With prices above 1,000% (at $ 2.10) year to date, Cardano (CRYPTO: ADA) he has had a tremendous career this year. Weather the cryptocurrency market is notoriously volatile and difficult to predict, the high-flying blockchain may have more room to grow due to its strong economic moat. Let's explore the reasons for the Cardano advantage.
1. Cardano is programmable
Launched in 2017, Cardano is a public blockchain designed to facilitate peer-to-peer transactions through its internal cryptocurrency, ADA (investors buy ADA tokens to bet on the growth and adoption of Cardano). different to Bitcoin, which is not programmable, Cardano allows private developers to create sophisticated smart contracts on its blockchain (Bitcoin smart contracts are less complex).
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Smart contracts are self-executing contracts that allow developers to create complex decentralized applications. These peer-to-peer programs allow anyone to interact on the network.
Cardano is home to several promising decentralized applications in development, including MELD, a decentralized financial platform that aims to allow users to lend their cryptocurrency or use it as collateral for cash loans. MELD is funded through a unique system called Initial Participation Pool Offering (ISPO), which involves ADA holders stake their tokens (proceeds go to MELD) in exchange for the new platform's native tokens, which are they will distribute to the wallets of the participants at the launch. in December.
Because investors need to stake ADA tokens to participate in ISPOs like MELD, these projects could help drive long-term demand for the token.
2. A more environmentally friendly proof-of-stake mechanism
Cardano is not the only popular blockchain that allows users to program and fund decentralized applications on its blockchain. Ethereum, which launched in 2015, offers similar functionality. But Cardano's competitive advantage comes from its proof-of-stake consensus mechanism (Ethereum also plans to implement proof-of-stake, but Cardano has the advantage of being the first to move).
Consensus is a key feature of blockchain platforms that ensures that the network is in sync and transactions are legitimate, eliminating the need for intermediaries such as traditional financial services. Proof-of-work systems like Bitcoin and Ethereum achieve consensus through mining, which involves solving complex computational puzzles to verify transactions in exchange for newly minted coins. The process consumes a lot of energy, and Bitcoin mining only consumes 91 Tetrawatt-hours of electricity per year, which represents almost 0.5% of global consumption, according to Business Insider.
Cardano uses a proof of stake system called Oroboros. Instead of solving puzzles, miners validate transactions based on how many coins they have in exchange for new coins. This process is called staking and is generally done on cryptocurrency exchanges such as privately owned ones. Binance or Kraken. Proof of Stake consumes much less energy than Proof of Work, giving you an edge in this environmentally conscious political climate.
Minimize risk in an uncertain industry
The cryptocurrency market is uncertain and prone to wild speculation. But investors focused on fundamentals can mitigate uncertainty by betting on assets with an economic moat that separates them from their rivals.
With a total market capitalization of $ 69 billion, Cardano is not cheap. But its eco-friendly proof-of-stake consensus mechanism and programmable blockchain could help it outperform in the long run.
This article represents the opinion of the author, who may disagree with the "official" recommendation position for a premium Motley Fool consulting service. We are variegated! Questioning an investment thesis, even one of our own, helps all of us think critically about investing and make decisions that help us be smarter, happier, and wealthier.
