Cardano (CCC:ADA-USD) has a much broader goal than simply using the blockchain to decentralize transactions. It wants to change the world – in a good way, thankfully.
If you go to its website, you will read a great deal of high-minded ambitions and that’s certainly much better than naked greed, especially in the financial markets. And it has actually built platforms and operates divisions that are trying to build the financial world it hopes to help deliver.
The challenge is scale.
And competing cryptos that aren’t really in it for anything other than self-promotion or the desire to grow their crypto’s value faster and bigger than any other.
But scale is the real challenge with all cryptos. They’re like a developer’s sandbox, where ideas are played with and new theories are tested. All the crypto websites tend to be vague on real deliverables aside from one day building a decentralized finance (DeFi) solution to the current system where everything needs to run through a bank or financial services company.
Cardano Has Good Intentions
Don’t get me wrong, I think Cardano has good intentions. But you know the saying about what the road to Hell is paved with.
I’m glad people are thinking outside the well-worn box of our current financial system. But this experiment isn’t going change financial systems overnight. There are a lot of powerful financial companies and governmental organizations that are just now figuring out how cryptos in particular and DeFi in general can work to their benefit.
You also have consumers that rarely change banks and the goal here is to have them switch currencies? That’s quite a leap for most of the population.
What Can I Do with It?
The other issue is practicality. Is Cardano practical? Now, if you set up your account so you delegate your stake to a group that funds schools in Ethiopia, then that is certainly more productive than many uses of your capital.
But can you buy a gallon milk? Theoretically, yes. But the problem is, that gallon of milk’s price would be all over the place on any given day or week.
In countries with hyper-inflation, most prices are written on chalkboards because the exchange rate for the currency varies so widely and quickly. Given that reality, consumers in those economies don’t save money because it’s likely to be worth far less in coming days. That’s not a secure currency.
This is my trouble with all cryptos and tokens today, and I’ve been covering Bitcoin and the crypto movement since 2014. They’re certainly trading vehicles but their value is locked up in their technology, nothing more.
It’s like having derivatives that don’t have any underlying value except what’s imputed by demand for the derivatives.
Don’t Get Me Wrong
That said, I think the concept of cryptos like Cardano show the potential for what cryptos and DeFi could bring to the global financial system.
And Cardano is doing some really innovative stuff. I applaud its imagination and its efforts to empower individuals more during financial transactions and allow their collective financial power work more to their benefit rather than financial institutions.
The great challenge is the crypto market is fragmented. And if the nature of decentralized currencies doesn’t allow that to be more organized, it’s going to be very difficult for Cardano and others to build the foundation that will allow its vision to become a global reality.
Jan. 1, 2021, Cardano was trading around 17 cents. Today, it’s around $1.59. That’s around a 773% run in six months. And nothing substantial has changed with the company or the currency to account for this. And this is the same for many cryptos.
This market is too young and too volatile for any serious money. But if you have some risk capital and want to set up a crypto account, Cardano has a vision worth buying into.
Disclosure: On the date of publication, GS Early did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
GS Early has been an award-winning financial writer and editor for nearly three decades, working with many of the leading financial editors and publishers during that time. He’s seen a few things and heard plenty.