists both in the field of cryptography and blockchain systems, as well as the broader scientific society.


On one side, this peer-review system sees Cardano hitting its roadmap journey at a much slower pace compared to its competitors. This ends up looking like the project is getting the short end of the stick. When this is inverted, the true purpose and derivative benefit of a peer-review system is clear. Most importantly, it ensures that all updates and developments of the Cardano blockchain are meticulously researched and worked on to address any issues that may crop up in the future.


This makes Cardano more of a future-proof blockchain protocol compared to Ethereum as all angles are covered from the get-go. 


Hardfork? No Problems

Ethereum major upgrades often go through several cycles before it hits the mainnet. For one, new upgrades are often run on multiple testnets with a package payload created to ensure its seamless adoption once it is released publicly. But this often does not go smoothly as depicted in the network glitch surrounding one of its upgrades.


This scenario is non-existent in the Cardano blockchain as all network upgrades are often seamless with little bumps encountered during its mainnet launch. 


Highly Decentralized

The underlying ideology backing blockchain tech is decentralization wherein value transfer and retention is not orchestrated by a single entity or party. On the issue of decentralization, Bitcoin and Ethereum are some of the names on the lips of the Web3 crowd.


However, a new study shows otherwise. According to the Edinburgh Decentralization Index (EDI), the Cardano blockchain has a Nakamoto Coefficient score of 58 while Bitcoin and Ethereum had an output of only 2. This means the Cardano blockchain is the most decentralized cryptographic network on the planet. 


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 realized 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 and Cardano blockchain is aiming to change the narrative.


Environmental Sustainability

Thanks to its Ouroboros PoS system, Cardano can scale to global needs with minimum energy use. Cardano does not require much 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 decentralized 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 open-source applications in the blockchain industry. The protocol has smart contract capabilities, which enable the creation of dApps. 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 network has an infinite loop of transaction output following its release of the Hydra upgrade which significantly beats Ethereum’s average of 30 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. 


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