- >Cardano is Gaining Momentum Against Ethereum. Here’s Why
Cardano is Gaining Momentum Against Ethereum. Here’s Why
The vast majority of the cryptocurrency market experienced significant drops over the last week but Cardano (ADA) was somehow able to gain almost 30% over the same timeframe.
The crypto market, at large, tends to follow Bitcoin so whenever an asset starts to act as an outlier it tends to get the attention of industry. So why is Cardano rising while everything else seems to be dropping?
Evan Jones | Mar 1, 2021
There are actually several key reasons. Essentially Cardano is set to deliver a blockchain ecosystem unlike any other on the market today, and a ton of major announcements and product releases are slated for the coming months. This comes at a time when users are starting to balk at massive transaction fees on Ethereum.
Investors are bullish, and when you consider that when ADA hit its last all-time high over three years ago the price of Bitcoin was less than half of what it is now, positive correction seemed due and is currently underway. Let’s see what has pushed ADA into the top three cryptocurrencies by market cap.
Mary Hard Fork Upgrade, Native Tokens
On March 1, 2021, the Mary Hard Fork protocol upgrade will be implemented on Cardano. This protocol upgrade was initiated on February 24, 2021 and takes an epoch (5 days) to appear in the ledger. With this upgrade native tokens and multi-asset capability are coming to Cardano.
Native tokens will bring multi-asset support to Cardano, allowing users to create uniquely defined (custom) tokens and carry out transactions with them directly on the Cardano blockchain.
The use of tokens for financial operations is becoming ever more popular. One look at the price of DeFI assets such as Uniswap or Aave makes that quite clear. Using tokens for financial operations can cut costs at the same time as improving transparency, enhancing liquidity, and, of course, being independent of centralized entities such as big banks. Tokenization is the process of representing real assets (eg, fiat currencies, stocks, precious metals, and property) in a digital form, which can be used to create financial instruments for commercial activities.
Cardano will provide many tokenization options. With the ‘Mary’ upgrade, the ledger’s accounting infrastructure will process not only ADA transactions but also transactions that simultaneously carry several asset types. Native support grants distinct advantages for developers as there is no need to create smart contracts to handle custom token creation or transactions. This means that the accounting ledger will track the ownership and transfer of assets instead, removing extra complexity and potential for manual errors, while ensuring significant cost efficiency.
Future and Utility of Native Tokens on Cardano
Developers, businesses, and applications can create general purpose (fungible) or specialized (non-fungible) tokens to achieve commercial or business objectives.
These might include the creation of custom payment tokens or rewards for decentralized applications; stablecoins pegged to other currencies; or unique assets that represent intellectual property. All these assets can then be traded, exchanged, or used as payment for products or services.
Unlike ERC-20 tokens that are based on Ethereum smart contracts, the tracking and accounting of custom tokens on Cardano is supported by the ledger natively. Because native tokens do not require smart contracts to transfer their value, users will be able to send, receive, and burn their tokens without paying the transaction fees required for a smart contract or adding event-handling logic to track transactions. This is an enormous advantage over Ethereum.
Babel Fees – Denominating Transaction Costs in Native Tokens
Based on the concept of the Babel Fish in Douglas Adams’ “The Hitchhiker’s Guide to the Galaxy”, which lets you hear any language in your native tongue, Babel fees is a mechanism to translate the token you use to the one that the platform requires for posting a transaction. The scope of this is huge, and once again it solves a problem that Ethereum currently cannot.
Here is a simple example:
If you are a newcomer to crypto and you want to buy and move some stablecoins into your wallet. At the moment, your only real option is to buy Ethereum and Tether, and then pay an arbitrary amount of gas to move them, because the actual fees are never known ahead of time and depends on a variety of factors. You will probably need to keep some extra ETH stashed away too, because you will not be able to know how much it will cost to move them when you need to either. At the current market rate, that is going to be a decent chunk of ETH. Overall, this is not an enjoyable user experience.
With Babel Fees Cardano essentially just made it possible to buy a stablecoin from an exchange and instantly send it to a wallet. This is because you can attach stablecoins to the transaction to pay the fees, a Stake Pool Operator will pay the ADA cost in exchange for receiving the nominated amount of stablecoin (though it could be ANY token created on Cardano attached to the transaction). You only pay the fees in the stablecoin (or whichever other asset is chosen). There is no need to buy and hold ADA like ETH. This user experience is more well suited for mass adoption.
Essentially Babel Fees will allow you to pay for transactions in either the native token you are sending, or in ADA, or even as a combination of multiple tokens. This is unprecedented flexibility.
Project Catalyst/Catalyst Fund
Project Catalyst was launched six months ago as a series of experiments to advance on-chain governance and accelerate community-driven innovation on Cardano. The project seeks to achieve the highest levels of community collaboration and to seed the best ideas with development funding via a community-moderated process.
Proposal teams will use these funds to develop tooling, build decentralized applications, launch education and training initiatives for developers, and so much more. Every new contribution adds fresh value to the ecosystem.
Essentially, with each Fund, developers can submit proposals for ideas for projects within the Cardano ecosystem, whether that is a DeFi project, creating a message signing standard, or educational tools for those looking to learn about Cardano’s code languages. Once all the proposals are submitted, Input Output Hong Kong (IOHK), reviews all of them and assigns them an impact value.
The community can then register to vote, and subsequently vote on which of the proposals they would like to see funded. The three examples above are all proposals that were funded during the last Fund (Fund2). Fund2 gave away $250k worth of ADA. Fund3 is set to take place March 3, 2021, when voting will open for two weeks. Voting can be done through the Project Catalyst application currently (iOS & Android), but it is going to be added natively to the Daedalus Wallet.
Each funding round has grown in its scope, level of funding, and community engagement. There are already 7,000 members on the IdeaScale innovation platform with 1,800 active voters. Adoption is growing by 10% every week and we have only just begun.
Fund4 will be the most accessible and ambitious round yet and the first million-dollar round – that’s the size of the ADA pot to fund development projects on Cardano. Twenty percent of treasury funds are set aside to reward and incentivize community advisers, referrers and participating voters for their contribution.
To participate in voting you need to meet a threshold currently set at 3,000 ADA – a threshold set to help protect the voting system from malicious attacks. For the previous Fund it was 8,000 ADA, the number will decrease in correlation with current price of ADA. An interesting thing to note is that you would currently need over 11 billion ADA to attack the network, or what is the equivalent of over $15 billion, as you need to have over 51% of the staked ADA, of which there is nearly 23 billion ADA, which is over half of the total supply that will ever circulate.
Goguen, DApps & Smart Contracts
The Mary Hard Fork is the first step in bringing smart contracts and decentralized apps (DApps) onto Cardano, Goguen will follow shortly thereafter and will allow DApps and smart contracts to be executed on Cardano.
One of the goals for the Goguen era was been the creation of Plutus, a purpose-built smart contract development language and execution platform using the functional programming language Haskell. It also allows one code base to support both on and off-chain components, improving the coherency and usability of the development experience compared with existing smart contract implementations. This is in contrast with Ethereum, where you have to use an ERC-20 contract standard that has fixed requirements. Goguen will allow smart contracts to be written in a plethora of programming languages.
According to Charles Hoskinson, Cardano could have had smart contracts four years ago, but they wanted to do it right, in a way that was accessible and functional in the long-term. Considering the issues Ethereum is facing right now, it looks to be the right decision for Cardano to take the measured approach.
Cardano has created an ERC-20 converter, meaning anyone with an ERC-20 project can simply drag and drop their project onto Cardano once Goguen is released and continue to work on it without missing a step. Projects such as SingularityNET have already begun working on Cardano after being exclusively on Ethereum.
Cardano recently started a developer net for GLOW, another programming language that Cardano will support that started on Ethereum.
This is not so much a rumor as an inevitability, IOHK is in the final stages of a large government contract in Africa. What country is unknown, but if we are to believe rumors, it is a significant one.
If and when this is launched/announced, it will not only be one of the biggest real-world implementations of blockchain technology, but it will potentially bring millions of new users to Cardano. If it is successful, it is reasonable to assume that it will spread to other countries in Africa, where there are millions of people with little to no access to banking services.
With Babel Fees, one of the major criticisms around digitizing currency in African nations is solved. This is the idea that the unbanked will find it confusing to need to purchase and maintain an ADA balance in order to transact in their nation’s official currency. With Babel Fees, they can buy stablecoins in their nations currency and pay the fees with them to send the stablecoins to family, friends, etc.
More Partnerships and Ideas on The Way
In addition to companies like SingularityNET starting to work on Cardano, there are partnerships in the works with many different sectors. SingularityNET is a decentralized Artificial Intelligence marketplace, they help users design, build, integrate, and deploy AI solutions into their company’s projects
The aforementioned Glow, yet another programming language, has announced they are working with Cardano now in addition to Ethereum (their original partner). Their programming language is supposed to be groundbreaking; an open-source programming language on the Cardano blockchain, which will allow anyone to write blockchain-based applications and deploy them on the network. While they started on Ethereum, they are looking for whatever ecosystem works best.
Cardano is currently forming a partnership with Celsius Network, one of the most popular crypto lending platforms. It is currently built on Ethereum, but if it works well on Cardano, the fees will be much lower through Cardano’s blockchain compared to Ethereum’s.
There are rumors of Cardano finally being listed on Coinbase, one of the biggest fiat on ramp providers for crypto, which would increase its liquidity even further.
Cardano is working with universities to create a dedicated software development center that will focus on the development of smart contracts. There are apparently a lot of suitors for this partnership but an announcement on what university wins the donation (Cardano is funding the program) is expected within the next few months.
Cardano has been working for 3 years on a dedicated DApp store which will make it easy for users to find and install useful DApps.
Conclusion: Ethereum is in Trouble
With all the things that Cardano is doing, and doing soon, Ethereum holders should potentially be worried about the future of the project. While Ethereum 2.0 is on the way, it is not expected to be in any way fully functional until 2022. By that time Cardano may have already taken a significant number of the Ethereum userbase, as Goguen will be in full effect within a couple months.
Why would anyone stay on Ethereum if they can do the same thing on Cardano, with little to no transaction costs, and with those transaction costs being payable in multiple assets, not just ADA? For anyone interested in DApps, smart contracts, and true decentralization, Cardano should be on your watchlist, if not in your portfolio.
Disclaimer: The information in this article is informative and is in no way to be taken as investment advice. Please do your due diligence before investing in any crypto project.