This year we'll see the two final
stages of Cardano's development roadmap, giving improvements
from efficiency to governance and beyond.
Now, it's unfortunate that in 2021's boom
of NFTs, DAOs and DeFi products, Cardano hasn't
really held the industry's attention, and critics have
been dismissive of the slow burn achievements that
have come out so far.
But what's next for Cardano?
Is it still the beast that it once was?
Here's where we stand and
everything we've been looking forward to from the
Cardano team in 2022.
DeFi has been a bit
of a question mark for ADA holders.
While there is staking built-in with Cardano, there are
still not many functional dApps within the ecosystem that can
compete with the likes of BNB or Avalanche.
And this is despite the Alonzo Smart Contracts
upgrade being released four entire months ago.
But Hoskinson has said that the ecosystem is there and
that it will be very active in the coming weeks.
In one of his live videos, he addresses concerns
over the Cardano DeFi alliance, specifically the fact that
there doesn't seem to be any DeFi use cases
on the network, a concern that I have,
concern that you probably have, he responded, saying that
he has knowledge of 127 projects including Wallets, DEXes
and NFT Marketplaces being built at the moment.
And to guide the direction of this network
is the DeFi Alliance, a community of developers
aiming to establish the standards and best practices
in the spirit of "Cooperative competitiveness".
Now we can't let Cardano off the hook completely here.
They mostly missed out on the growth of the $100 billion
DeFi sector this year, but it seems that there may
be some catalysts on the horizon, and before we go further,
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Now, what's in the future for Cardano?
The Alonso Hard Fork, which I
covered last year, brought some much needed
functionality to the Cardano blockchain.
It allowed developers to finally build on
the network, making use of Smart contracts.
These contracts make use of Plutus,
a programming language similar to Haskell
but created specifically for Cardano.
It's a functional programming language now.
Charles Hoskinson, during one of his holiday season
live sessions, talked about the hard fork combinator event
coming in February, which brings with it several
improvements to Plutus that programming language on Cardano
improvements that will help light wallet developers integrate
dApp stores much more easily, which in turn
will help developers to build the DeFi ecosystem
on Cardano even further.
But what's particularly exciting to me about this upgrade, is the
Hoskinson says, will be brought to the
main net towards the latter half of 2022.
This would open Cardano up to the
massive Ethereum ecosystem while allowing users to
enjoy the low fees of Cardano.
And this would come into view alongside
the Voltaire hard fork, which we anticipate
to happen some point around June.
The focus of Voltaire is going to be on
governance, allowing Cardano and their community to develop proposals
and then vote on those proposals as a community.
So an example of this in
practice could be transaction fees.
Let's say users begin to think Cardano
fees should be a little bit lower.
As a community, we can make that decision and vote
on this to enact lower fees on the network.
How this is done is through a
system called Cardano Improvement Proposals or CIPs.
Cardano.org lists three major types of CIPs.
First is Standards Track CIP.
You can think of this as very
large changes, things that could affect the
network protocol or interoperability of the system.
The second is a Process CIP.
This can propose a change to
a process or event regarding Cardano.
This is like slightly smaller changes.
It could be a procedure, guideline
or a tool used in development.
And then last we have Informational CIPs.
An example of this could be design issues
or general guidelines without necessarily proposing new features.
Really, what all of this means is the network will
be closer to becoming a fully decentralized ecosystem, which has
been a goal of Cardano since day one.
Also, something to note here is if you'd
like to participate further in the Cardano network,
you should do so by staking your ADA.
Doing so actually helps Cardano and earns you
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Now, another big part of Hosk's announcements was
the continued work on bringing finance to
underbanked and unbanked African countries.
Hosk and the boys, they went on a tour,
to six countries last year.
During that tour, they proposed solutions to
assist African businesses who need access to
financing outside of the traditional banking system.
The African banking system is pretty messed up.
It's one of the worst and
most predatory in the entire world.
So the goal here is to allow these individuals
to essentially skip past traditional banking and jump right
into Web3 banking Solutions.
The problem in many of these countries is
the lack of regulations and transparency.
This leads to predatory services with security risks
and interest rates that would make Scott Tucker blush.
What really matters is access
to capital in these countries.
This is the key to growing an economy, and this is
one of the most exciting use cases
for crypto in general, if you ask me.
It's very exciting to get financing to these countries.
I see Cardano picking up more and
more governmental partnerships in the future.
Partnerships like their deal with Ethiopia to build
and provide a blockchain based student ID system
for more than 5 million students.
And if you think about it, when it comes
to crypto and governments, it sounds like an oxymoron
or like a match that would never happen.
Cardano is likely the number one choice due to Cardano's
philosophy of engineering and safety to the Nth degree, a
philosophy that has actually hurt them in the last months
due to the complexity of their systems.
So it's an interesting thought experiment.
Who wins the long run, the fastest movers who can grow
a user base that they then attempt to defend
in the long run as other projects get introduced
and build better and better systems,
basically, they're the first movers, or is it the slow
but careful movers who measure twice, cut once, plotting along,
making sure everything is perfect at the expense of losing
potential users in the short run in order to have
the best possible product in the long run?
If we look at history, there are examples
of both sides winning, both types can win.
I mean Gillette Razors is an example of a company who was a
first mover who pulled it off for the long haul.
They pioneered the safety razor in 1903
and held the majority share of the razor
market for more than 100 years.
But then on the other side is Xerox with
their Fax machines or Netscape with their Internet browser.
Both of these companies were first at
the scene, picked up massive market share,
and then eventually lost to competitors.
So I wanted to learn more about this, and
I found a piece done by the Harvard Business
Review on whether it's possible to determine if a
first mover will win in the long run.
And this turned out to be extremely insightful.
So they said that the first mover
advantage is kept in three main ways.
First, a technological edge over competitors, second, taking away
scarce assets that competitors need, or third, building a
base of customers who would find it especially costly
or inconvenient to switch to a competitor.
Now, if we take these three criteria
and compare Ethereum versus Cardano, we can
get a better understanding of the future.
Does Ethereum have a technological advantage?
I would argue yes and no.
Cardano is certainly better in efficiency, but
Ethereum is currently easier to build on.
Is Ethereum taking away scarce
assets that Cardano needs?
I would argue likely no.
And is it costly for users to switch from Ethereum
to another network, I would say no, not at all.
So based on these criteria, it's hard to
argue that Ethereum's lead is set in stone,
but will Cardano be the winner?
I wish I could tell you.
At this point there are many exciting layer-1 projects out there.
But the main point here is that the
that Ethereum may not be number one forever.
And if we listen to the Harvard Business Review, they
would say it likely won't be that way forever.
So expanding on this further HBS, they go into
which markets are most likely to see a first
mover, retain their position at number one.
And the answer is when the
waters are calm, winners stay winning.
What they mean by this is,
in industries where technology doesn't advance quickly,
the head honcho is more likely to stay ahead.
And one of the worst industries
for keeping that number one position?
HBS says industries that evolve rapidly see the
highest likelihood of the king being dethroned.
So if we look at the crypto industry, I'm
not sure that there's an industry moving faster.
even six months ago, really.
So what do I personally take from all of this?
I kind of believe that there's
a ticking time clock on Ethereum.
If they're not able to improve their fees and
technology quickly, it will be very hard for them
to remain number one for the long haul.
If Cardano can get dApps and usability off the ground
soon enough, I think they'll be a very, very solid contender.
But like I mentioned, competition
is very tough right now.
We have to be realistic with ourselves.
So what else is in store for Cardano?
I mentioned that there are two major hard fork events
that are set to happen in the next year.
This will be the first time in Cardano
history that the project would go through two
major evolutions within the same year.
In the first quarter of this year, we're expected
to see the launch of Basho, where scalability solutions
are going to be the main focus.
This goes hand in hand with the fact that
many DeFi protocols will go live at the same
time, increasing the likelihood that the network may be
congested and the need for more scaling solutions.
The main solution here is the introduction of
side chains, essentially new blockchains which are connected
and interoperable with the Cardano main chain.
These function by offloading some of the work from
the main network to be processed elsewhere in order
to free up some of the main net's capacity.
One of them is called Mithral, which is named
after the fictional metal from The Lord of the Rings.
Mithral is ultimately going to be used to
make multisignature transactions faster and more efficient while retaining
all the security features of the main network.
Now another side chain solution is called Hydra.
This one is very exciting, which may
launch even sooner than originally thought.
It's a layer-2 scalability solution which aims to
maximize the throughput of the Cardano network and reduce
latency all at little to no cost.
What makes that possible is a
concept called Isomorphic state channels.
Basically, where siblings of the ledger, called heads
are created and inside of every Hydra head,
you can find native assets, NFTs, protocols and
supported transaction speeds of 1000 per second.
So if Hydra ever gets to the point where
it's a 1000 headed beast, we could one day
see potential speeds of 1 million transactions per second.
Now, what I think a lot of us love about
Cardano is the ethos of the project, you know, attempting to do
things right the very first time, and it's pretty clear
that at this point they aren't in a rush to
beat all other projects to the punch, a tactic that
really will only show its results with time.
Either way, this is still an exciting time for the
ecosystem and crypto as a whole, and it's important to
remember how early we are in this space.
So much can change even in a few months.
The only thing we can be certain of
at this point is uncertainty and excitement.
There's going to be a lot that happens and a lot that we don't guess.
And that's going to do it for today.
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