Cardano | Explained

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Cardano Overview

Cardano is a decentralised public blockchain and a cryptocurrency project, which is fully open source, and runs the blockchain for a cryptocurrency called Ada. The platform works on the secure proof-of-stake algorithm (named Ouroboros), which eliminates the need for the energy-consuming protocol, which partly resolves the scalability problem.

Cardano’s goal is to become an advanced smart contract platform. Cardano is a decentralised public blockchain and a cryptocurrency project, which is fully open source, and runs the blockchain for cryptocurrency called Ada. The platform works on the secure proof-of-stake algorithm (named Ouroboros), which eliminates the need for energy-consuming proof of work protocol, which partly resolves the scalability problem. Cardano’s goal is to become an advanced smart contract platform.

Cardano’s Founders

Cardano was established by the blockchain development firm IOHK (Input Output Hong Kong) and led by its current CEO Charles Hoskinson, co-founder of Ethereum and BitShares. Jeremy Wood is also a co-founder of the project, who started in IOHK with Charles after both have left the Etherium Foundation.

The Solution

Cardano is trying to solve a problem of earlier blockchains and to create a smart contract platform, which seeks to deliver more advanced features than any protocol previously developed. It aims to run smart contracts and decentralised applications. IOHK is a tech arm of the projected, which is committed to using “peer-to-peer innovation to provide financial services to the three billion people who don’t have them” as per the website statement.

Advantages

Advantages of Cardano — compared to other smart contract platforms (for example Ethereum) — include Cardano’s scalability and strong academic foundation. It is one of the first blockchain platforms to evolve out of a scientific philosophy and is very research driven, and has a large global R&D team, that exclusively deals with research for Cardano, i.e. members of the team perform academic research, publish academic articles, visit conferences and collaborate with other independent academic community members, and only then provide input and work for Cardano.

Cardano is not only a cryptocurrency but a platform that can potentially run financial applications. So, when buying in ADA, investors can profit from two distinct sides of the project: firstly, ADA is a technologically strong cryptocurrency, and secondly, the project value of the Cardano system is a function of the sum of all projects that will use Cardano platform.

Disadvantages

A major disadvantage of Cardano is the lack of tangible output, that could generate immediate cash flows in the current 2018 or in the next 2019 financial period. It is still in the early stage and has no running platform. Basically, the project is about creating from scratch a world-class blockchain plus an advanced smart contract platform, while both still don’t exist.

Another potential disadvantage is a huge, extremely ambitious roadmap, coupled with some delays.

Cardano also — compared to Ethereum — has less adoption, fewer partnerships and a much smaller developer community.

Cardano | ADA

Funds Raised

Cardano has raised BTC108k during 5 funding tranches, according to the Ada Distribution Audit, which is around $704 million at current prices, but the exact fiat amount depends on the weighted average price of sold BTC.

Current total expenses on the team of developers are around $10–15m per year, which is relatively small compared to the raised amount, which means Cardano can run its operations for years, if not decades with the current assets and the current burn rate.

Regarding Cardano’s market capitalisation, it is around $2 billion, which puts Cardano as the world’s 9th cryptocurrency, based on its market capitalisation, according to the CoinMarketCap database. This represents around 1% of the total market cap of all cryptocurrencies, which is approximately $209 billion (as of 22 October 2018).

Price Impact

The price of Cardano is in the mid-term steady downtrend from January 2018 to October 2018. Short-term price is moving sideways, which means that currently, forces of supply and demand are nearly equal. The current price of $0.075627 signals that we might expect a reversal breakout above the resistance level at 0.0831, possibly to the next resistance at of $0.09 to $0.095. Next support is at just above $0.07.

For a long-term HODL investor, the coin may appear relatively interesting. The risk-reward ratio — how much your potential reward is, for every dollar you risk — might be very lucrative.

The Competition

The major direct competitor of Cardano is Etherium, as a developer platform. Indeed, the ideas are similar, but Etherium has already developed a working platform, while Cardano has not yet created a tangible output.

EOS and NEO could be also considered as competitors.

EOS is a development platform for decentralized applications (DApps), which looks very operating system like, as it emulates a real computer: hardware (CPU + GPU) for processing, memory (local/RAM/HDD) for storage and software, distributed equally among EOS holders. EOS is a blockchain protocol, which aims to operate a smart contract development platform for decentralized applications (DApps), with advantages of being fast = highly scalable (millions of transactions per second) and almost free (almost zero transactions costs and fees for users).

NEO, also called “Etherium of China”, includes a blockchain and cryptocurrency, with the aim of creating “Smart Economy”.

NEO defines “Smart Economy” as:

  • Digital Assets (anything that exists in binary format and with the right to use);
  • Digital Identity (information on an entity used by computer systems to represent an external agent);
  • Smart Contracts ( = automated contracts = self-executing with specific instructions written on its code which get executed when certain conditions are made).

Cardano Alternatives

Investors, that consider an investment in Cardano, might pay close attention to Etherium and — to a slightly lesser extend — to EOS and NEO.

Etherium has higher valuation and potentially less upside, scalability problems, but Etherium’s strong sides are: already working platform, huge community and potentially less downside volatility/risk.

EOS’s strong sides: tangible progress in moving forward (definitely in front of Cardano now), and speed/efficiency in fixing problems.

NEO’s strong side is also the fact that it has very good ties to the local market, including regulation, which is extremely important in China.

Finally, Cardano has a more ambitious roadmap and relatively higher risk/potential and eventually longer holding period/investment horizon.


Cardano | Explained was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.