Since reaching a high in early November, the cryptocurrency market has dropped roughly 40%, losing $1.2 trillion in less than three months. And Cardano (ADA) has taken a beating. The ADA coin’s price has dropped by roughly 60% from it’s all-time high. Despite this, it is the 7th-most valuable cryptocurrency, with a market cap of just over $35 billion.
Cardano’s evidence-based approach to blockchain development has earned the project a devoted following (and critics), as well as enthusiasts who believe Cardano has big upside following the recent sell-off.
In fact, some investors predict that ADA will reach $25 by 2025, implying a 2,200 percent increase from its current price. Is that a reasonable expectation or just more Cardano hopium?
Let’s get started.
Cardano’s cutting-edge blockchain
Charles Hoskinson, an Ethereum co-founder, left the project in 2015 to launch Input Output Global (IOG), a blockchain research and engineering firm. He hoped to advance the industry by addressing Ethereum’s lack of scalability and its energy-intensive proof of work (PoW) consensus mechanism. Hoskinson took the first step toward realizing that vision in 2017, when IOG launched the Cardano blockchain.
Cardano’s key innovation is the Ouroboros proof of stake (PoS) consensus protocol. Ouroboros is the industry’s first peer-reviewed and verifiably secure consensus protocol, as well as being more energy-efficient than PoW solutions. In other words, it has undergone rigorous academic scrutiny.
Evidence-based, peer-reviewed development has become ingrained in Cardano’s lifeblood. IOG publishes academic research on blockchain technical updates on a regular basis, and the Cardano project is divided into five distinct eras, each focusing on a different set of features. These eras (phases) address Cardano’s foundation, decentralization, smart contracts, scalability, and governance in that order.
Cardano is now in its third era of development, with smart contract functionality going live back on September 12, 2021. That meant that developers could create blockchain-based decentralized applications (dApps) and decentralized finance (DeFi) services.
Because those products necessitate transaction fees paid in the native cryptocurrency, the resulting demand for ADA should drive its price higher as Cardano gains traction. That was what was supposed to happen.
Six months later and it’s still not clear what exactly is being successfully built on Cardano-although a lot of developers are . Other than the decentralized exchange SundaeSwap, not much appears to be going on. The price of the ADA token reflects this as it has dropped over $2 from an all-time high of $3 just before the smart contract rollout last September.
Of course, Ethereum is the clear industry leader, with over 2,900 dApps deployed and $150 billion invested in blockchain-based DeFi products. However, according to CoinMarketCap.com, over 4,000 developers have previously worked with Cardano’s test network, and CardanoCube lists over 280 dApps and smart contracts that are already live. Cardano is also gaining traction in the DeFi space, with investors already pouring $74 million into blockchain-based financial products.
In the future, the next stage of Cardano’s development is critical, as it involves an upgrade to the Ouroboros consensus protocol. Hydra, in particular, is a scaling solution that will enable multiple side chains – additional blockchains that will connect to the core chain – thereby more efficiently dividing network load.
Hydra could eventually increase throughput to 1 million transactions per second (TPS), while also allowing for instant confirmation of those transactions.
To put this in context, Ethereum currently handles a maximum of 14 TPS, with each transaction taking six minutes to complete. Because of network congestion, transaction speeds have slowed and fees have risen as a result of the lack of scalability. As a result, Ouroboros Hydra is critical to Cardano’s future, and the upgrade could occur in 2022.
Cardano’s Target Price
Price targets are inherently speculative, especially in the cryptocurrency market. Stocks have been around for centuries, but cryptocurrencies are a new asset class that does not generate revenue or profits in the same way that publicly traded companies do. Also worth noting is that if ADA does indeed reach $25 by 2025, Cardano’s market cap will exceed $830 billion. Only Bitcoin has ever had a higher value.
Cardano, on the other hand, promises far more utility than Bitcoin, and it is certainly possible for ADA to reach that price target. After all, meme tokens such as Shiba Inu have yielded much higher returns in much less time. Having said that, a lot of things would have to go right for Cardano to reach a market cap of $830 billion.
For one thing, Hydra’s implementation must be perfect. If Cardano can differentiate itself in terms of scalability, more developers will be motivated to learn Plutus, the programming language used to create Cardano smart contracts.
At that point, those developers must create an engaging ecosystem of dApps and DeFi products, and those products must go viral with consumers and investors. If the right conditions are met, demand for the ADA token could push its price to $25. However, the likelihood of Cardano reaching a market cap of $830 is slim-at least based on current projections and past performance.
Cardano is an intriguing blockchain project with a lot of potential. Yet, they seem to be losing the race to supplant Ethereum, as newcomers Solana and Avalanche are lightening fast and gaining wide acceptance. At the time of this article Cardano’s ADA token was trading at $1.05.
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I write about blockchain, crypto, NFTs and other disruptive technologies and innovations.