The Long-Term Bullish Case for Cardano (ADA)
Cardano has been the target of equal parts anticipation and frustration since its launch in late 2017. The frustration stems from the fact that unlike most other cryptocurrency projects, Cardano has refused to contribute to the frantic hype train which sees desperate altcoins compete to be the biggest, the fastest and the first onto market.
Instead, Cardano has nurtured its reputation as ‘the thinking man’s’ cryptocurrency, and continues to prioritize slow, steady progress, with each step checked and double-checked by its competing peer-review groups.
Despite holding its place among the top ten cryptocurrencies for most of 2018 and 2019, the feeling is that the best is still to come for Cardano. So let’s take a look at this slow-burner, and the reasons why there’s still a long-term bullish case to be made for ADA.
A Very Different Approach to Cryptocurrency
One of the most striking aspects of Cardano’s creation is that it did not start off with a solid roadmap or even a whitepaper. Instead, the team employed an approach which would be more appropriate for engineers or artists, by ‘embracing a collection of design principles, engineering best practices and avenues for exploration’, as seen below:
The practice of using competing peer-review teams is virtually unknown in the cryptocurrency space, largely because there’s no legal or public pressure demanding it. Investors have shown themselves more than willing to throw their money behind projects based on the strength of rhetoric and branding alone. There’s even reason to suspect that some of the creators of major cryptocurrencies don’t understand their own code; portions of which are often lifted wholesale from other projects.
In this sense, Cardano’s tight, peer-reviewed approach is a refreshing change of pace in a normally hectic and ill-disciplined sector of fintech. So much so that cryptocurrency analysis group Weiss Ratings tweeted out after the Ethereum Constantinople update failed to launch in early January.:
“In the aftermath of the Ethereum Constantinople failure, its devs are beginning to realize the importance of formally verifying your code before writing it. This is the approach favored by Cardano, and we believe it should become a standard in the crypto industry.”
One Cardano for Blockchain, Another for the Real World
Cardano’s documentation anticipates the need for the existing financial infrastructure to make a smooth transition (wholly, or even just partly) into blockchain. Right now, most cryptocurrency transactions have all irrelevant metadata stripped out, essentially leaving nothing but sender’s address, target address and transaction value.
In the world of big business, how is a lawfully-bound company to utilize blockchain to the fullest if they can’t trust it to carry the mass of legal data which traditional contracts require? This is why Cardano’s development is split into two separate layers – the settlement layer, and the computational layer. This separation of responsibilities is something that other existing blockchains like Ethereum are trying to implement only now, with layer 2 scaling solutions like Plasma.
Those two layers will communicate via sidechains, which the team eventually foresee growing into a network of larger blockchains as the Cardano user base and value increases. This will be helped by interoperable scripting tools like Plutus, more on which can be read here.
Ouroboros – A Provably Secure Proof-of-Stake Consensus Algorithm
One of the things you’ll hear about Cardano’s unique Ouroboros Proof-of-Stake (PoS) algorithm is that it is ‘provably secure’. Ouroboros is the product of Cardano’s peer-reviewed academic research, and its claims to security were given a boost in the arm in January 2019 when Proof-of-Stake systems were put to the test by a team of hackers.
Of the twenty-five PoS cryptocurrencies attacked by a group of students in the security experiment, it was discovered that five of them were susceptible to 51% attacks. The traditional rhetoric states that PoS was set up, partially, to avoid 51% attacks, but the hackers found that those using PoSv3 implementations were particularly vulnerable to network takeovers.
As Cardano was built from the ground up, it refused the standard PoSv3 protocol and built its own version – Ouroboros. While Qtum, Particl, Navcoin, HTMLcoin, and Emercoin all showed vulnerabilities to the same attack, Cardano was safely resistant. Read more on what separates Ouroboros from traditional Proof-of-Stake algorithms here.
The loose roadmap shows 10% progress made on the staking algorithm which will one day power the Cardano blockchain. The percentage rate is not relative to any real timeframe, but rather gets updated as and when the team agree that real progress has been made.
Shelley Update On Horizon
The next major milestone in the Cardano roadmap is the Shelley implementation – long awaited, much anticipated, and for those very reasons, much derided. Looking back through Cardano community forums reveals that Shelley has been ‘just around the corner’ for a while now. When you’re constantly being told that the thing on the horizon is getting closer, even though it doesn’t seem to move… you eventually start to wonder if it isn’t just a permanent fixture in the distance.
Shelley will bring with the activation of ADA staking on Cardano, and a range of other features, including quantum resistant signatures, human-friendly addresses, multisignature transactions, and updates to the Daedalus wallet.
Looking Forward: IOHK Summit – April 2019
The Cardano roadmap will become a lot more clear when former Ethereum contributor, and founder and CEO of Cardano, Charles Hoskinson speaks at the IOHK Summit this coming April, as per this recent announcement:
“The Cardano roadmap is changing. We will be launching an exciting new roadmap which showcases the Cardano 2020 vision after the IOHK Summit, which will be taking place on April 17-18. CEO Charles Hoskinson will outline this vision in his keynote speech and the roadmap will be relaunched with a renewed focus on this milestone.”
Social media chatter is hopeful that Shelley won’t be pushed back any further, while the anticipation surrounding the summit is also hoped to result in a good-will price pump. Cardano’s price immediately after the summit may depend on what’s revealed during the summit.
That said, Cardano’s holders are a loyal bunch, and it will take a lot to dislodge their trust in what they see as the only truly scientific approach to cryptocurrency in the space today. Barring any spectacular catastrophes, there’s every reason to believe Cardano will be around for the long haul.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.