Since the launch of Ethereum in 2015, smart contract-based blockchains have been growing in popularity. A number of smart contract-oriented platforms have been launched since then, trying to emulate Ethereum’s massive market success.
Among these platforms is Cardano (ADA), currently the 7th largest crypto by market cap and a smart contract blockchain utilizing a unique two-layer architecture.
What Is Cardano (ADA)?
Cardano (ADA) is a blockchain that has been designed specifically for smart contract functionality and high levels of scalability. It uses a two-layer operational model, with the first layer, called the computational layer, used for smart contract code execution and processing. The layer on top of it, the settlement layer, is used for crypto asset storage and transactions between addresses.
While Ethereum handles both smart contract processing and transactions between addresses on the same base layer, Cardano splits these two key functionalities into its two layers.
Similar to Ethereum, Cardano uses the Proof-of-Stake (PoS) block validation method, which is much faster and less energy intensive than the Proof-of-Work (PoW) validation used by Bitcoin.
Cardano’s native cryptocurrency, ADA, performs three key functions on the platform:
1. The utility function. ADA is used to pay for transaction fees on the network.
2. The staking function. ADA may be used to stake funds on the platform in order to participate, or delegate participation to other users, in the blockchain’s transaction validation process.
3. The governance function. Holders of ADA have the right to vote on the platform’s rules, direction, and potential changes.
ADA is a capped coin with a maximum permitted supply of 45 billion. All 45 billion ADA have already been minted and represent the coin’s current total supply. Of this amount, 35 billion ADA (78% of the total supply) are in circulation. ADA has a market cap of $13.6 billion, making it currently the 7th highest-capped cryptocurrency.
ADA currently trades at $0.39. A year ago, the coin was worth $0.79. This gives ADA a yearly growth rate of -50%, hardly an impressive result. For comparison, Bitcoin, the main benchmark for the crypto market, has lost 19% over the same period.
For the last 12 months, ADA has largely been in either a downtrend or a sideways move, with only short periods of weak uptrends. Big yearly losses and the lackluster trends for ADA hint that while it is still a major crypto, the investor community is not convinced about its benefits or growth potential.
Cardano was founded as a project in 2015 and then launched as a blockchain in September 2017. Despite being envisioned as a smart contract platform, Cardano did not have complete smart contract functionality until September 2021.
Since graduating into a full-fledged smart contract platform, Cardano has become home to just over 70 DApps, a figure that is far from impressive for a platform widely promoted as a major smart contract blockchain.
Who Is Behind Cardano?
Cardano was founded by Charles Hoskinson, one of the eight co-founders of Ethereum. The platform’s development is managed and supported by three entities:
1. The non-profit Cardano Foundation, based in Switzerland
2. Blockchain technology company IOHK, based in Hong Kong
3. Another blockchain technology company, Emurgo, based in Japan
The steering role among these entities belongs to the Cardano Foundation, which is currently headed by CEO Frederik Gregaard.
While Cardano (ADA) retains a spot in the top 10 rankings, this is one top crypto whose future potential remains unclear. Since becoming a fully functional smart contract platform, Cardano has failed to become a close competitor to the likes of Ethereum or BNB, at least as measured by the number of functional DApps on the platform. The mismatch between expectations and reality has now been reflected in ADA’s lackluster yearly performance of -50%. Once dubbed by some a certain HODL coin, ADA is now a coin with uncertain growth prospects. In our view, among the top cryptos, ADA is currently far from the best investment choice.