Cryptocurrency has been booming over the past six months, and that’s allowed a lot of seemingly left-for-deal alt-coins to come back to life. For example, take Cardano (CCC:ADA-USD).
ADA’s price fell as much as 98% from its 2017 peak to its ultimate trough. However, Cardano improbably came back and is now as valuable as ever.
Charles Hoskinson founded the Cardano platform in 2015 and it officially launched in 2017. Hoskinson, for those unfamiliar, was initially a co-founder of Ethereum (CCC:ETH-USD).
However, he left Ethereum over strategic differences with Vitalik Buterin and launched his own project, Cardano, which he felt would be able to improve upon Ethereum’s framework in several key ways.
While Hoskinson targeted a few important elements such as better energy efficiency and lower transaction fees, Cardano hasn’t really taken off.
Yes, Cardano’s market capitalization briefly spiked from $600 million to $10 billion in 2017, but the price of ADA went into a long slumber since then. Until 2021, that is. This year Cardano’s price has reached its old highs from 2017. Here’s why.
Cardano: NFT Connection?
One of the biggest trends right now is non-fungible tokens (NFTs). These are being compared to digital art.
A creator can put some piece of intellectual property — a tweet, .jpg file, meme, video, or other such thing into a digital token. Then, using the NFT architecture, the unique rights to that property can be auctioned.
While you can obviously reproduce copies of things infinitely on the internet, the NFT secures actual digital ownership of the original content for whoever buys the asset.
Cardano has enjoyed some trading buzz thanks to NFTs. Hoskinson has been appealing to NFT platforms to consider using Cardano instead of Ethereum for handling these transactions.
That makes sense in theory given the high transaction costs on Ethereum right now. Still, it’s far from certain if Cardano will pick up much NFT business and if NFTs themselves will be a lasting investment category.
Cardano: Smart Contracts Are The Real Catalyst
NFTs are fun and may boost Cardano’s price for a bit. Like many other crypto memes, however, NFTs may end up gone before long. Does anyone still remember CryptoKitties?
No, the real driver for Cardano here is smart contracts. the company’s leadership has suggested that it will be rolling out smart contracts on its blockchain by early May. This is potentially the killer app that could elevate Cardano to the big leagues.
Ethereum has gained tremendously in stature since last year, as it has developed a decentralized finance “DeFi” ecosystem based around smart contracts. This allows a bunch of novel financial arrangements and legal contracts that can be operated seamlessly online.
Recent estimates suggest that Ethereum’s DeFi platform now holds around $40 billion in assets. Cardano hopes to grab a big chunk of that. Its different architecture will allow it to avoid the huge transaction fees that have hampered the adoption of Ethereum.
Hoskinson’s other claims, such as that Cardano is more energy-efficient than Ethereum, could make a big difference if Cardano catches up to Ethereum in terms of its main features.
Out of the second-tier of cryptocurrencies, Cardano is one of the better options. It’s certainly ahead of other currently popular altcoins such as Ripple (CCC:XRP-USD) or Dogecoin (CCC:DOGE-USD).
Cardano has a well-known founder, an active development roadmap and a number of potentially valuable features. Skeptics will argue that there’s a bit of a speculative element to Cardano, particularly since many r/WallStreetBets folks gravitated to ADA.
However, that’s true of many altcoins lately, and Cardano is far from the most touted of the bunch.
Over time, there still hasn’t been much to demonstrate that Cardano will overtake Bitcoin or Ethereum in importance. And, at least so far, the crypto market has largely rewarded the biggest coins rather than the upstarts. However, the launch of Cardano smart contracts could change things.
If you want to diversify a little outside of the big two, ADA isn’t a bad option.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.