Upgrades are usually a time to rejoice for crypto investors. In the run-up, you will see a massive increase in the token price because of anticipation. But when it goes live, there can be a drop because many investors take their profits and decide to invest them elsewhere. The same happened with Cardano (CCC:ADA-USD), which fell 10% after the Alonzo upgrade went live.
The much anticipated hard fork will help Cardano tap the decentralized finance (DeFi) and nonfungible token (NFT) investment boom, expanding the network’s ability to run a range of crypto applications. After the Alonzo series of upgrades, the platform will support applications like smart contracts, helping it compete with the likes of Ethereum (CCC:ETH-USD).
But then, many will be asking why Cardano is sinking since making such a transformative change. It is a classic case of “buy the rumor, sell the news” and does not have any bearing on the long-term trajectory of the altcoin. Now that investors have taken their profits, the time is ripe to take advantage and initiate or add to your position.
Cardano And Its Place in the Crypto World
Cardano launched in 2017. The public blockchain platform was founded by Ethereum’s co-founder Charles Hoskinson. Unlike Bitcoin’s (CCC:BTC-USD) proof of work algorithm, Cardano uses a proof-of-stake (PoS) mechanism. Both of these systems work differently. But the main point to note is that the PoS mechanism is less energy-intensive making it more environmentally friendly. Cardano’s Ouroboros proof-of-stake (PoS) algorithm is also faster at processing transactions — 1,000 transactions per second (TPS). In comparison, Bitcoin can process up to 3 to 7 TPS and Ethereum around 10 to 20 TPS.
Cardano is the blockchain platform. ADA, Cardano’s native currency, is often referred to as Cardano, but it’s not the same thing. It has two distinct layers, which are used for different tasks. The Cardano Settlement Layer (CSL) helps in completing crypto transactions. Cardano Computation Layer (CCL), the second tier, allows users to execute smart contracts. Having two layers sets Cardano apart from many legacy platforms because it improves long-term scalability and quick transactions.
Meanwhile, academic writers are consistently looking for ways to improve the blockchain. It is unique for cryptocurrencies to have such strong, credible, academic backing, as is the case with Cardano.
Finally, Cardano’s consensus mechanism ensures mathematically proven safety. This is very important in the crypto space since cyberattacks can substantially threaten the credibility of a network.
IOHK’s Ethiopia Blockchain Deal
Cardano, alongside its commercial arm Emurgo has partnered with Ethiopia’s Ministry of Education to digitize the learning experience in the country. Using Cardano’s platform, teachers and students will be able to conduct their daily tasks much more efficiently in the digital space.
Cardano’s blockchain ID project will go live in January 2022. Millions will take advantage of the program allowing school authorities to track performance like never before. Apart from the IDs, high school students will receive chips upon graduation that will hold their educational credentials, resolving the issue of fake certifications that has been plaguing Ethiopia for quite some time now.
The collaboration is yet another example of how blockchain technology can revolutionize daily lives, especially in areas lacking infrastructure. In a recent interview with The Daily Hodl, John O’Connor, the Director of African Operations at IOHK, said it is looking to expand operations in Africa, “We’re meeting with some of the top-level officials, senior government officials, presidents, who are all interested in seeing more about our identity solution.” IOHK is the development company behind Cardano, and its research arm recommends developmental changes to the platform.
So, the Ethiopia deal is only the beginning of Cardano’s African sojourn.
Strike While the Iron Is Hot
Ultimately, the utility of any token has a significant bearing on its future. Even meme coins cannot escape this reality. This is why you see development teams scrambling and pushing out updates for ‘joke’ cryptocurrencies. Considering this, Cardano looks to be in a very healthy state because of its many use cases and the recent upgrade.
Since there is a dip, now is the ideal time to add more ADA to your portfolio.
On the publication date, Faizan Farooque 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. Faizan does not directly own the securities mentioned above.