Interest In Cardano Network Is Outpacing Its Technical Advancement

June 3, 2021 04:00 PM





The Top 10 was unchanged to marginally up this morning as BTC struggled to break out above resistance at USD 40,000. Spot volumes have declined and are less than half of the 30-day average.

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The Cardano network’s ADA token achieved a record market cap of USD 73 billion in mid-May. The network, which has limited functionality, has benefited from the narrative-driven investing that’s typical in crypto markets. 

In March, Cardano underwent the Mary upgrade, described as introducing “native tokens [and] multi-asset support” on the network. That upgrade was said to be paving the way for the Alonzo upgrade, which introduces smart contract functionality, currently scheduled for August. According to Input Output HK (IOHK), the network’s principal developer, Alonzo enables “the deployment of a wide range of new DeFi applications for the first time.” Last month, IOHK revealed it had launched a testnet for the Alonzo upgrade ahead of its full deployment. 

Cardano is currently in the “Shelley” phase of its development, the 2nd in a 5-part roadmap to full technical maturity. The Shelley phase is described as decentralizing the network and introducing independent stakers to facilitate transactions. When the network launched its mainnet in 2017, IOHK performed core services over the network. Last year, the network introduced staking with Cardano undergoing several technical iterations towards fuller decentralization

In April, IOHK revealed a partnership with the Government of Ethiopia which aims to develop Atala PRISM, a “decentralized identity solution” built on the Cardano blockchain. 

Following Elon Musk’s tweets regarding Tesla suspending BTC payments over environmental concerns, a number of articles cited Cardano’s low energy proof-of-stake model, including a piece from The Independent titled “What Is Cardano? The 'Green' Crypto That Defied Musk’s Bitcoin Crash.”  

Cardano has also enjoyed considerable attention on social media. The Cardano forum on Reddit has 497,000 members, compared to the Ethereum forum’s 988,000; at the start of the year, the number of Cardano forum members totaled 94,000. 

During the market selloff in May, ADA saw as much as USD 31 billion wiped from its market cap. The coin currently has a market cap of USD 55 billion.  

The Cardano blockchain has seen virtually no practical uptake beyond speculation on the price of ADA. As such, it’s benefited from narrative-driven investing that’s foregone more critical considerations. For example, Canada’s 5th largest bank, CIBC, has over 10 million customers and 44,000 employees, and has a virtually equal valuation to ADA: USD 54 billion. 

Such comparisons serve to highlight the dislocations present in valuations of networks such as Cardano. The network’s valuation follows a typical pattern where increased interest in blockchain applications hasn’t been accompanied by advances in the actual usefulness of such networks.

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