Smart Money Should Follow As Cardano Moves Into Smart Contracts

Back in May, Input Output Hong Kong (IOHK), the team behind the Cardano (CCC:ADA-USD) blockchain, announced a rollout plan for smart contracts.

The Cardano (ADA) token with other gold and silver tokens in the background.
Source: Shutterstock

I’m someone who believes that the most successful cryptocurrencies 5 to 10 years from now will be those that provide the most utility. By getting the Alonzo smart contract platform up and running, IOHK gives ADA-USD the juice to potentially become one of the crypto winners over the long haul.

What Does Alonzo Do for Cardano?

The rollout is a 30-60-90 day play plan that begins with Alonzo Blue, transitions to Alonzo White, and finishes with Alonzo Purple. The expected finish date is September 2021.

On June 12, IOHK’s director of marketing and communications, Tim Harrison, said on the company YouTube channel that Alonzo is now able to run smart contracts.

“‘Apparently, it could create a very simple smart contract and pass it to the ledger. So they can have their first smart contract written against our network,’” Yahoo Finance’s Dale Hurst reported Harrison saying while providing additional comments.

“‘It could be as simple as a transaction that passes back a ‘Hello, world,’ or a confirmation of a payment that has been made.[…] It means that we have Alonzo running smart contracts.’”

Once smart contracts can be completed on the Cardano network, IOTK will begin developing decentralized applications (dApps), including those used for decentralized finance (DeFi).

The last two words is when my ears perked up. I continue to study and understand DeFi because I believe that is the sector where Cardano and the other utility cryptos could have the biggest impact.

So Alonzo is absolutely vital to Cardano’s future and that of its ADA altcoin.

Cardano vs. Ethereum

My InvestorPlace colleague Larry Ramer recently argued that it makes far more sense to invest in Ethereum (CCC:ETH-USD) than Cardano. He believes that “betting on a more established player in a new sector is less risky than betting on a challenger in a new sector.”

After all, Ethereum has a market capitalization of $295.4 billion compared to just $50.1 billion for Cardano. It’s akin to investing in Toyota (NYSE:TM) over Nio (NYSE:NIO).

I totally get that viewpoint. I’m constantly providing less risky options for investors interested in electric vehicles, clean energy, artificial intelligence and all the other tech innovations happening right now. Not everyone is interested in high-growth investing strategies.

In my last article about Cardano, I reasoned that it was an excellent alternative to Bitcoin (CCC:BTC-USD) because it was an environmentally friendlier cryptocurrency that still provided meaningful utility through smart contracts and the like.

As Alonzo makes its way through the development process, it will become increasingly clear later this year that Cardano can be a worthy alternative to Ethereum, which itself is trying to move from proof-of-work to a proof-of-stake network

In a few months, Cardano’s progress could spur the price of ADA back over $2 where it was in May.

The Bottom Line

A recent article from NewsBTC contributor Reynaldo Marquez caught my interest as I researched Cardano. In that article, Marquez pointed to crypto analyst Ben Armstrong’s purchase of one million ADA-USD. In Armstrong’s own words:

“Their roadmap is painstakingly mapped out to capture any corner cases keep the bugs to a minimum. Even on their website, they describe Cardano as peer-reviewed and evidence-based. This laser focus means that Cardano is primed to be a lean powerful machine ready to take the lead over their competitors.”

Basically, Armstrong believes Cardano will move beyond transaction processing or remittances to solve real-world infrastructure problems. 

Again, this goes back to utility and the fight for second place. As a store-of-value and currency, Bitcoin has likely won the race. Who comes second or third really depends on the value they add beyond the coin itself. 

According to Marquez, Armstrong believes the ADA price can increase four-fold with the successful implementation of smart contracts and all the DeFi dApps that will flow from this technology. 

I am looking forward to the creation of future DeFi applications based on the Cardano blockchain and smart contracts.   

On the date of publication, Will Ashworth 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.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


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