Buy Cardano, But Not for Its Idealism

If you’re like most people, you’ve read just about everything there is to know about Cardano (CCC:ADA-USD), the blockchain network that seeks to drive the underlying decentralization protocol to facilitate deeper innovations at greater scale. While this an intriguing fundamental backdrop, will it mean much to the everyday investor? Well, that’s where I find a surprising lesson.

The Cardano logo and description on a smartphone.
Source: Grey82 / Shutterstock.com

Before I get into what I believe is one of my most difficult theses thus far, though, I should give some historical context to the evolution of blockchain technology. Pioneered by Bitcoin (CCC:BTC-USD), the original cryptocurrency proved that societies can transact digital assets of economic value across borders through a non-human administrative process.

Basically, rather than utilizing a centralized intermediary, Bitcoin transactions and its supply distribution depend on consensus among several decentralized contributors and validators. Now, very few will bother participating in the operations of a complex network without financial incentives. That’s where proof-of-work (PoW) comes in, a mechanism which requires intensive computing power to contribute to and benefit from the network.

Soon enough, though, blockchain advocates saw vulnerabilities in PoW protocols. Namely, these protocols are energy inefficient and concentrate power with a minority of entities who can afford expensive crypto mining rigs. To remedy this flaw, some have suggested proof-of-stake (PoS) instead. PoS is a protocol that enables those who stake the most holdings of an underlying cryptocurrency the highest probability of network participation and, thus, financial rewards.

According to the Cardano website, the blockchain platform is the first PoS protocol to be “founded on peer-reviewed research and developed through evidence-based methods.” More significantly, the ADA network “brings a new standard in technology – open and inclusive – to challenge the old and activate a new age of sustainable, globally-distributed innovation.”

You just have to love Cardano for this directive. But at the same time, that’s not the reason to buy it.

Separate the Mission and the Reality of Cardano

Several months ago, legendary rock star Gene Simmons generated headlines when he bought $300,000 worth of Cardano coins. Coincidence or not, ADA soon saw a big move higher, followed by sustained bullishness that took the price tag to a blistering high of around $2.30.

But I couldn’t help thinking to myself: if Simmons and other celebrities bought massive amounts of Cardano, they could then choose to be strong network influencers if they wanted. Just take their millions, convert it to ADA and stake their holdings — voila! A Cardano whale.

This hypothetical circumstance raises an uncomfortable thesis. No matter what economic system someone develops, it seems like there will always be unfairness and a concentration of wealth involved. But if that isn’t discouraging enough, even Jesus taught that inequity is an enduring problem.

Stay with me here. Of course, this sounds like a random, alarming statement. However, the reason I bring it up is because of one specific quote. When speaking on the subject of budgeting for the ministry, Jesus said, “For you have the poor with you always.” The statement is so profound that it bears serious consideration.

Do you know what Jesus did here? Basically, he called an economic reality that’s true to this day. Despite so many different economic systems throughout the centuries, not a single protocol has truly addressed systemic inequity — something we’re wrestling with in the United States right now.

So, blockchain? You got to be kidding right? This is probably the most inequitable market there is and shifting to PoS isn’t going to do squat.

Buy Cardano for the Right Reasons

Please note that I’m not attacking Cardano here. I own ADA coins, so I have zero incentive to bash it. However, I also have to be objective. While ADA may rise on several factors — mostly due to the greater fool theory — it will not rise by fundamentally eliminating the inequities and abuses that perpetuate systemic, global poverty.

As Bloomberg pointed out late last year, crypto whales have become even bigger during this rally. That really cuts into the decentralization narrative. Sure, decentralization is awesome. But does it really matter if the rich only get richer? Just like in any other economic system in the history of mankind?

Again, Cardano can move higher — that’s certainly possible. But it will not climb because it can accomplish its equity-driven mission. Don’t bet on that specific narrative.

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On the date of publication, Josh Enomoto held a long position in ADA and BTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


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