What Is Cardano (ADA) and Is It Worth Investing In?
As cryptocurrency investing has grown in popularity over the last few years, fear of missing out — FOMO, for short — is enticing new investors to enter the crypto market and leaving current investors scrambling to keep up with new developments.
Blockchains like Bitcoin and Ethereum grab most of the headlines because of their widespread use and high token prices. However, many other options exist, including several “Ethereum killers” developed to make crypto trading faster, cheaper and more secure.
One of the notable projects among this group is called Cardano, and its native token is cardano, which uses the ticker symbol ADA. Here’s everything you need to know about this up-and-coming cryptocurrency platform and token.
What Makes Cardano Stand Out From the Pack?
Cardano quickly made a name for itself in the competitive world of cryptocurrency, largely due to its unique process and technology.
Rooted in Academia
Cardano was the first peer-reviewed blockchain to appear on the cryptocurrency scene. Before rolling out its protocols, the nonprofit responsible for Cardano assembled a team of university scientists and other academics to perform an extensive review.
A Problem-Solving Algorithm
Another feature contributing to Cardano’s success is its proof-of-stake technology called Ouroboros. This algorithm grants miners more mining power according to the amount of coin they own. Created as a less risky alternative to the energy-sucking proof-of-work algorithm, POS is the original consensus algorithm for blockchain technology.
As a third-generation cryptocurrency, Cardano also aims to improve upon the mounting issues associated with the first-generation bitcoin and the second-generation ethereum, POW being one among many.
As a result of its speed and rapid technological advancements, Cardano will eventually process up to a million transactions per second. Hence Cardano is not only considered one of the most technologically advanced blockchains available, but cardano is now the eighth-largest cryptocurrency overall.
How Does Cardano Work?
To understand how Cardano works, it’s helpful to break it up into the blockchain’s layers. There are two components in any given transaction: the mechanism by which tokens are sent and the condition behind the moving tokens.
The first layer, called the settlement layer, allows users to send and receive ADA coins. The second, or computation, layer allows users to create and enter into smart contracts.
Highlighting this company’s distinctive approach, Cardano doesn’t just offer a few paragraphs of backstory on its website as most businesses do. Instead, it categorizes its history into five different eras, each named after a different literary genius.
The Byron Era
The ideas behind Cardano were conceived by founder Charles Hoskinson in 2015, but the first version wasn’t shipped until September 2017. It named its cryptocurrency ADA — after the programmer Ada Lovelace — and also launched its official desktop wallet.
The Shelley Era
This period focused on achieving growth, adding value and optimizing decentralization in a smooth, low-risk and interruption-free manner.
The Goguen Era
In this period, Cardano implemented a series of improvements. These included the integration of smart contracts, which made the cryptocurrency more accessible to wider audiences.
The Basho Era
This era centered on improving the underlying performance of Cardano’s network to better support high transaction volumes. As of September 2022, this is the company’s current stage.
The Voltaire Era
Finally, in the Voltaire era, the Cardano team envisions the transformation of Cardano into a truly decentralized and self-sustaining system, put in the hands of its community. A treasury system will fund all future development.
Is Cardano a Good Investment?
The short answer is maybe. Cardano, like all cryptocurrencies, is highly speculative, so it’s important to understand the risks and know what you’re getting into before you buy. Here are the most significant factors that may influence your decision:
The Current Market Activity
Cardano prices have struggled since hitting an all-time high of $3.10 on Sept. 2, 2021. The downward trend differs slightly from that of the crypto market in general, led by bitcoin and performing decently until November 2021. The upside of that is cardano’s relative stability since mid-May. Bitcoin prices have fallen 35% since then. As of Sept. 23, however, the token hasn’t shown signs of recovery.
Cardano currently is currently trading at $0.4516 and has a trading volume of $1.03 billion. Cardano’s market cap sits at $15.45 billion. Out of a total supply of 45 billion coins, about 76%, or 34.23 billion, are currently in circulation.
Where the Company Is Heading
On March 1, 2021, Cardano launched its “Mary” protocol update, designed to turn the company into a multi-asset network similar to Ethereum. Mary also allows users to create non-fungible tokens. These are increasingly popular and valuable digital representations that prove authenticity and ownership.
In December 2021, Cardano reached an important milestone when it processed its 20 millionth transaction, according to CNBC TV.
As of Sept. 23, Cardano’s Vasil upgrade is in progress. Cardano noted in its weekly network update that the upgrade was triggered on Sept. 22 and will be available to developers on the mainnet on Sept. 27.
It’s designed to improve Cardano’s smart contract capabilities, enhance speed and reduce costs, according to CoinDesk. The upgrade comes less than two weeks after a major Ethereum upgrade, The Merge, that transitioned the No. 2 blockchain from its outdated proof-of-work protocol to a proof-of-stake protocol like Cardano uses.
Regarding the company’s operational plans, its ADA team is currently formulating a blockchain solution to meet the needs of the millions of unbanked individuals in African countries. As previously mentioned, Cardano is also working hard to become fully decentralized and remove itself from IOHK’s management.
Whether Cardano returns to prices above $2 — or even $1 — depends its ability to compete with other Ethereum killers and Ethereum itself, following its upgrade, as well as factors that are outside of Cardano’s control — the regulatory environment, for example. Trading platform eToro delisted Cardano from its platform last year because of regulatory concerns.
Good To Know
If you invest in cryptocurrency, be ready for massive price swings. They’re fairly normal occurrences in this notoriously volatile market. Mentally preparing yourself for these wild investment fluctuations ensures you don’t act irrationally when they occur.
How To Invest in Cardano
Investing in Cardano requires a process akin to other cryptocurrency platforms.
Buying ADA is a four-step process:
- Obtain one of Cardano’s wallets.
- Locate your distinct ADA address.
- Buy ADA through an exchange.
- Withdraw ADA into your wallet.
Cardano now has staking rewards. These allow ADA holders to earn interest in addition to their market price gains. The company even provides a staking calculator, which can help predict your future awards if you delegate your stake to the same pool over 365 days.
Daria Uhlig contributed to the reporting for this article.
Information is accurate as of Sept. 23, 2022.
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- Nasdaq. 2022. "Cardano Is a Better Bet Than Bitcoin and Ethereum Right Now."
- CoinDesk. 2022. "The Top ‘Ethereum Killers’ Compared."
- Essential Cardano. 2022. "Weekly development report as of 2022-09-23."
- CoinDesk. 2022. "What Cardano’s Highly Anticipated Vasil Hard Fork Will Bring."
- CoinDesk. 2022. "The Ethereum Merge Is Done, Opening a New Era for the Second-Biggest Blockchain."
- Yahoo. 2021. "ADA Rocked After eToro Announces Surprise Delisting in US."