2 reasons to buy Cardano
With prices up more than 1,000% (to $ 2.10) since the start of the year, Cardano (CRYPTO: ADA) had a great race this year. While the cryptocurrency market is notoriously volatile and difficult to predict, high-flying blockchain may have more room to grow due to its strong economic divide. Let’s explore the reasons behind Cardano’s advantage.
1. Cardano is programmable
Launched in 2017, Cardano is a public blockchain designed to facilitate peer-to-peer transactions through its internal cryptocurrency, ADA (investors buy ADA tokens to bet on Cardano’s growth and adoption). contrary to Bitcoin, which is not programmable, Cardano allows private developers to create sophisticated smart contracts on its blockchain (Bitcoin’s smart contracts are less complex).
Smart contracts are self-executing contracts, which allow developers to build complex decentralized applications. These peer-to-peer programs allow anyone to interact on the network.
Cardano hosts several promising decentralized applications under development, including MELD – a decentralized financial platform aimed at allowing users to lend their cryptocurrency or use it as collateral for cash loans. MELD is funded by a unique system called Initial Stake Pool Offering (ISPO), which involves ADA holders staking their tokens (revenue goes to MELD) in exchange for the new platform’s native tokens, which will be distributed in the portfolios of participants in the launch in December.
Since investors must stake ADA tokens to participate in ISPOs like MELD, these projects could help fuel long-term demand for the token.
2. A more environmentally friendly proof of stake mechanism
Cardano is not the only popular blockchain that allows users to program and fund decentralized applications on its blockchain. Ethereum, launched in 2015, offers similar functionality. But Cardano’s competitive advantage comes from its proof of stake consensus mechanism (Ethereum also plans to implement proof of stake, but Cardano has the first player advantage).
Consensus is a key feature of blockchain platforms which ensures that the network is in sync and transactions are legitimate, thereby eliminating the need for intermediaries like traditional financial services. Proof of work systems like Bitcoin and Ethereum achieve consensus through mining, which involves solving complex computational puzzles to verify transactions in exchange for newly minted coins. The process is energy intensive, with Bitcoin mining alone consuming 91 tetrawatt-hours of electricity per year, or nearly 0.5% of global consumption, according to Business Insider.
Cardano uses a proof of stake system called Oroboros. Instead of solving puzzles, miners validate transactions based on the number of coins they hold in exchange for new coins. This process is called staking, and it’s typically done on cryptocurrency exchanges like private companies. Binance Where Kraken. Proof of stake is much less energy intensive than proof of work, giving it an edge in this environmentally conscious political climate.
Minimize risks in an uncertain industry
The cryptocurrency market is uncertain and subject to savage speculation. But fundamentally focused investors can ease uncertainty by betting on assets with an economic divide between them and their rivals.
With a total market cap of $ 69 billion, Cardano doesn’t come cheap. But its environmentally friendly proof-of-stake consensus mechanism and programmable blockchain could help it outperform in the long run.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.