Uncertainty has clouded Cardano’s growth since it was launched in 2015. In fact, Ether (ETH-USD) the token of the Ethereum blockchain, was trading under $1 a coin at the time and presently, a unit is worth $3,294. To put things in perspective, ADA, the token of the Cardano (ADA-USD) blockchain, is presently worth just $1.15 a unit after all these years.
Surprisingly, Cardano’s market capitalization remains high at around $40 billion, earning it the spot as the seventh-largest cryptocurrency. Meanwhile, other projects that have returned far more are nowhere near that market value.
The question is, why are people still keen on the Cardano project? What even is the Cardano blockchain project?
This article will try to answer these two questions.
What Is Cardano Blockchain Project?
The Cardano blockchain project was created in 2015 by two Ethereum co-founders, Charles Hoskinson and Jeremy Wood, while its ADA token was introduced in 2017. Basically, Hoskinson and his team created Cardano to address some of the noticeable limitations in the Ethereum blockchain project.
The platform was built on the Ouroboros consensus protocol created by Cardano during its foundation phase. This Ouroboros protocol operates as proof-of-stake (PoS).
To throw more light on the PoS mechanism, it is a consensus mechanism used in processing, validating and creating new blocks in the blockchain. Meaning, Cardano, built a one-of-a-kind proof-of-stake (PoS) platform to address the limitation in the proof-of-work (PoW) approach used in the Ethereum blockchain.
Ouroboros is “the first verifiably secure blockchain protocol,” hence why Cardano is referred to as the third-generation blockchain. It introduced an evidence-backed alternative to energy-consuming PoW used by both Bitcoin and Ethereum.
To simplify Cardano’s use case, it is a decentralized application (DApp) development platform for decentralized finance (Defi) services and verifiable smart contracts in general.
According to the company, “Cardano is a proof-of-stake blockchain platform: the first to be founded on peer-reviewed research and developed through evidence-based methods. It combines pioneering technologies to provide unparalleled security and sustainability to decentralized applications, systems, and societies.
“With a leading team of engineers, Cardano exists to redistribute power from unaccountable structures to the margins – to individuals – and be an enabling force for positive change and progress.”
Why Are People Still Keen on the Cardano Project?
Cardano is an alternative to the world’s second-most-capitalized blockchain project, Ethereum. Both of them are used to power Dapps and execute smart contracts. However, because Ethereum is a proof of work blockchain platform, it uses more energy to mine blocks and validates transactions compared to Cardano which uses proof of stake.
Therefore, because of the tedious process of executing transactions and building blocks, the transaction fees on the Ethereum blockchain are unnecessarily high. This, I believe, will play an important role in luring future developers to Cardano.
Another important factor is the limitation of a PoW blockchain platform as it gets bigger. Because it needs miners to validate transactions (unlike PoS which needs validators), transaction processing time increases as the projects on the Ethereum platform increase. This is the reason Ethereum is working on changing to PoS.
But Ethereum has the largest market share, as the originator of Dapps and the powerhouse of smart contracts with a $125 billion total value locked (TVL). Moving from PoW to PoS at this stage could derail the entire project and expose Ethereum to more risks.
TVL is the totality of all staked crypto assets that are earning interest, rewards, etc on a blockchain project. It also can be used to measure the healthiness of a project, meaning the bigger a project TVL, the more reliable it is.
Also, because of the loopholes in PoW, hackers have exploited Ethereum blockchain-powered projects and stolen billions unlike in Cardano blockchain with zero hacks. Cardano adopted a strict slow peer-reviewed process that double-checks each program before it is launched.
Here is what the company has to say on its rigorous peer-reviewed process “Cardano is the first blockchain platform to be built through peer-reviewed research, to be secure enough to protect the data of billions, scalable enough to accommodate global systems, and robust enough to support foundational change.”
Bottom Line on Cardano
Becausea single Ether is $3,294 but a Cardano token is $1.15, potential investors can own more of Cardano at an affordable price, especially after its TVL rose from about $3 million in January 2022 to $246.66 million in March.
Note that even if Ethereum successfully changed to PoS, then Cardano’s sound and clear execution process, environmentally friendly approach to execution and affordable fees are likely to continue to lure developers to the project in the long run.
On the date of publication, Samed Olukoya 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.