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Cardano: Crypto’s Rising Star

Let’s have a look at why Cardano’s native token (ADA) may be cryptocurrency’s next outperformer. This crypto, named after Ada Lovelace who is considered the world’s first computer programmer, is rising in popularity.

The fact it’s receiving growing attention may be due to its high level of scalability and the many use cases it can be applied, which makes it a prime candidate for cryptocurrency investors.

Cardano Smart Contracts

Cardano is a blockchain technology that relies on the proof-of-stake protocol as opposed to the proof-of-work protocol. The proof-of-work protocol is used by Bitcoin, which is notoriously energy-consuming. Cardano is separated into two different layers, Cardano Settlement Layer (CSL) and Cardano Computing Layer (CCL).

The CSL is where the transactions are validated by the Ouroboros consensus mechanism, and contains the ledger of accounts and balances. The CCL is where computations are made, for all apps running on this blockchain, via the use of smart contracts.

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Contracts are a set of terms agreed upon by two parties who sign a document which is usually verified by a third party. That document then needs to be processed by the third party so that it is recorded at a government or institutional level. Smart contracts eliminate the need for third parties.

The use of smart contracts allows two parties to agree on terms without the need for outside intervention. The system is secure, decentralized, and can be used in a variety of highly complex situations. The code can include the consequences under the terms of an agreement.

For example, in the case of a supplier who fails to deliver his goods. The smart contract can return the funds to the buyer, send the goods back to the supplier’s warehouse, and log all the details in the ledger.

The positive characteristics of smart contracts are:

  • Security
  • Speed & low cost
  • Accuracy
  • Transparency
  • Autonomy
  • Standardization

Behind The Curtains: Ouroboros

The Cardano cryptocurrency makes use of the Ouroboros blockchain protocol. The blockchain unites mathematically verified mechanisms and unique technology to ensure security and sustainability. Cardano is the first to use this blockchain technology.

Ouroboros is the first open-source code blockchain protocol based on proof-of-stake. The security level of this blockchain is comparable to that of blockchain for Bitcoin. Ouroboros is also scalable, the concept has been developed bearing in mind that the technology must be able to grow as the world does around it.

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Scalability of Cardano

Cardano teamed up with another actor IOHK to research and develop the technology behind the cryptocurrency. Cryptocurrencies need to be scalable. Meaning they need to be able to make a continuously growing number of transactions.

Think of credit cards, they make payments happen within a matter of seconds. If people are going to use cryptocurrencies for payments, then these transactions need to happen just as fast.

One of the main problems so far with proof-of-work cryptocurrencies has been the limit to the number of transactions that can be processed per day. The limit to the number of transactions means that when interest is high many investors will find their transactions in a queue.

There have been many occasions in the past and present where crypto transactions have been halted, at times for days, while the backlog clears up. For a cryptocurrency to be a viable alternative to fiat money transactions have to happen quickly.

Visa for example makes 150 million transactions per day, which is equal to around 24,000 transactions per second (TPS). At the moment standard blockchain protocols based on proof-of-work can only manage around a few dozen TPS. Whereas proof-of-stake protocols can handle several hundred TPS.

Proof-of-stake protocols are a big improvement over proof-of-work in terms of transaction workload. However, they still don’t have the same firepower standard fiat money transactions can offer.

IOHK teamed up with scientists and researchers to find a way to massively increase the number of TPS. They recently released a white paper, Hydra, with the solution. Hydra allows for the possibility of adding extra nodes in the second layer.

The second layer is where all computations are made, and Hydra allows for a multitude of pools to be created. Each pool can process approximately 1,000 TPS. The big feature here is that you could have a thousand pools.

With 1,000 pools each processing 1,000 TPS you can scale up to 1 million TPS. The increase is possible because the protocol relies on adding additional nodes. Rather than adding additional power to hardware, there are limitations to hardware as we are already experiencing.

Cardano Price Prediction

We’re often asked, “How high can Cardano go?” Cardano has had a rocking start to the year 2021, with a rally that took the coin from $0.19 in January to a high of around $3.10 in September. Until recently the cryptocurrency has had a lackluster life since its launch in 2017.

The cryptocurrency managed a small rally in 2018. However, interest quickly faded. While investors lost interest the coin traded below $0.25 until the recent rally began at the start of 2021. The chart below shows the weekly price action for ADAUSD from August 2020 to November 2021.

More recently Cardano saw the release of the awaited Hydra upgrade. The market had a typical approach, and bought the rumor, and sold the fact. The coin has seen its prices coming down for the past few weeks.

However, we feel that if they manage to increase the number of investors with Cardano in their wallets and quickly implement the Hydra paper, this cryptocurrency could prove to be an outperformer in 2022 and in years to come. Ultimately, we’re bullish for our Cardano price prediction for 2030, since a number of unique features make this coin promising in the long term.

Technically, since the start of the year, the virtual coin has seen successively higher highs and higher lows. We can see from the chart the upward black trend line has not been broken since the start of the year. If it doesn’t break the trend line we should see more price action to the upside.

How to Buy Cardano

There are many popular crypto exchanges online, here we are going to look at the best in the US in three different categories. A list of all the most popular exchanges may be too long to go over and beyond the scope of the article.

We are going to have a look at the best exchanges for beginners, seasoned investors, and the best overall.

Coinbase.com

The best exchange for beginners goes to Coinbase.com. This exchange has a very simple platform to use for someone who has just started looking at cryptocurrencies. The platform has strong user reviews and security ratings.

You can invest and trade in over 100 cryptocurrencies, and getting your account approved and ready to go is easy and relatively quick. The convenience and ease of this platform come at an extra cost. The fee structure is complex and more expensive than most other competitors.

If you’re more of an expert you can upgrade to their Pro accounts. This account offers a more sophisticated platform with more complex trading orders, better charts, and progressively lower fees.

Binance.us

The best exchange for seasoned investors is Binance.us. This exchange has very competitive fees that decrease the more you trade. It has two platform types, Simple and Advanced, with real-time market prices. You will be able to set up trades with more complex orders such as limit order, market order, or stop-limit. 

There are some exchanges out there that offer margin trading, which allows you to invest in more cryptocurrencies than the initial capital in your account. However, Binance.us currently does not offer this facility. Not allowing investors to double or triple their initial stake may be doing some a favor.

Crypto.com

In our books, Crypto.com takes the best exchange overall. This platform has over 150 cryptocurrencies and 10 million users. The exchange also offers a Crypto.com Visa Card where you can get up to 8% back. 

It has a streamlined user interface, easy to pick up, and with all the functions you might need. The exchange platform has all the technical analysis and drawing tools to help you set up your trades. They even accommodate up to 10 times margin trading for those with a big enough risk appetite.

Wrapping Up

There is no doubt that the interest in cryptocurrencies continues to rise. When Wall Street hedge funds actively involve themselves in a crypto project like Cardano, you know this is a cryptocurrency that is going places.

Cardano in particular seems to have features that other virtual coins cannot offer.

First of all, it is set to be highly scalable, as the demand for its use grows the technology will be able to have everyone covered. This aspect is extremely important, you cannot expect to be a valid alternative to fiat money if people can’t make all the transactions they want at the same time.

As more and more applications for the blockchain are found, so too, will demand to grow for the virtual coin. Earlier this year the Cardano foundation announced it was partnering with the Ethiopian government to integrate the Cardano blockchain into the country’s school system.

The possibilities do not end there. The Cardano team has also partnered with EMURGO, a multinational blockchain company. The corporation provides solutions for governments, developers, startups, and enterprises.

Finally, this cryptocurrency is also highly sustainable. The huge amounts of electricity needed to mine some cryptocurrencies are not required. The low electricity bill and lower hardware requirements are thanks to the double layer and the proof-of-stake protocol.

Gino D’Alessio

Gino D’Alessio is a Broker/Dealer with over twenty years of experience in various OTC markets such as Bonds, FX, and Derivatives. Currently a Financial Markets and Investments Writer & Analyst for SophisticatedInvestor.com.

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