The fast and volatile market where cryptocurrencies trade is seeing a new player rise to the top. Cardano, or ADA by its ticker, is its own public and decentralized blockchain. Over the past year Cardano has seen a price rise from $0.12 to $2.89 as of August 29th, 2021. This is a nearly 2400% gain! Not only is Cardano’s growth impressive but it also has a Market Capitalization of $93 Billion. This makes ADA the third largest cryptocurrency by market capitalization. Bitcoin in first with $912 Billion, Ethereum in second with $375 Billion, and Dogecoin holding in fourth at $37 Billion. However, a coin that has grown a lot doesn’t mean much by itself. So let’s look into the why and how Cardano is becoming such a popular coin in the crypto space.
One of the reasons Cardano is becoming an established coin is because of its similar functionality to Ethereum. Ethereum uses smart contracts which can be used to power decentralized finance (DeFi) products, apps, NFTs, etc… Cardano does not yet have its smart contract feature but its developers have expressed it may come out this year. If Cardano has smart contracts then it would, arguably, be as useful as ethereum. The idea ADA might be as functional as ethereum has lead many to buy into ADA.
What a smart contract does is basically act as the middleman. A smart contract is a set of rules and conditions that a computer monitors. When these conditions are met, the contract executes and both parties receive what they signed for. For example, let’s say you wanted to buy an orange from a farmer. To ensure the farmer doesn’t take your money and run, you would get a middleman. The middle man would take your money and take the farmer’s orange. Then they would give you your orange and the farmer the money. In essence, a smart contract functions as a middleman but without the need for a human.
PoW vs. PoS
Another reason Cardano is popular right now is because it runs on a Proof of Stake (PoS) system instead of Proof of Work (PoW). To summarize these two in short: PoW forces blockchain validators to compete for transactions to verify. PoS has validators validate transactions based on how many coins they own. The great sentiment among the crypto community is that PoS is more efficient, fair, and uses less energy than the PoW system. To some extent, these points are valid. For instance, in PoW the validators have to compete with one another. Meaning, two validators could be validating the same transaction which wastes time and energy.
Ethereum has yet to switch to a PoS system but has plans to do so. However, Cardano is more likely to introduce its smart contract functionality before Ethereum switches to PoS. This means Cardano will have both PoS and smart contracts before Ethereum does. This anticipation has led the price of Cardano to move blisteringly fast and is why so many crypto-enthusiasts have jumped aboard the Cardano train.
All being considered, Cardano has only grown as much as it has because of anticipation not because of functionality. At the current moment, you cannot do much with ADA except trade someone else ADA. If smart contracts are introduced to the Cardano blockchain then this would give immense functionality and competitiveness. Ethereum would no longer be the reigning champion of smart contracts and would have to compete with Cardano to stay competitive. Overall, the rise of another blockchain with smart contract functionality is good for Defi. More functional coins support the process of Defi and make crypto as a whole more applicable.
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