There are currently nearly 9,000 cryptocurrencies listed on CoinGecko, which is probably way too many. Most will fail the same way hundreds of Dotcom stocks failed in the 1999-2001 boom and bust- but remember, Amazon and Google (now worth $2T+ each) were stocks that survived that boom and bust. Among the noise, there are winners. Cardano is surely one of these winners that will stand the test of time and change the world. If you’re not drinking the Cardano Kool-Aid yet, or are wondering why Cardano fans are so die-hard, this article is for you.
One of my main theses is that it’s really important to know what you’re investing in. I learned it from billionaire investor Peter Lynch:
“And the single most important thing to me in the stock market, for anyone, is to know what you own. I am amazed at how many people own
stocks cryptos*, they would not be able to tell you why they own it.” -Peter Lynch
*edited for our use case.
By the end of this read, if you don’t know already, I’ll make sure you know why you own Cardano, and if you don’t why it might be worth a look.
This post scratches the surface of why Cardano is going to grow from a crypto with a market cap in the tens of billions of dollars to one with a market cap of trillions of dollars. The full essay on Cardano written by Charles Hoskinson is a great read if ADA makes up a considerable amount of your portfolio. The more you own, the more you need to know about it. Get educated on the coins you hold and know why you hold them- this will help you weather the rough times that come with the crypto market. Imagine you’re Charles Hoskinson standing before a bunch of venture capitalists trying to raise money for IOHK- how would you pitch Cardano? If you’d rather watch a video than read, this YouTube video of Hoskinson explaining the ins and outs of smart contracts is a must-watch. Excluding stablecoins, Cardano is currently the fourth largest crypto by market capitalization, and will be the third largest in the near future and perhaps the largest in the distant future. How big a coin’s market cap is important. Institutional investors and people new to crypto will prefer larger caps because the crypto market is already so volatile. Without any more wait, here are the reasons why Cardano is so special:
Cardano’s Founder Charles Hoskinson
If you haven’t noticed, the crypto space is still fighting to gain traction with mainstream and institutional investors. Thankfully, there are crypto funds coming online into retirement plans in the US, where currently over $22T sits in retirement funds. Since the media narrative on cryptocurrency is that it’s volatile and is a haven for vice, investors are sheepish and need a ‘known quantity’. Charles is an Ethereum co-founder, which gives his Cardano project a lot of credibility. We in the crypto community might know what XRP or Solana are, but most everyone outside of crypto is only familiar with Bitcoin and Ethereum. Charles is outspoken about the project and constantly in the public eye giving updates via interviews on YouTube, podcasts, and Tweets. Having an intelligent, trustworthy spokesperson that is happy to explain what Cardano does one thousand times over will pay off in spades for the Cardano platform. Apple had Steve Jobs; Cardano has Charles Hoskinson.
Hoskinson’s Twitter Prof Pic
ADA Holds Up Against Tough Intellectual Scrutiny
Cardano is the first and one of only a few blockchain technologies to be officially academically peer-reviewed. We’re talking about people with PhDs in Computer Science and Mathematics doing their best to highlight flaws and inefficiencies on the network. Cardano is following the principle of failing quickly in a controlled setting to overcome shortcomings with its design. Sadly, most other cryptos follow the opposite approach- launch and iterate. Because of this, plenty of cryptocurrencies have flamed out over the years- over 100 different coins have been in the Top 10 on Coin Market Cap since its inception in 2013. By running the gauntlet with the world’s best, ADA is bulletproofing itself. Think of ADA as a brand new Toyota Corolla that’s indestructible and ready to rock n’ roll for half a million kilometers. As platforms like Ethereum grow and become more valuable, there are heavy economic incentives for bad actors to manipulate the network. While Bitcoin has proven itself worthy as a store of value, we have yet to see a resolute proof-of-stake network that can field smart contracts and stand the test of time. Cardano will be that network. In the words of Hoskinson “it will be like WiFi where one day it all just works.” Cardano is also one of the only networks preparing itself for the post-quantum computing future, which will likely come in the 2030s. I won’t discuss that part in this article, however.
Simply put, Cardano begins with the end in mind. It’s addressing interoperability and scalability issues up front, so there’s no doubling back like we’ve seen with Ethereum 2.0 and Wrapped Bitcoin. There will not be a Cardano 2.0 because they’re going to get it right the first time.
Architecture That Scales
The Cardano blockchain is stratified into two layers, the Cardano Settlement Layer (CSL) and the Cardano Computational Layer (CCL). While a deep dive for this topic will be in another article, the architecture makes sense because it separates the ‘ledger/store of value layer’ (CSL) and the ‘why was the value moved’ (CCL) layer. These separate layers exist for many reasons, the most important of which are security and efficiency. Cardano established staking long before Ethereum did, and ADA holders have already been benefiting from staking rewards. Over 80% of all ADA tokens are staked, meaning the network has plentiful computational power at the ready to process a large amount of transactions fast.
A Solid Business Strategy
Where are the real world problems to which the cryptocurrency is being applied? As I’ve said before, the thing that will truly move the price of blockchain assets the most is going to be when the rubber starts meeting the road and the technology starts providing economic value to real-world situations. Hoskinson has been more proactive than any other cryptocurrency leader in pursuing real-world applications with countries and fortune 500 companies. Take the Africa use case- a continent with a population of 1.2 billion people, the majority of whom are unbanked. All of the top 5 fastest growing economies in the world are in Africa. The young are digital natives and much more likely to adopt crypto. And it’s not just Africa that’s young- around 53% of the world’s population is under the age of 30 and most of these people are digital natives. Much like how mobile phones have leapfrogged desktops in Africa, digital currencies will leapfrog traditional banking services in Africa too. Once you get 100 million people in East Africa using Cardano as a payment system, Cardano will become extremely attractive for businesses who previously did not have access to those markets. Sure, it will take time- but it’s a change that will last.
Where Cardano Could Falter
This is a question of business strategy. I will sum up business strategy in one sentence: What’s one thing that you’re capable of doing that’s really difficult to do that others can’t? Amazon has an incredible distribution system that’s hard to replicate; Facebook has a platform with 2 billion users worldwide that’s hard to replicate. Is what IOHK doing hard to replicate, and if so, what about it is hard to replicate?
As we’ve seen, there are thousands of cryptocurrencies on the market you could invest in. Many of these coins run on code that are carbon copies of other cryptos and add no value. Although Cardano is built on the Haskell programming language and Haskell is notoriously difficult, this still isn’t the most difficult thing to duplicate. Given enough time and money, competitor cryptos could come in and easily compete against ADA. What will protect Cardano the most is adoption and use of its platform by nation-states, businesses, and investors. Developers need to be building their dApps on the Cardano network- and rural citizens in countries like Ethiopia or Brazil need to be transacting in Cardano, which will attract businesses looking to enter those markets.
Once businesses, individuals, and governments start using the platform and it works, they’ll be less likely to jump ship because switching costs of transaction networks are so steep. This is one reason that’s slowing the adoption of crypto worldwide- it’s tremendously expensive both economically and culturally for individuals, businesses and nation-states to try and adopt a digital currency. Those who are starting to, like El Salvador, have less to lose since their existing systems are broken. In the tech business, if you’re trying to push a new product that will force others to incur steep switching costs, the de facto rule of thumb is that the new product needs to be 10x better than the existing solution. Smart contract platforms like Cardano aren’t 10x better than fiat- they’re 100x better.
The Cardano Mindset
One of my favorite pieces of advice Hoskinson has ever said is something that totally jives with my life philosophy- “if there’s something you really want to do, take it slow and do it right, don’t worry about ‘oh no, there’s not enough time’ or ‘the window of opportunity is closing’, the window of opportunity is always going to be there for something amazing to be built or done.” I’m paraphrasing here, but I think this is a great philosophy to apply to anything you want to do- from learning a new language to starting a new career or becoming better at a sport.
But back to why Cardano is so special. There are currently a few big rivals to Cardano, including Polkadot and Ethereum. While a winner-take-all future with these cryptos is a possibility, the most likely outcome is that these platforms will coexist alongside each other and fiat currency. The digital transformation of the past 30 years has changed so much- but one thing that has stubbornly remained is how we bank/transact, keep records, and have middlemen for nearly everything. Blockchain technology will drastically reduce the cost and speed of each of these things. Platforms like Cardano that are well-designed and have a founder with a solid business strategy will grow and experience exponential network effects.