The Long-Term Bullish Case for Cardano (ADA)

Cardano (ADA/USD) is a cryptocurrency that’s one of a kind. Its uniqueness is the source of both its strength and weakness. If Cardano and its unparalleled vision pan out, the payoff for long-term investors can be sufficient to impact the lives of two generations. Otherwise, you can simply write it off as another failed project.

That’s because right now, Cardano is in the early stages of development. The cryptocurrency touts lofty methods and goals but it has very little to show for. We might not see the true potential of the cryptocurrency in the next five years or so.

Thus, if you wish to invest in Cardano now, you have to know that you’re betting on the development team to deliver on their promises. Sounds speculative, but it doesn’t have to be. We conducted an in-depth research on Cardano and discovered it is a solid pick for a long-term fundamental play. In this article, we reveal the long-term bullish case for Cardano.

Motivation Behind Cardano

The development team behind Cardano is led by Charles Hoskinson. This is the same Charles Hoskinson who co-founded Ethereum with Vitalik Buterin. Hoskinson’s primary goal is to deliver a blockchain-based financial tool that can be accessed by billions of people across the globe.

Ethereum was a good first start but it was not the technology that could help him achieve his primary goal. He looked at other cryptocurrencies and was not satisfied. There’s no cryptocurrency in existence that offers the following characteristics:  

  • Impeccable quality through sound research
  • Interoperability
  • Scalability

In Charles Hoskinson’s mind, these are the qualities of a blockchain-based financial tool that can be effectively used by billions of people around the world. Thus, Cardano was born. As a long-term investor, this is what you’re betting on.

Impeccable Quality Through Sound Research

Most, if not all, cryptocurrencies are based on a white paper implemented in the form of code or protocol. In many cases, no one understands the technicalities behind the white paper. Even worse, there’s no regulating body that verifies whether the code or protocol will actually work or if the claims are legitimate. Nevertheless, billions of dollars are pumped into the industry.

Other than Cardano, none of the 10 largest cryptocurrencies by market capitalization are based on peer-reviewed protocol. On top of that, no cryptocurrency in the top 10 was implemented using a formal specification, except Cardano.

This is the current standard in cryptocurrency that Cardano seeks to change.

The team led by Charles Hoskinson relies on a methodical and academically-oriented approach. They adhere to a set of scientific principles that includes:

  • The formal verification of code, which means to know with certainty what functionalities a program is capable or incapable of doing.
  • The ”first-principles” approach or breaking down things into their fundamental truths and then making developments from there.
  • Peer review, which is the academic and scientific evaluation of the protocol by other professionals in the field.

With this philosophy, long-term investors will be getting a platform created with the highest standards of safety and quality. More importantly, the peer review helps ensure that the theory is solid and that the platform will work as advertised.

The drawback, however, is that the development of Cardano will take time… a lot of time. Think of a miracle drug or vaccine in the early stages of development; that’s Cardano. If you are an investor who can afford to wait, this miracle drug might just work wonders on your net worth.

Interoperability

Now that you know the vision, the motivation, and the methodology that drives Cardano, it’s time to explore what sets it apart from its competitors.

Imagine a platform where you don’t have to log in to an exchange to buy and sell various cryptocurrencies. Instead, you’d convert cryptocurrencies into fiat and see the balance immediately reflect in your bank account. That’s what Cardano promises to accomplish.

The cryptocurrency aims to provide an ecosystem where a user can transfer value and information between different blockchains, as well as the financial legacy system. According to Charles Hoskinson, Cardano seeks to provide this ecosystem in the next few years where users can interchange cryptocurrencies, such as Litecoin to Bitcoin to Ethereum to Cardano. On top of that, the system also aims to enable users to communicate with their regular bank accounts or even their credit cards.

In a nutshell, Cardano aims to bridge the gap between the cryptocurrency industry and the traditional banking system. If accomplished, this might be the catalyst for the mainstream adoption of crypto. In addition to that, billions and billions of new funds might flow into crypto because there’s a system that allows the legacy financial system to communicate with the crypto industry and help ensure compliance.

As a long-term investor, the development of these features make Cardano extremely attractive. These functionalities alone, if successfully developed, can make the cryptocurrency bullish in the next five to ten years.   

Scalability

For Cardano to be the bridge between many cryptos, as well as crypto and the traditional banking system, it must be scalable. What this means is that Cardano should be able to handle hundreds, if not thousands, of transactions per second (TPS). To give you a better perspective, Bitcoin can handle 7 TPS while Ethereum can do 15. Currently, Cardano does between 50 – 250 TPS.

Although Cardano’s TPS is significantly higher than that of Bitcoin and Ethereum combined, it is still not sufficient to help Charles Hoskinson reach the goal of creating a financial tool that will be used by billions. This is why the team is working hard to develop the Ouroboros Hydra. This is a proof-of-stake system that highlights the sharding functionality.

In a nutshell, sharding enables a consensus protocol like Cardano to boost its processing speed as more nodes (stakeholders or miners) participate in the system. Ideally, the more participating nodes or stakeholders, the higher the processing speed. Below is a video of Charles Hoskinson explaining how he and his team plan to significantly increase the scalability of Cardano:

With the Ouroboros Hydra, Cardano’s TPS go as high as tens of thousands. This enables the cryptocurrency to surge ahead of Visa, which handles an average of 4,400 TPS. More importantly, this makes the platform and the network robust enough to serve billions of people.

Bottom Line

Cardano is not limited to the functionalities that we mentioned above. It offers so much more but the reliance on scientific rigour to ensure quality and safety along with interoperability and scalability are the three qualities that can make Cardano the runaway cryptocurrency leader in the coming years. Even though the altcoin is still a speculative play, our research suggests that Cardano is a solid investment for a long-term fundamental pick.

 

Disclaimer: The writer 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.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.
Comments
  • Thanks Kiril. Insightful and educating as usual. Let me digress a bit and ask you what you think of DGTX as its main launch( 04/30/2019) approaches. Thanks

    • In my opinion, it’s still so early in the development stage. Of course, it will be hard to build on. It will take time before it gets easier. Same way as when the internet was just being created, it took hours to send an email using complicated linux code… This article is looking at things from a long-term perspective. The technology and potential is still sound

  • All of them have gone through tons security audits from many different entities and have dealt with hackers literally attacking their chain for years. This provides more security than any peer review could.

    Any coins that are currently live and working have gone through more rigorous testing than any peer review could with people constantly trying to exploit the blockchain to steal money. For example, Ethereum, EOS, XRP, XLM, Tezos have arguably been tested much more thoroughly than any peer review process could do because their chains are live and are constantly being attacks by hackers trying to steal money.

    Exploits are still found to this day on bitcoin which is the most secure blockchain in terms of code ever built and it no doubt that has been audited and attacked from every angle probably 1000 times more than Cardano. Cardano’s peer review process is overrated.

    here’s a peer review on Ethereum by a really reputable guy: https://medium.com/@muneeb/peer-review-cbc-casper-30840a98c89a

    This peer review stuff is all just a marketing for cardano because they have no real product, nothing they’re making is that innovative and they are years behind competition.

  • pretty impossible to tell who the actual winners will be.

    But the technology of cardano itself doesn’t seem that sound to me and it’s coming in extremely late to market.

    Cardano looks super futuristic until you realize that they’re just sharding like hundreds of other networks and really have nothing that special to offer.

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