The world of blockchain and cryptocurrency has seen a massive increase in projects and new technologies over the last several years. While much of the public was made aware of the existence of crypto during the Bitcoin surge in 2017, blockchain has actually been around for much longer.
Bitcoin was first released in 2009 as one of the first applications of blockchain technology. Ethereum was released in July 2015 as a more adaptable and functionality-focused platform compared to its predecessor. However, around the same time, the development of an entirely different blockchain began.
Cardano took an entirely different approach to blockchain as its founders realized the potential difficulties a proof of work protocol would face. Instead of depending on miners, Cardano focused on the implementation of proof of stake. An algorithm that allows users to stake their Cardano tokens (ADA) to help validate transactions on the network. This used considerably less energy than proof of work but didn't provide the kind of incentive Bitcoin and Ethereum could.
What is Cardano?
As the third-largest cryptocurrency by market cap, Cardano has a lot to offer. It was originally founded by the co-founder of Ethereum, Charles Hoskinson to combat some of the shortcomings in the proof of work model. While its initial release didn't garner the attention Bitcoin and Ethereum had, it has begun to garner significant support as energy efficiency and large fees have become problematic on the larger blockchains.
But the proof of stake consensus isn't the only thing that makes Cardano unique. Since its official release in 2017, Cardano has had a clear development roadmap aimed at creating a complete decentralized application development platform. The DApp platform would incorporate a multi-asset ledger as well as verifiable smart contracts, providing better functionality and scalability than Ethereum.
In fact, Cardano's recent "Alonzo upgrade" added smart contract functionality to the blockchain. Further expanding the ever-growing offerings and accessibility it provides to users and developers.
Cardano as an investment
Although Cardano hasn't garnered as much attention as its older siblings, things have begun to change. Bitcoin and Ethereum's proof of work consensus incentivized miners and users with big payouts. In comparison, Cardano's proof of stake consensus offered more managed and less attractive rewards. That is until now. Both Bitcoin and Ethereum have begun struggling with scalability issues leading to large fees and considerable transaction wait times. The massive energy consumption needed to sustain the proof of work protocol has also come under fire as companies like Tesla have called for more efficient platforms.
While Ethereum 2.0 has begun to implement a proof of stake consensus, it's quite a long way from full implementation. Meanwhile, Cardano has a tried and tested system in place that continues to grow and scale. In fact, the Cardano blockchain uses less than .01% of the energy demanded by Bitcoin.
Cardano may have been ahead of its time when it was released in 2017, but it definitely seems like its time has come. Cardano has garnered increasing attention over the last year and has almost doubled in price in the last few months. As the project continues to develop and move along its roadmap, more functionality and value is added.
With the recent "Alonzo upgrade" released in September, the platform has even more to offer with the ability to use smart contracts. This further enhances its appeal to developers and investors as it shows the dedication and commitment of the Cardano team.
So how can you invest in the Cardano ecosystem?
ADA Ownership
The easiest and most direct way to invest in Cardano is by simply purchasing the native currency ADA. The cryptocurrency can be purchased on a variety of platforms and exchanges and traded just like any other token. As the #3 cryptocurrency in the world, there is a considerable amount of liquidity in the market so buying some shouldn't be an issue. Depending on where you purchase or sell your ADA, your transaction will be subject to certain fees. Fees on the Cardano blockchain are extremely low, and shouldn't amount to much. However, if you use a service or exchange like Coinbase then you will be charged service fees that can get costly.
ADA Staking
But trading ADA isn't the only way you can invest in Cardano. With the proof of stake protocol, users can also "stake" their tokens to a pool in order to gain an ROI. The average ROI for staked ADA is currently around 4.5%, and that's currently compounded every 5 days. Staking your ADA provides incentives in the form of more ADA tokens, but it also allows you to be a part of the ever-growing ecosystem. Staking ADA essentially lends your wallet to a pool or group of other ADA token holders. Together, the pool works to verify and validate blocks on the blockchain. When your pool is selected to add the next block, the pool is rewarded with ADA. This ADA is then split between the pool participants based on the amount of ADA they are lending to the pool. If you want to liquidate your assets, there's no need to worry whether they are staked or not. The system allows users to trade and transfer staked tokens as they please. This is because the wallet itself is delegated, so it will remain staked even without any tokens in it. So staking Cardano really doesn't have a downside. Investors can rest assured knowing that there is:
- No slashing
- No lockup/cool off period
- No minimum amount required
- Compound interest
Financial institutions and Cardano Over the last several years, we've seen financial institutions adopt Bitcoin as a tradeable asset, investment option, and even a legal tender in some cases. But what about Cardano? While Cardano hasn't received the massive amount of publicity Bitcoin has, that hasn't stopped large investments from making their way to the platform.
Cardano also has plans to onboard 50 banks as well as 10 Fortune 500 companies in the next 5 years. This is something neither Ethereum nor Bitcoin have tried to do, and may just be what the blockchain needs to push mass adoption.
The advantages and benefits Cardano has to offer are quickly coming to fruition as efficient and scalable blockchain solutions are being sought after. The platform has positioned itself as the perfect successor to older blockchains, and its continued development will further cement itself as a strong contender. Only time will tell where the project will find itself in the next few years, but its future certainly looks bright.