The cryptocurrency market has recently been experiencing range-bound fluctuations, shifting towards a pattern where existing capital is battling it out. This environment makes it difficult to generate new profitable opportunities. In such conditions, it's wise to reduce trading frequency to avoid unnecessary losses and patiently wait for new opportunities to emerge.
During such market phases, institutional investors often cluster together for safety. Those valuable digital assets that have been unfairly sold off during market downturns often become prime investment choices. These assets are typically the first to attract renewed capital interest and show signs of recovery. Among these, Cardano's ADA token stands out as a particularly promising cryptocurrency. Having previously achieved a remarkable 6x price increase within just 30 days, ADA demonstrates strong potential for another significant rally.
Understanding Cardano and ADA
ADA is the native cryptocurrency of the Cardano blockchain platform, which positions itself as an "improvement-driven" project within the cryptocurrency space. Interestingly, its improvement targets are none other than the established giants of the crypto world—Bitcoin and Ethereum.
Bitcoin, representing Blockchain 1.0, primarily focused on decentralization by eliminating intermediate institutions that traditionally processed transactions, enabling direct peer-to-peer transactions. However, it essentially functions as a ledger without recording the actual content of transactions.
Ethereum then emerged as Blockchain 2.0, introducing smart contracts that could record agreements through programmed conditions, representing a significant leap forward. Despite these advancements, both cryptocurrencies still face certain limitations that have drawn criticism from the community.
Key Technological Advancements of Cardano
Addressing Transaction Scale Limitations
Cardano addresses transaction scale limitations through three primary approaches:
First, it tackles transactions per second (TPS) limitations. Bitcoin produces a block approximately every ten minutes, recording about 4,000 transactions at a speed of 7 TPS. Ethereum, through algorithmic improvements, reaches about 25 TPS. While this represents an improvement, it still fails to meet user demand, resulting in congested transaction channels and poor user experience.
The Cardano project team innovatively developed the Ouroboros algorithm, which operates on a proof-of-stake (PoS) consensus mechanism. This system allocates voting power based on the amount of ADA tokens held in a user's wallet. This means that if your wallet contains ADA and your computer is operational, you continuously participate in network validation, providing nodes and contributing computational power to the network, thereby increasing TPS capacity. As more participants join the network, the potential TPS increases correspondingly.
Second, the platform addresses bandwidth limitations. As blockchain demand grows, requiring faster transmission speeds and larger block capacities, greater bandwidth becomes essential.
Cardano utilizes RINA technology, implementing protocols that enable nodes to share data. When sufficient nodes participate, bandwidth can expand virtually without limits.
Finally, the platform tackles data storage limitations. As time progresses, blockchain data grows exponentially, causing some nodes to struggle with storage capacity, leading to system instability and resource wastage.
The Cardano team discovered that not every node needs to record all data. By implementing partitioning technology that assigns each node responsibility for specific blocks with bidirectional binding to ensure accuracy and security, data storage capacity can expand nearly infinitely.
Enhancing Operational Capability
Cardano also focuses on improving operational capabilities between different blockchains and between blockchain and traditional institutions.
As the number of blockchains continues to grow, establishing connections between them has become increasingly important.
Currently, token transactions cannot be executed on-chain and are instead concentrated on exchanges. These centralized platforms present significant security concerns, as demonstrated by the hacking of Binance, one of the largest exchanges, which caused market-wide declines. Exchanges also face regulatory challenges and transparency issues. Moving transactions back to blockchain could resolve these problems.
The Cardano project proposes using sidechain technology to return token transactions to the blockchain, establishing connections between different blockchain networks. Sidechains create interconnected chains that enable communication between two separate blockchains, facilitating token conversion between them.
The relationship between blockchain organizations and traditional financial institutions remains strained, primarily due to blockchain's decentralization and anonymity features. However, for blockchain to reach its full potential, it must establish better relationships with traditional institutions through enhanced collaboration.
The Cardano project team has proposed three concepts that are being systematically developed:
First, implementing partitioned data storage where user transactions are recorded on the public chain and stored in blocks. Users can extract transaction records through an audit process, addressing traceability issues and facilitating regulatory oversight.
Second, using public keys as unique identifiers within the blockchain for identity authentication, with encryption protecting privacy within the blockchain. This approach prevents criminal activity while protecting privacy, addressing both security and privacy concerns in blockchain.
Finally, creating metadata storage that encrypts user information, enabling regulatory oversight while preventing privacy breaches. This approach alleviates concerns from traditional financial institutions while gaining user acceptance, creating a broader development platform.
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Improving Scalability
Cardano addresses scalability issues related to ICO irregularities and the proliferation of fork coins.
The most profitable activities in the 2017 cryptocurrency boom primarily involved ICOs and fork coins. However, these short-sighted approaches exhausted the market's development momentum, leading to the 2018 cryptocurrency downturn.
Ethereum's smart contracts sparked the ICO frenzy, enabling easy creation of projects where programmers could write some code, create a whitepaper, promote through communities, raise funds, list on exchanges, and cash out.
Observing these ICO弊端, the Cardano project team proposed using a "Treasury Model" to address these irregularities.
Future projects developed on the ADA public chain raising funds would avoid these problems through a specific operation where investor funds are aggregated into an organization. Investors vote proportionally based on their token holdings, with projects receiving more votes obtaining development funds released in batches. This model resembles a fund structure, offering potentially lower returns but more stable development.
Fork coins represent another criticized issue. The number of Bitcoin forks continues to increase, particularly after Bitmain's contentious fork creating Bitcoin Cash, which affected Bitcoin's computational power and hindered long-term project development. Ethereum also split into Ethereum Classic and Ethereum due to transaction rollbacks.
Blockchain development inevitably requires updates and upgrades, which can lead to disagreements over interests. Unresolved disagreements result in forks.
ADA analysis identified the main cause of fork coins as the absence of predetermined rules for development direction. When disagreements emerge, parties hold different views without resolution mechanisms. The team uses smart contracts to establish predetermined rules, creating constitutional constraints to prevent fork coin creation.
ADA Token Economics
The ADA token has a total supply of 45 billion coins, distributed through:
- ICO: 25 billion
- Company operations: 5 billion
- Mining: 10 billion
Notably, the token supply will never increase beyond this fixed amount.
At current measurements, ADA maintains a market capitalization of approximately $25.6 billion, ranking seventh globally among digital currencies by market value. With 25.9 billion tokens in circulation, each token is valued at approximately $0.99.
Investment Analysis
Investment Advantages
- Strong team foundation: The founder previously co-founded BitShares and served as Operations Director at Ethereum. Core team members are established experts in the blockchain field. Partner institutions primarily include research organizations with numerous technical patents.
- Steady project progress: The team regularly updates project progress and code weekly, visible on their official website, demonstrating reliability. The blockchain transaction layer is already complete, with other components progressing according to plan.
- Significant investment value: If realized according to vision, the project could represent a disruptive product. Some compare it to a patch for Bitcoin and Ethereum, which may underestimate its potential impact.
Investment Risks
- High market capitalization risk: The current $25.6 billion market capitalization reflects significant investor optimism. However, as the project remains in development phase, questions remain about its successful implementation.
- High technical innovation challenges: The Cardano project is exceptionally complex, including innovative attempts like "sidechains" and "quantum-resistant wallets." Whether these can be implemented on schedule remains uncertain, requiring cautious evaluation.
ADA has long been undervalued and overlooked, with approximately 90% of current investment originating from Japan. As project milestones are achieved and practical applications gradually emerge, more countries will likely recognize its value and participate in trading, potentially leading to higher valuations and making it a worthwhile investment project.
Frequently Asked Questions
What makes Cardano different from other blockchain platforms?
Cardano distinguishes itself through its research-driven approach and scientific philosophy. The platform undergoes rigorous academic review and utilizes evidence-based methods for development. Unlike many projects that prioritize speed to market, Cardano focuses on building a secure, scalable, and sustainable blockchain infrastructure through methodical development and peer-reviewed research.
How does Cardano's proof-of-stake mechanism work?
Cardano uses a unique proof-of-stake consensus protocol called Ouroboros. This energy-efficient algorithm selects validators based on the amount of ADA they hold and are willing to "stake" as collateral. The system randomly chooses validators to create new blocks and validate transactions, rewarding participants with ADA tokens for their contribution to network security and operation.
What practical applications is Cardano targeting?
Cardano aims to provide banking services to the world's unbanked population, create secure systems for educational credentials, and develop trustworthy voting mechanisms for governmental elections. The platform also focuses on supply chain tracking, healthcare record management, and creating financial instruments for developing economies through its scalable and secure infrastructure.
How does Cardano ensure regulatory compliance while maintaining decentralization?
Cardano implements a unique approach through metadata attachment to transactions, allowing users to include compliant information when necessary while maintaining privacy otherwise. The platform also features identity verification capabilities through its Atala PRISM solution, enabling users to prove their identity without revealing unnecessary personal information, striking a balance between regulatory requirements and privacy preservation.
What is the roadmap for Cardano's future development?
Cardano's development occurs in five phases: Byron (foundation), Shelley (decentralization), Goguen (smart contracts), Basho (scaling), and Voltaire (governance). Each phase introduces critical functionality, with the complete system aiming to create a self-sustaining, decentralized platform with advanced smart contract capabilities, scalable infrastructure, and community-driven governance.
How can investors participate in Cardano's network and earn rewards?
Investors can participate by purchasing ADA tokens and delegating them to stake pools through various wallets. By staking their tokens, investors contribute to network security and receive regular rewards proportional to their staked amount. This process doesn't require technical expertise or expensive equipment, making it accessible to everyday investors seeking to participate in network operations.
Note: This content represents analytical perspectives only and should not be considered investment advice. Always conduct thorough research and consult with financial professionals before making investment decisions.