Cardano is one of the projects that have seen immense growth in the past few months and the same can be said for its native cryptocurrency ADA. It saw a significant uptick as Bitcoin and Ethereum faced criticism for their energy-intensive proof of work consensus mechanisms.
The Cardano blockchain operates on a proof of stake mechanism which means it is a more environmentally-friendly cryptocurrency. The blockchain has also been going through a lot of developments that make it a worthy opponent to other blockchain platforms and a contender for the future of finance.
Cardano plans to roll out its Alonzo update on its mainnet by August through a hard fork. The update is an important step for the company because it will enable smart contracts on the Cardano blockchain, allowing it to compete more effectively with the Ethereum blockchain which has grown significantly in the last few years thanks to its support for smart contracts. This has enabled the development of many dapps on its network.
Meanwhile, Cardano attributes its growth to a carefully laid out roadmap, peer-reviewed developments, and partnerships with governments in developing countries. However, its lack of smart contract support has hindered adoption but that will no longer be a problem for the network once the Alonzo update takes place.
Once smart contract functionality is introduced, the Cardano blockchain will become more attractive for smart contract developers. It will also make it more competitive with the Ethereum blockchain, and could potentially make it the preferred network thanks to significantly cheaper fees. Transactions on the Ethereum network have lately been quite expensive. In contrast, transactions on the Cardano blockchain are incredibly cheap and this alone could encourage more developers to favor it over rival blockchains.
The ability to run smart contracts and dapps on the Cardano blockchain will be a huge catalyst for ADA because more utility means more value on such a network. The cryptocurrency is currently trading at $1.52, which means that it has a lot of growth potential as more network adoption takes place.
ADA has been on a strong growth trajectory in 2021 with its price trading as low as $0.17 on January 1. It peaked at $2.47 in May before its strong gains were curtailed by the market correction that took place in the same month. It will likely continue to experience more gains especially with the introduction of smart contracts to the Cardano network.
There are a few more things to note about the upcoming Alonzo update’s impact on the network. Cardano’s Ouroboros Proof of Stake consensus protocol can handle several hundred transactions per second. It will be able to process more than 2 million transactions per second when it implements the Hydra scaling solution. Such a high transaction throughput will make it even more attractive for transactions.
Although there are expectations for ADA to grow exponentially once the Alonzo update goes live, the expected growth might be limited by the large amount of ADA in circulating supply. It would take a significant increase in its market cap for the price to go up 100 fold. Its current market cap is just over $48.6 billion while Ethereum’s market cap is currently at $289 billion with a circulating supply of slightly over 116 million ETH. Cardano would need to grow 5X if it were to match Ethereum’s market cap but that might take some time to happen.
Cardano’s growth potential might also be curtailed by the finalization of Ethereum 2.0. However, it could still benefit from significant adoption thanks to lower transaction fees, which means an influx of funds into the Cardano ecosystem, boosting its market cap.
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