Cardano and Ada: Advantages and Disadvantages

Cardano and Ada: Advantages and Disadvantages

Ethereum co-founder Charles Hoskinson founded Cardano in 2015 and positioned it as a public blockchain platform that goes through regular peer-review in each stage of its development and a greener alternative to Bitcoin and the original version of Ethereum with the use of a proof of stake consensus system rather than the energy-intensive proof of work system.

The Switzerland-based Cardano Foundation oversees and supervises the development of the entire blockchain project. Ada is the native cryptocurrency coin of the platform. It is currently the third-largest cryptocurrency in the world in terms of market capitalization, following Ether, the native cryptocurrency of Ethereum, and Bitcoin.

The Pros: Advantages of Cardano Blockchain and the Ada Cryptocurrency

Research-First and Peer Review

One of the main advantages of Cardano is the special attention directed toward the importance of evidence-based research and peer review. This approach differs from other blockchain platforms and cryptocurrencies. To be specific, instead of straightaway introducing new versions or iterations, related products, and new features to the public, each update goes through a series of tests. Each stage of development fundamentally undergoes peer-reviewed.

It is also important to highlight the fact that a strong team is behind the development of the platform. Aside from the expertise and experience of Hoskinson and the guidance of the Cardano Foundation, it aims to bring an open and inclusive standard in technological development and deployment by making the platform as open-source as possible.

Proof-of-Stake Consensus

Negative environmental impacts due to high power consumption requirements represent one of the major criticisms and drawbacks of Blockchain technology. The same is true for Bitcoin. However, the Cardano blockchain platform achieves consensus using the more energy-efficient proof-of-stake system. Note that Bitcoin and the initial version of Ethereum use the more computing-intensive and energy-hungry proof of work system.

Hoskinson said that estimates from February 2021 showed that the network uses 6 GWh of electricity per year. Bitcoin consumes around 110 TWh annually. The platform achieves energy efficiency further by limiting the number of people who can mine Ada. Note that Bitcoin does not restrict the number of people and computers that can mine its native cryptocurrency.

Resemblances with Ethereum

Scalability, as well as the diversity of blockchain applications, are the other advantages of Cardano. Similar to Ethereum and unlike the single-use case of the Bitcoin platform, possible applications include smart contracts, minting of cryptocurrency tokens and non-fungible tokens, and development of other blockchain-based applications such as NFT games, decentralized finance, and supply chain and inventory management, among others.

Marlowe is one of the notable projects launched using this blockchain platform. The service centers on enabling anyone to create and execute peer-to-peer financial agreements using smart contracts. The platform has also partnered with Nervos Network, a developer and provider of a layered crypto-economy network, to build the first cross-chain bridge.

Supply Cap on Ada Cryptocurrency

The maximum supply of Ada is capped at 45 billion. Similar to the supply cap on Bitcoin, this limitation creates a sense of scarcity that can help further drive up its value in the future, especially if it manages to become a more popular cryptocurrency as determined by widespread utilization by end-users and acceptance by merchants.

Modern economics defines two essential characteristics for a commodity to have value: utility and scarcity. Of course, this is not a guarantee that the value of Ada will increase, but if and when it becomes popular, the limited supply can help increase both demand and value. Furthermore, because of this limit, it is also deflationary in nature, unlike the inflationary nature of other cryptocurrencies such as Ether and Dogecoin.

More on the Scalability of Cardano

Remember that scalability is one of the advantages of Cardano. Both Bitcoin and Cryptocurrencies have experienced problems when it comes to handling transactions. Bitcoin can process about 5 transactions per second, while Ethereum can process about 15. These two platforms are not as fast as other non-cryptocurrency digital payment systems. Note that Visa processes about 1700 transactions per second.

However, the Cardano blockchain platform has handled 257 transactions per second based on tests. There are plans to upgrade its system to increase further its processing capabilities. It has an ambitious goal of processing 1 million transactions per second. Because this platform is designed not only for cryptocurrency but also for other blockchain applications, future upgrades will maximize the potential of blockchain technology.

The Cons: Advantages of Cardano Blockchain and the Ada Cryptocurrency

Late-Entrant and New-Entrants

Undeniably, one of the biggest disadvantages of Cardano is it does not have the first-mover advantage, unlike Bitcoin. Furthermore, with Ethereum being the second-largest blockchain network in the world, this platform and its native cryptocurrency need to overcome the challenges of a highly competitive market with existing dominant players.

The barriers to entry in the blockchain and cryptocurrency market are considerably high, thus providing an opportunity for existing platforms and cryptocurrencies to gain momentum and compete against the more established ones. However, the fact remains that several competitors are still emerging every now and then to capitalize on the promising applications and advantages of blockchain technology.

Considerably Slow Progress

Research is one of the strengths of this platform. However, this same research-oriented focus is also a major drawback of Cardano. The developers have embraced a slow-and-steady approach to development to ensure that all roll-outs are free from bugs and errors and have practical or feasible and beneficial use cases or applications.

As a comparison, Bitcoin already has a solid blockchain platform built solely for cryptocurrency. Ethereum has a more mature technology and an established community of developers, contributors, and supporters. The Ethereum blockchain platform will also launch a second version that will replace the energy-intensive proof of work consensus system for the more energy-efficient proof-of-stake system.

Remains Not as Popular as Others

Because it does not have the first-mover advantage as Bitcoin and was not the first to introduce the distinctive features and advantages of Ethereum, it is not as popular as these two blockchain platforms. The native cryptocurrency Ada is also not as widely accepted as Bitcoin and Ether as a medium of exchange and a store of value.

As a digital asset, it also remains more speculative than Bitcoin and Ether, thereby making it a riskier investment than the two. Furthermore, it is also worth mentioning that cryptocurrencies remain highly volatile. The historical performances of Bitcoin and Ether have been characterized by extreme highs and sudden lows. The same is true for all other cryptocurrencies in the market, especially the lesser established ones like Ada.

A Note on the Pros and Cons of Cardano Blockchain and the Ada Cryptocurrency

The primary advantage of Cardano rests on the fact that it is a scalable blockchain platform developed and introduced for multiple applications. It is similar to Ethereum but is more scalable. The technology is more promising because of the research-oriented focus and philosophy of its developers and the participating open-source community.

However, it remains considerably younger and smaller compared to Blockchain and Ethereum blockchain platforms. Ada is also not as popular as the native currencies of these two platforms. Note that a strong focus on research also slows down the deployment of new critical features and updates. Time will tell whether this platform will gain substantial market dominance.