Is Cardano a Good Investment?
As the 6th ranked cryptocurrency at $67 billion, it is safe to say Cardano has come a long way since its launch in 2017. It is widely regarded as the best third-generation cryptocurrency, solving the problems discovered in Bitcoin and Ethereum.
It has also appreciated greatly, soaring more than 1000% this year alone, ahead of Bitcoin and Ethereum. However, it still has a long way to go as Bitcoin and Ethereum’s values are way higher than Cardano’s. At the same time, it offers a good option for investment.
Should I invest in Cardano? Would it have a return on investment over the next few years? Is it the next big hitter? What fraction of my portfolio should I dedicate to ADA coin? This article will answer all these questions. Whether you are a potential investor or you simply want to widen your pool of knowledge, then everything you need to know about Cardano is here.
What Is Cardano (ADA)?
Cardano is a Blockchain, while ADA is its native governance token. ADA, like all other cryptocurrencies, is a digital coin that runs on the Cardano Blockchain. The Cardano Blockchain is an entirely decentralized network designed with mathematical and scientific principles by a team of cryptographers and engineers. The Blockchain has intelligent contract networks where dApps can be created. It is often regarded as the 3rd generation network because it solves many problems using Bitcoin and Ethereum.
Cardano was developed by co-founders Charles Hoskinson and Jeremy Wood. Hoskinson wanted to create a scalable Blockchain that could tackle the problems of Bitcoin. He collaborated with Jeremy, who was a co-developer at Ethereum.
Presently the Blockchain is run by:
- The Cardano Foundation: a non-profit entity for Blockchain management.
- IOHK: a research company founded by Charles Hoskinson and Jeremy Wood in 2015. The company designed the Cardano Blockchain.
- The crowdfunding entity financially supported Cardano and developed its Blockchain.
What Is the Architectural Design of Cardano?
The Cardano Blockchain architecture is designed on a series of layers and interconnected systems, which include the settlement layer, computational layer, Oubourous Hydra and Daedalus wallet
Cardano Settlement Layer (CSL):
Cardano’s CSL layer is the unit of account where the token holders can instantly make ADA transactions with low transaction fees.
Cardano Computational Layer:
The CCL is a set of protocols that fulfil most Blockchain functions. The layer runs the network’s smart contracts, handles its security and helps with identity recognition and blocklisting.
Ouroboros is a Proof of Stake network specially built for the Cardano Blockchain. It uses a consensus mechanism that allows transactions and validation with smart contracts provided by the Blockchain. It also rewards token holders who act as validators and stake their ADA token to mine new coins and ensure network security.
How Does the Ouroboros Work?
With every token holder having an equal chance of selection, the network randomly selects a few nodes to mine new coins. These holders are known as slot leaders.
Then, the Blockchain is divided into slots. Each slot division is known as an epoch. Slot leaders are assigned to an epoch or part of the epoch for mining. The successful miners take the coin.
As the PoS system requires, slot leaders stake their coins as collateral for mining. The more the network grows, the more epochs created and the more slot leaders. As these epochs work independently, the network prevents many node transactions on a single web, ensuring fast transactions no matter the size of the network.
Cardano also has its native wallet, Daedalus. With the Daedalus Wallet, users get total access and control of their Blockchain nodes. They can also participate in staking and receive new ADA tokens while operating on the PoS network and also delegate their tokens and receive a reward.
What problems does ADA solve compared to other cryptocurrencies?
The ADA token is regarded as the 3rd generation coin because it is the first cryptocurrency that effectively tackles the shortcomings of 1st generation crypto, Bitcoin, and 2nd generation crypto: Ethereum. It aims to tackle three problems related to cryptocurrency which are; scalability, sustainability, and interoperability.
One of the significant problems plaguing Bitcoin and Ethereum is its low transaction speed and exorbitant fees, and high energy costs. It happens as a result of increasing transaction volumes on the networks.
Cardano solves the problems in 2 ways. Its algorithm, Ouroboros, and the proof of Stake network provide a faster, cheaper, and less energy-consuming alternative to Bitcoin and Ethereum.
It also confirms transactions by dividing the Blockchain into epochs validated by a slot leader. These epochs work independently and there can be as many epochs as possible. This feature prepares the network for future scalability requirements. Higher transaction volume and would not harm transaction Speed.
This relates to how the cryptocurrency operates in its native Blockchain and its interface with other Blockchains. Currently, established cryptocurrencies are the only intermediary with which users can perform crypto exchanges.
Cardano provides an alternative by enabling a cross-chain coin transfer through side chains. This side-chain conducts off-chain transactions between traders of different tokens.
To avoid hard fork-offs, Cardano built a constitution of protocols where every crypto holder had a say. It has a self-governing system where decisions are made by votes made by the token holders of the cryptocurrency.
These protocols and decisions are hardcoded onto the Blockchain and the dApps using the Blockchain. It eliminates the necessity to create additional fork offs or upgrades as seen in the recent upgrade of Ethereum to Ethereum 2.0
Cardano Yoda tweeted about why he thought it had higher potentials than Bitcoin and Ethereum in a tweet on November 14, 2021.
Cardano price prediction
In 2017 when ADA was launched, it traded around $0.02 throughout the year. Its price soared exponentially in 2018, starting at $0.3679 on December 28, 2017, when cryptocurrency boomed.
On January 4, 2018, it was $1.33, rising by over 250% in less than a week.
It crashed back to around $0.08 for the next few years and began another upsurge in 2021 after starting the year at $0.1814. Then, steady growth began. It clocked $1.12 on February 20, a retreat to $0.9931 on March 13, $1.56 on April 14, then a dip to $0.9 after that.
Since the April blip, the cryptocurrency continued its steady growth until another recent blip. It reached a high of $1.82 on May 12, called the $2 mark on May 14 and $2.46 on May 16.
It reached an all-time high of $3.10 on September 2, then crashed in the same month when Alonzo upgraded its rigid fork and China banned cryptocurrency in their country. October 5, it was at $2.20, and $2.17 on October 25.
Today (November 14, 2021), the ADA coin is trading at $2.04 after dipping by 0.32% from the previous day. It currently ranks 6th among cryptocurrencies and has a market cap of $67.8 billion.
Price predictions are made using algorithms, and they are not always correct. Even though they may forecast close to the eventual price, they are not always completely accurate. These are the predictions from Coinarbitragebot and DigitalCoinprice.
Coinarbitragebot believes ADA coin price could hit $1.93 by the end of 2022 and could hit $2.32 in 2023. In the next 3 years, the forecast platform believes that the highest the coin could go is $13.60.
On the other hand, Digitalcoinprice’s prediction is not as bullish as Coin Price’s. The former predicts the ADA value to reach $3.01 by the year ending, $3.72 by 2022, $4.16 by 2023, and $6 in 2025.
Is Cardano a Good Investment?
Determining whether a coin is a good investment depends on its current performance and potential for the future. Cardano has solved some real-world problems, but it also has its shortcomings, while other new coins and upgrades possess the improvement it brought on arrival.
It boasts of supporting multi-chain transactions and low transaction fees. A feature also contained in Polkadot and the impending ETH upgrade. Regardless, the following potential benefits and shortcomings will hopefully determine whether the coin will be a good investment.
- Constant Development: Cardano was developed by the IOHK engineers who reviewed its protocol to stifle potential weaknesses. It is still being reviewed by these engineers, who suggest ways on how the network can be improved and how shortcomings can be tackled.
- Multiple Layer System: It has a settlement layer and computational layer which ensures quick transactions, seamless upgrades and scalability requirements.
- Third Generation Blockchain: Cardano is more decentralized and scalable than Bitcoin and Ethereum. It also has an Ouroboros system that meets all the scalability requirements no matter the size of the Blockchain.
- Digital Identity: One fascinating feature of Cardano is its ability to streamline payment for unbanked citizens, especially in developing countries. By doing this, users have a digital identity on the altcoin.
- Slow Development: Even though it boasts many good features, they are not fully implemented. It still has to go through many stages and technological advancements to realize its full potential. Its token standards and smart contracts are not complete. Therefore, it can’t compete with fully established ones like Ethereum and Bitcoin.
- Competition: Its features are no more unique than other competing cryptocurrencies. Its innovation in the cryptocurrency markets is now also being adopted by other Blockchains. Polkadot can process multiple chain transactions; Ripple is faster, while ETH 2.0 has a better ecosystem and more developed smart contracts. Competition from other coins can dent its value over the next few years, especially if it is not upgraded on time.
Despite its cons, Cardano is a good investment. However, many unforeseen factors can affect where the coin is going. Will it see wide adoption by dApps? Will its development progress quickly? How much will it be affected by competitors’ influence? These and many other factors will determine its viability for investment.
Lastly, it is worth noting that only a tiny part of your portfolio should be allocated to Cardano. Because cryptocurrency, although it is a gratifying business, can also go the other way and provide zero return on investment.