Cardano is a blockchain platform that aims to solve some of the major problems with existing cryptocurrencies like Bitcoin and Ethereum. It was founded by Ethereum co-founder Charles Hoskinson and is built on scientifically peer-reviewed open source technology. There are several key reasons why Cardano is worth investing in:
The technology
Cardano uses a Proof of Stake consensus mechanism called Ouroboros which is far more energy efficient than Proof of Work used by Bitcoin. It allows transaction validators to be selected based on how many coins they hold rather than how much computing power they have. This improves sustainability.
The Cardano platform is built using Haskell code which allows formal verification of code. This means mathematical proof of the correctness of programs can be provided which is superior to existing platforms built using less formally verifiable languages.
Cardano will support smart contracts through its Alonzo upgrade. These will enable complex decentralized applications and DeFi products to be built on top of the blockchain.
Scientific philosophy
Cardano was founded on scientific principles and peer reviewed academic research. Over 90 scientific papers have contributed to the design of the platform across a range of disciplines like cryptography, game theory, systems modeling and programming language design. This rigorous approach minimizes risk of design flaws.
Network security
Cardano uses a multi-layered architecture that separates the accounting and computational layers. This provides flexibility as well as security benefits. The settlement layer where the ADA token operates is completely isolated from the control layer where smart contract computation takes place. This segregated design reduces vulnerabilities and prevents total network outages.
Scalability
Scalability is a major problem facing older cryptos like Bitcoin and Ethereum. Cardano is using sidechains to significantly improve its ability to scale. Sidechains allow transactions to run parallel to the main blockchain and help process larger volumes of transactions.
The Hydra protocol uses isomorphic state channels to enable high transaction throughputs. By using such scalability solutions, Cardano aims to rival payment processing networks like Visa in transaction capacity.
Interoperability
Cardano will enable interoperability between its own platform and other blockchains through the use of sidechains. This will allow it to access liquidity and capabilities of other crypto networks while retaining the security benefits of its own protocol.
The platform also uses Metadata to attach information to transactions. This can enhance interoperation with legacy systems outside the Cardano blockchain. Overall, Cardano aims to provide seamless connectivity between its network and external systems.
Staking rewards
Cardano uses a Proof of Stake consensus mechanism that enables ADA owners to earn frequent staking rewards by delegating stake and validating transactions. Annual staking rewards are currently around 5-6%, allowing investors to earn passive income on their holdings.
The incentives are structured to punish dishonest behavior. Validators can thus earn predictable rewards by maintaining network integrity and following protocol rules.
Regulation-friendly
Cardano aims to comply with regulations in the jurisdictions it operates in. Its metadata system allows identity and other regulatory compliance data to be embedded into transactions. This facilitates meeting KYC/AML requirements.
The platform also prevents platform tokens like ADA from being considered securities. Overall, Cardano offers features to create a transparent and compliant blockchain ecosystem.
Decentralized governance
Cardano has a decentralized governance system that allows ADA holders to participate in voting on platform updates and proposals. This governance model helps build an engaged community and enables rapid evolution through seamless upgrades.
Project Catalyst allows the community to fund Cardano development projects and further enhances decentralized control. Platform development is guided by those invested in the ecosystem.
Strong team
Cardano was founded by Ethereum co-founder Charles Hoskinson who has an extensive background in cryptography and mathematics. The platform is developed by three organizations:
- EMURGO – Commercial arm to boost Cardano adoption
- IOHK – Blockchain engineering company
- Cardano Foundation – Non-profit advocating adoption
Between them, these organizations have some of the best minds in cryptography and distributed systems working to build and enhance Cardano.
Large ecosystem
As a third generation smart contracts platform, Cardano aims to host a large decentralized ecosystem of applications and services. The Alonzo upgrade will enable an exponential increase in development activity on the network.
There is significant venture capital investment into Cardano-based startups looking to leverage its scalability and security. The number of Dapps deployed will grow consistently as the technology matures.
ADA cryptocurrency
The native cryptocurrency of the Cardano network is ADA which has the ticker symbol ADA. Some of the benefits of the ADA token include:
- Used to pay fees on the network
- Used to fund project development via staking rewards
- Enables holders to vote on Cardano governance
- Will enable execution of smart contracts
- Circulating supply of 33 billion with a max supply of 45 billion
As a top 10 cryptocurrency, ADA is one of the most prominent altcoins with high liquidity and trading volumes. The token has potential for long term capital gains.
Compelling valuation case
Despite the strengths of its platform, Cardano’s valuation lags leading smart contract networks like Ethereum. This creates an investment opportunity before mainstream usage and adoption kicks in. Some key valuation metrics include:
| Metric | Value |
| Market capitalization | $35 billion |
| Price to earnings ratio | 80 |
| Price to sales ratio | 60 |
Cardano has room for multiple expansion as its commercial applications grow. The zenith of its valuation may potentially be 5-10x from current levels.
Wide availability
The ADA token has excellent availability and can be purchased from most major crypto exchanges. Users have a range of options to buy ADA including:
- Binance
- Coinbase
- Kraken
- KuCoin
- Huobi
High liquid markets enable efficient execution for both retail and institutional traders. The token ranks among the most highly traded cryptocurrencies globally.
Conclusion
Cardano is a blockchain poised for massive growth given its advanced platform capabilities and robust roadmap. It aims to deliver scalability, security, interoperability and sustainability advantages over earlier generation cryptos.
The network has strong fundamentals from its research-driven approach, staking rewards model, compliance friendly design and decentralized governance system. The ADA cryptocurrency has an attractive risk-reward profile that can generate substantial ROI for investors.
Overall, Cardano presents a compelling investment thesis for the future based on its technical vision, strong community and execution by its academic and engineering teams. For investors with a multi-year time horizon, it remains one of the most promising blockchain projects to consider allocating funds to.