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Cardano ($ADA) Now Highly Regarded by Top Crypto Fund Manager

In the middle of a market drawdown, news concerning short-term price movements dominate the headlines. However, when it comes to investing for the long-term, there.

Posted July 5, 2021

Cardano Logo on navy background
Cardano Logo on navy background

In the middle of a market drawdown, news concerning short-term price movements dominate the headlines. However, when it comes to investing for the long-term, there are far more important pieces of news that we should pay close attention to.

Cardano’s Ada cryptocurrency is now included in the collection of crypto assets under management by Grayscale. Specifically, Ada now makes up 4.26% of Grayscale’s Digital Large Cap Fund, which is third largest after Bitcoin (67.27%) and Ethereum (23.59%) as of Friday, 2 June 2021.

The company also holds Bitcoin Cash, Litecoin and Chainlink tokens as part of their diversification strategy. The fund manager currently holds around $30 billion in crypto assets, and is subsequently one of the biggest institutional buyers of Bitcoin and Ethereum — the Grayscale Bitcoin Trust holds around $22 billion worth of Bitcoin so far.

The company announced last Thursday that it has “adjusted the fund’s portfolio by selling certain amounts of the existing fund components in proportion to their respective weightings and using the cash proceeds to purchase Cardano (ADA).”

Great enthusiasm from Cardano long-term investors

Cardano was founded by Charles Hoskinson, who is also a co-founder of Ethereum. Hoskinson left the Ethereum project in 2014 prior to Ethereum’s launch and subsequently worked on his own vision of a blockchain network. 

Cardano aims to improve upon Ethereum with a solution known as a Proof of Stake. This allows the network to run much faster and more efficiently compared to Ethereum. The main component behind Proof of Stake is a group of computer nodes (network members) known as staking nodes.

The principle behind Proof of Stake is that staking nodes must deposit a large stake of cryptocurrency as collateral. In return, staking nodes are given the power to validate all global transactions and earn an incentive for maintaining the integrity of the network. However, a staked deposit can be deducted as a penalty if a staking node harms the network in some way.

Cardano is not unique in the implementation of Proof of Stake, but what makes this network appealing is that it is relatively easier to run a staking node. While some networks require a large sum of cryptocurrencies to deposit for staking, on Cardano, the minimum amount of Ada to deposit into the staking wallet address is 1 Ada.

Anyone can run a staking node on their own computers, but this requires technical know-how. At the risk of improperly setting up a staking node, most Ada “stakeholders” join in what’s known as staking pools, where multiple users stake their Ada in one or several managed staking wallets.

If running a staking node is akin to depositing one’s cash into a personal savings account where it will earn interest, then depositing into a staking pool is equivalent to depositing one’s cash into a fund manager, and earning shares of profit.   

As of 30 June, the Cardano community was thrilled to see that the number of staking wallets in the network has reached a record of 650,000. This accounts to $30 billion worth of Ada, which is 71.7% of all Ada in circulation. 

There is indeed great enthusiasm for cryptocurrency and positive speculation of its future value. Furthermore, many financial experts recommend staking as a way to invest for the long term.

According to Eloisa Marchesoni, co-founder of Blockchain Consulting, there is an inherent risk in running a crypto mining rig (such as the one used to earn Ethereum), and therefore crypto investors looking to create passive income should choose the low-risk environment set up for staking.

Staking on Cardano is relatively less risky compared with staking on other blockchains. One advantage is that on Cardano, your staked assets are still yours to control, as the assets are not transferred to a wallet that you do not own. On other blockchains, your assets are locked up in a wallet that you do not control.

“Cardano addresses have separate keys for spending and staking, meaning that if you decide to stake your Ada tokens, they will never leave your wallet,” Wouter Witvoet explains. Witvoet is the CEO of the Canadian financial services company DeFi Technologies.

Anticipation for the next major update on Cardano

Cardano’s development is slower than average. This is affected by the founders’ personal approach of relying on peer-reviewed academic research on blockchain. Even so, enthusiasm for Cardano, driven partly by Hoskinson’s consistent community engagement on social media, has strongly increased its market price in recent months.

On 12 June 2021, Cardano released the Alonzo hard fork of the Cardano blockchain, which is an intentional split in the blockchain. This paves the way to the much anticipated smart contract functionality update that is speculated to go live as early as August.

Smart contract functionality is what sets the “old” and the “new” blockchains apart. Bitcoin as the oldest existing blockchain does not have this functionality. This means, on Bitcoin’s network, you could only make simple transactions of Bitcoins from one wallet to another. 

Smart contracts allow users to do more complex transactions, such as make pre-paid deposits for a service, issue and exchange non-native tokens, loan or borrow money, and many more. Ethereum is the pioneering blockchain with smart contract functionality. 

Meanwhile, Cardano is now building a solid foundation in order to become on par with Ethereum. 

The rate of adoption of Ada cryptocurrency

Prior to the recent updates, some people wonder whether Cardano will develop in time to stay ahead of its competitors like Polkadot, Solana, NEO, and even the long-anticipated Ethereum v2.0.

Others have suggested that the Ada price is a bubble waiting to burst, as currently lacking in smart contract functionality and therefore on-chain utility means that Cardano’s bullish price movement is still based on sensational hype.

However, it is important to note that the Input-Output Hong Kong (IOHK), the developers behind Cardano, has already applied their blockchain infrastructure to various organisations and even whole nations, in order to put the technology to good use in society.

Having a much different agenda to other blockchain companies, IOHK focuses on unlocking the potential for blockchain to serve enterprises in areas such as digital identities, traceability, and supply chain authentication.  

In contrast, Cardano competitors like Polkadot focus more on decentralised finance (DeFi) projects that are not necessarily grounded within regulatory frameworks. 

Long-term investors in Cardano are possibly up for a great treat when smart contracts are introduced in the blockchain, expanding the network’s use cases and accelerating its adoption on the global stage. 

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Last updated October 18, 2022

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