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Cardano (ADA) coin review: Is ADA worth investing in 2021?

date March 4, 2021 time 7 min read 745 views

Cardano is one of the top 10 cryptocurrencies by market cap and the first peer-reviewed network designed to resolve frequent blockchain issues. The size of its network and the demand for Cardano coin (ADA) are testaments of the viability of its doubled layered approach to smart contracts, decentralization, and security. Continue reading for more details on how Cardano coin has retained its place at the top echelon of the crypto market.

This year, Cardano coin became one of the top 3 cryptocurrencies by market cap after Bitcoin and Ethereum which hold the 1st and 2nd spot respectively.

But why has Cardano, a coin that has been active since 2015, only now reaching the top of the charts? And why do some believe it is now one of the top contenders with Ethereum for scalable smart contract blockchains?

In this Cardano coin review, we’ll explore the workings of Cardano coin (ADA) and its blockchain, the Cardano network.

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What is Cardano?

Cardano is a third-generation smart contract blockchain
Cardano is a third-generation smart contract blockchain (source: tokeny.pl)

Cardano is an open-sourced smart contract and proof-of-stake (PoS) blockchain looking to improve upon major blockchains like Bitcoin and Ethereum.

The network describes itself as the first peer-reviewed blockchain born out of academically developed solutions. The team behind Cardano, IOHK (Input-Output Hong Kong) states that the project is an ongoing collaboration between engineers, academics, and blockchain experts. 

When it launched in 2015, Cardano deviated from other blockchains by planning for the then-uncommon proof-of-stake consensus model in its roadmap. Proof of stake allows the network to create a more energy-efficient transaction validation system that does not require the monumental computing power of Bitcoin mining. 

To become validators and create new blocks, network participants only need to lock their coins on the blockchain instead of using large amounts of electricity to mine.

After years of development, this consensus protocol officially launched in July 2020. This marked a critical shift of the network from centralization to decentralization.

And on March 1st of 2021, Cardano announced its plan to implement a series of updates ushering the blockchain into the smart contract era. Seeking to focus on a broad range of industries, including, education, health, and agriculture and compete directly with Ethereum.

A multi-layered blockchain

Here’s what makes Cardano  different: Cardano has opted for a two-layer architecture as against the single-layer design incorporated by established blockchains. 

The first layer, called Cardano Settlement Layer, governs the peer-to-peer transactional component of the blockchain and is fairly similar to other types of blockchain.

The second layer, the Cardano Computational Layer, undertakes chain security and allows the deployment of smart contracts.

Cardano hopes their system will let them create applications that can more easily conform to the increasing crypto regulations of various regions worldwide on the second layer. At the same time, they can preserve the integrity of the base protocol on an unchangeable first layer.

Governance

To achieve its lofty goals, Cardano has set up three governing bodies:

  1. The Cardano Foundation is tasked with overseeing, promoting, and standardizing the Cardano ecosystem. Based in Switzerland, the foundation is a non-profit organization functioning as the mouthpiece of the community and enabling the appropriate environment for the advancement of the Cardano movement. It also secures crucial partnerships to drive adoption.
  2. Input-Output-Hong-Kong (IOHK) is an engineering and technology company focused on designing, developing, and maintaining the Cardano blockchain. IOHK relies on a peer-reviewed approach to software development. The company utilizes open source and scientific development architecture and collaborates with educationists to create sustainable solutions. 
  3. EMURGO. This for-profit enterprise develops and nurtures commercial opportunities for Cardano. Besides, it integrates businesses into the Cardano ecosystem. Note that network participants would eventually have complete say over the governance of the blockchain once the right infrastructure is put into place.

Presently, token holders have little-to-no input in the governance of the Cardano blockchain. However, once smart contracts are fully operational, the development team plans the next phase of updates to decentralize the network’s governance. This upgrade will allow participants to vote on future Cardano developments.

Development Roadmap 

Cardano has outlined a development roadmap that involves 5 phases of upgrades. Each phase will add new functions to the Cardano chain via a soft or hard fork. As most governance on Cardano is still centralized, previous hard forks on the chain have not resulted in spin-off chains.

Byron (Foundation Era)

Cardano’s Byron era was the first stage of active development and included the launch of Cardano’s coin, ADA in 2017.

During Byron, IOHK launched the Daedalus desktop wallet while EMURGO created a lightweight alternative called Yoroi. The Byron development phase focused on building a strong foundation for Cardano and saw the listing of ADA on top exchanges. This phase gave way to the Shelley Era in 2020. 

Shelley (Decentralization Era)

Shelley transformed Cardano from a federated network to a decentralized ecosystem.

After the Shelley mainnet launched in July of 2020, Cardano’s proof-of-stake consensus protocol went live. This phase enabled staking rewards on the Cardano blockchain and allowed more participation in the validation process of the network. With this, the blockchain could optimize security and performance significantly. 

Goguen (Smart Contract Era)

The implementation of the Mary update on March 1, 2021, marked the beginning of the Goguen era.

This phase looks to enable smart contract infrastructure allowing developers to create dapps and expand the functionality of the blockchain. Following the successful launch of the Mary update, Cardano has become a multi-asset blockchain capable of hosting its own economy of decentralized applications and tokens similar to ERC20 tokens on Ethereum.

Basho (Scaling Era)

In the future, the Basho upgrade will focus on scaling Cardano by implementing side chains and introducing sharding mechanisms to speed up transactions. The development team has yet to confirm the launch date for this upgrade. 

Voltaire (Governance Era)

Voltaire is the supposed last stage of development poised to transfer governance completely to ADA holders and establish Cardano as a self-sustaining network. 

During this stage, the team will launch a voting and treasury system. This upgrade will give ADA holders voting rights to steer the management and future developments of the blockchain.

What is Cardano Coin?

Like a majority of blockchain platforms, Cardano created a native coin to incentivize use called ADA. In addition to providing transactional solutions, the coin will be crucial to the governance of the network as well as its consensus protocol (more on this later).

Cardano Staking Rewards

Unlike the Bitcoin Network, Cardano plans for ADA holders to be able to stake their Cardano coins to validate blocks.

They can delegate their coins to full nodes or staking pools, who have the technical expertise and resources to meet the requirements for running a validator node. The network incentivizes honest participation by rewarding validators with ADA. Therefore, in addition to gains generated from price fluctuations, ADA holders can earn extra income by staking their coins.

The history of Cardano Coin (ADA)

How has Cardano performed over time
How has Cardano performed over time? (source: quoteinspector.com)

Named after Ada Lovelace, a mathematician recognized as one of the pioneers of computer programming, ADA was launched in 2017 at the peak of the Initial Coin Offering (ICO) boom. The ADA ICO raked in $62 million, which funded the initial expansion of the Cardano ecosystem.

Following its successful launch, ADA went on to record significant price fluctuations that saw its value rise by 5,900% in just three months. To put this into perspective, ADA sold for $0.02 during its ICO run, barely three months before it crossed the $1.20 price mark. This was as good as it got for ADA investors for a very long time, with only a notable and sustained price surge recorded in 2020 amidst the explosive DeFi renaissance.

How much is the Cardano coin worth?

Like every other major cryptocurrency, Cardano coin’s price has performed in tandem with Bitcoin. More recently, ADA has showcased unprecedented price movements in anticipation of the “Mary” update, the initial phase of its planned smart contract upgrades.

In early 2021, ADA generated relentless price spikes that caused its value to surge by over 600% in just under 2 months. This impressive run propelled Cardano to the third-largest cryptocurrency in the world.

Is Cardano a good investment?

Cardano’s ADA has soared in market visibility in recent weeks
Cardano’s ADA has soared in market visibility in recent weeks (source: coindesk.com)

Judging by the current market cycle and the value proposition of its blockchain, there is a high potential for Cardano. Below are two things that could spur the price of Cardano coin.

Blockchain speed

By enabling a multi-layer blockchain architecture, Cardano may have effectively developed a scalable network. However, it was discovered during a preliminary test in 2017 that the network could only process about 257 transactions per second.

While this is significantly higher than the current capacity of Bitcoin and Ethereum, it is still far from what is expected of a global payment network.

That said, Charles Hoskinson, the founder of Cardano and CEO of IOHK, released an academic paper detailing the possibilities of a layer 2 scaling solution, called Hydra. According to Hoskinson, this implementation could optimize Cardano’s system to provide the capacity to process 1 million transactions per second. IOHK started implementing this off-chain protocol in March 2020.

The explosive smart contract market

DeFi is making huge waves in crypto right now, and until now it has mostly been based on the Ethereum blockchain. However, ecosystems like Cardano may be moving in on the action with the implementation of similar smart contracts with better scalability.

How to buy Cardano coin

You can buy, sell or trade Cardano on any of the top exchanges like Binance, Coinbase, or Huobi. Depending on your current location, you can access a reputable exchange that allows you to purchase Cardano with fiat currencies or other cryptocurrencies.

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