What Is Cardano (ADA) & Is It Worth Investing After the Breakout?

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ADA is the utility token of the Cardano blockchain and it is used as a medium of exchange. The Cardano blockchain was created as a twin of Ethereum by Charles Hoskinson, a co-founder of Ethereum, integrating distributed ledger technology and smart contract infrastructure.

There are thousands of different blockchain projects in the market, and it may be difficult for an inexperienced investor to select worthy options. Cardano (ADA) has become one of the fastest-growing blockchain assets in the cryptocurrency industry, attracting investors’ attention. Today, we’ll take a closer look at Cardano and its underlying technology to find out what makes it so attractive — and why so many investors are sure about its future.

What Is Cardano (ADA)?

Created as an alternative to Ethereum, Cardano is the first peer-reviewed decentralized blockchain protocol to utilize a scientific approach.

Cardano’s developers have aimed to create a blockchain platform that can process more transactions at a lower cost. At the same time, they’ve endeavored to protect users’ data by combining the distributed ledger technology and smart contract infrastructure.

The Cardano blockchain allows people to build smart contracts, create decentralized applications and protocols, and instantly send and receive funds with minimal fees. The Cardano utility token, ADA, is used as a transfer of value like many other crypto tokens. Yet it differs from other cryptocurrencies in its functionalities. Stake pool operators use it in the staking system to maintain the security of the protocol. Users who stake their ADA tokens on the blockchain utilize them to verify transactions.

Apart from that, active users are also rewarded with ADA coins for participation in safety provisions. For instance, ADA holders use their coins to vote on changes or improvements to the protocol, thus taking part in its development. In contrast, the developers use it to power their smart contracts, which run on the Cardano blockchain. 

Cardano vs. Bitcoin vs. Ethereum

Though Cardano combines features of both Ethereum and Bitcoin, it has some other tweaks and features inherent to third-generation blockchain that help it overcome its limitations. One of Cardano’s unique approaches is based on scientific philosophy and peer-reviewed scientific evidence. That means that all changes or new features must be developed, reviewed, and agreed upon by academics before implementation.

It’s also worth noting that Cardano was created while Ethereum was still in its early stage of development. All of Ethereum’s limitations, which we’ll discuss below, refer to its 1.0 version — and are now irrelevant since the project has finally switched to proof of stake (PoS) and implemented sharding technology.

Security

As a smart contract platform, Cardano provides safety and scalability through its unique two-layered architecture. The Cardano Settlement Layer (CSL) handles all transactions using Cardano cryptocurrency, with minimal transaction fees. Simultaneously, the Cardano Computation Layer (CCL) is a set of protocols that help run smart contracts. It enables developers to create decentralized apps, ensures security, and makes small changes for end-users.

Proof of Stake Consensus Algorithm

Bitcoin and Ethereum networks follow the proof of work (PoW) protocol. It requires a massive amount of electricity in order to verify transactions. On the other hand, Cardano relies on the proof of stake (PoS) process, which is far less energy-consuming and helps to reduce transaction fees. While the success of the Ethereum London hard fork serves as a concrete stepping stone for Ethereum 2.0 to move from PoW to PoS. 

Scalability

Bitcoin, Ethereum 1.0, and other previous generations’ blockchains can manage only a limited quantity of transactions per second (TPS). Cardano saw this problem in scalability and solved it by implementing the Ouroboros protocol, built on the proof of stake model, to ensure high transaction speed and an equitable chance of earning a reward. It offers such advanced features as separation of layers, mathematical security in choosing blockchain validators, a secure voting mechanism for token holders, and an infinitely scalable consensus mechanism.

The Ouroboros Protocol 

With a PoS algorithm, nodes on a network create new blocks by staking their cryptocurrency as collateral to validate transactions. Ouroboros relies on a different algorithm. The blockchain is split into epochs, each lasting for about 20 seconds, and is made up of fixed periods called slots. Each slot gets its slot leader elected by stakeholders and is responsible for adding one block to the protocol. 

The slot leaders must create at least 50% of the transaction blocks within a given epoch. Each block is approved by input endorsers, whose election is based on stakes. An epoch can be partitioned infinitely, making it possible to run as many transactions as needed. All users who participate in mining an epoch receive rewards for their services. 

Anybody who owns a 2% stake in the Cardano blockchain can choose to mine a block. However, nodes with more significant stakes have greater chances of being elected slot leaders. The multi-party computation (MPC) used achieves a form of randomness to make the slot leaders’ election as unbiased as possible. With this approach, it’s as if each elector is tossing a coin and sharing a fair result with everyone else.

What Are the Uses of Cardano (ADA)?

Centralized structures and archaic management procedures have produced many issues: poor governance, high amounts of manual workflow, limited transparency, procedural inefficiency, high costs, fraud, and data breaches. Cardano, based on blockchain technology, aims to solve these problems.

As an open-source platform for smart contracts, Cardano accommodates a wide range of use cases, solving problems across multiple industries. These include retail, education, government, finance, agriculture, and healthcare. 

Retail

IOHK (the company behind Cardano) offers Atala SCAN. This tamperproof system establishes product provenance and an auditable system to protect brands and customers from counterfeit goods in the retail sector. 

Education

The education sector can benefit from Atala PRISM, an ID and credentials solution, which secures academic certifications within a tamper-proof ecosystem. 

Government

Atala PRISM can be used in the government sector for credential issuance and verification systems, in order to avoid dependence on issuing authorities. 

Finance and Digital Identity

Atala PRISM also provides the possibility of digital identity for unbanked citizens in developing countries of Africa and Asia. In 2019, the Cardano team began cooperating with 54 countries to build blockchain governance tools. 

Agriculture

In the agricultural sector, the Cardano blockchain is used for product certification and traceability via the Atala Trace or EMURGO solutions. 

Healthcare

The healthcare sector can use Atala SCAN to authenticate and verify the origin and supply chain of pharmaceutical products, guaranteeing patients’ safety worldwide.

Generally, Cardano ADA can function as a payment method; be spent or sold; or serve as a voting tool for ADA holders, concerning changes and developments within the Cardano ecosystem. It helps to maintain security by verifying transactions that are staked to it on the blockchain, in the process staking pool operators, who receive more ADA coins as rewards. 

Though ADA can be stored on exchanges or in different crypto wallets, Cardano provides its native wallet, Daedalus, for holding ADA as an investment tool. Token holders can earn coins for delegating ADA or running a staking pool within the Daedalus wallet.

Cardano Pros And Cons

Among Cardano’s pluses are a great development team, unlimited scalability potential, quick and cheap transactions with ADA cryptocurrency, a fair consensus mechanism, and the capability to create decentralized applications.

Cardano’s drawbacks include the fact that its blockchain is still under development. It needs to improve its scalability issues, as it’s only capable of processing 257 transactions per second (TPS). Also, it has problems with the official wallet sync and network connectivity. Another issue is the potential for double-spending, or 51% attack, as there’s still the danger that input endorsers may approve the same set of transactions from two different slot leaders.

The History Of Cardano

Charles Hoskinson is a mathematician who co-founded Ethereum and Cardano. The ICO of Cardano’s token ADA in December 2016 helped the team raise over $62 million. Subsequently, the project was launched on September 29, 2017.

The full rollout of the Cardano blockchain will be executed in five separate stages, named after great poets, a computer scientist, and a famous French author. 

  • Byron (foundation) tested the initial functionality. 
  • In Q2 2018, in the next stage, Shelley, the mainnet was launched and the system’s decentralization and PoS implementation began. 
  • Cardano has already started the Goguen rollout to integrate the smart contracts platform. 
  • Basho will implement blockchain optimization via scaling solutions.
  • Finally, Voltaire will add treasury and governance systems.

Is Cardano (ADA) a Good Investment?

The price of any digital asset depends on many factors. To critically answer whether an ADA token is worth holding, it’s best to know the factors that drive its value.

Since the total number of ADA coins is limited, the coin is inflation-resistant as the demand for it keeps growing. The decentralized nature of the Cardano blockchain makes it secure, while its layered architecture provides scalability. Taken together, these technical characteristics are what make Cardano a unique coin with good potential. 

Cardano’s success also depends on the number of DApps and smart contracts built on its blockchain. A rigorous process of peer-reviewed research makes the blockchain stable and durable.

Summing up, Cardano stands a good chance of getting its fair share of the crypto market. It’s continually moving upward, becoming an excellent choice for traders and new investors who’ve just entered the crypto market. Simultaneously, ADA crypto remains a solid choice for traders who wish to diversify their portfolios.

Is ADA a Better Investment Than Other Altcoins?

Cardano has been steadily occupying a place at the top10 at CoinMarketCap for a significant period of time. Its value and market cap are competing with — and in some cases beating — those of XRP, Tether, Litecoin, Bitcoin Cash, and Chainlink. Though Bitcoin and Ethereum’s capitalizations may be higher, ADA has shown considerably more growth over the last 12 months. 

Understanding Cardano (ADA) Prices

Current Price Analysis

Cardano (ADA) price chart
ADA price chart from Jan. 1, 18 to Aug. 19, 2021.

After reaching an initial high price of $1.33 on January 4, 2018, ADA’s value steadily declined, reaching a low point of $0.027 on December 15, 2018. After that, the price fluctuated within the $0.03–$0.06 range until it reached $0.090 on April 6, 2019.

Cardano had started from $0.032 for one ADA coin, with a tendency to grow, reaching $0.181 on November 24, 2020. This was followed by a drop to $0.128, subsequently fluctuating between $0.131 and $0.16.

Echoing other cryptocurrencies, its price rose meteorically through the early stages of 2021. It finally breached the $1 mark again in February 2021, before hitting $1.48 on February 27 and hitting its all-time high of $2.46 on May 16 following the Bitcoin bull. Since then, ADA has been declining steadily following the crypto market sentiment. However, ADA managed to break out from the resistance level on Aug. 10 and reclaiming the $2 range and hitting a high of $2.16 on Aug.15 before it reclined to $1.80 – $1.90 range after Ethereum’s co-founder said the Alonzo hard fork will ease the smart contract executions on Cardano’s network.

As of Aug. 18, ADA is trading at $1.96, slightly below the $2 range. But will it breakout once again after the Cardano summit that is set in September 2021? 

What Do the Analysts Think?

Using opinions from some crypto experts below, we can attempt to determine what Cardano’s price could be by 2025.

Most ADA forecasts agree that the coin’s price will continue its generally bullish momentum. In 2020, Ryan Selkis, CEO of the cryptocurrency-tracking site Messari, mentioned in his Crypto Theses that he believes Cardano will jump from the eighth to the fifth spot in the list of the world’s biggest cryptos. Indeed, this prediction has already proven correct. Today, Cardano (ADA) is ranked no.5 with over $630 million, which is just slightly below Tether’s (USDT).

CoinSwitch is also optimistic about ADA’s growth as Cardano gains more partnerships, which will positively influence its price. It speculates that ADA will touch $3, at most, by 2025. CryptoGround and CoinLiker support these predictions and foresee ADA’s price hitting $2 or $3, respectively, in 2025.

Crypto-Rating.com is even more bullish on Cardano’s prospects, predicting it could reach $6 by 2025 and $10 by 2030.

The Bottom Line

With one of the most significant market caps and a huge daily trading volume, Cardano is very popular among cryptocurrency enthusiasts. Its four-year history shows stable growth in ADA’s value, despite periodic price drops. A large number of partners support Cardano’s long-term growth potential. 

All this and the latest technical analysis, market trends, and expert opinions indicate that Cardano is a good investment option that will bring great profit to its investors. However, the crypto market remains volatile, and cryptocurrencies are fairly difficult to predict. It would be best to consider all factors before choosing a digital asset to invest in. Do your research (DYOR).

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