What is Cardano, cryptocurrency’s hottest altcoin?

This weekend, a not-so-new altcoin has been doing the rounds and has become one of the hottest crypto coins to own. Cardano (ADA), which was founded six years ago by Ethereum co-founder Charles Hoskinson, is currently the biggest market cap of all altcoins (so it’s third behind Ethereum and Bitcoin) according to Coinbase. And in the last couple of weeks, it has hit an all-time high. As a result, it’s gaining even more interest from investors. These include the self-proclaimed ​“first Dogecoin Millionaire of 2021” Glauber Contessoto, who has recently decided he’s going to go all-in (with newly earned money, not his dogecoin bucks) on ADA.

What’s ADA? Well, Cardano, like Etherum, is the blockchain (Ether is the currency), while the coin doing bits is a token called ADA (it’s named after the mathematician Ada Lovelace) and is the native token/​currency for Cardano’s blockchain.

Because it’s newer, cheaper and generally less valuable. But also, it’s a third-generation coin, which means it has been developed to have more uses than first-generation coins such as Bitcoin (which is basically just a coin you hold, buy, or sell) and second-generation coins such as Ethereum.

Also, given Ethereum is doing well, and the co-founder made Cardano, the token holds a certain amount of clout. The team around Cardano are generally well-respected in this world. This boom is down to Cardano announcing a big upgrade (called Alonzo) that will launch in September, allowing for smart contracts, and more decentralised finance (DeFi) options on its blockchain.

Ethereum is a second-generation blockchain, which means it has features that first-generation blockchains such as bitcoin doesn’t. These features include being able to make decentralised apps, NFTs, smart contracts and more. The usability of Ethereum is a big part of why it has started catching up with, and could even surpass, Bitcoin. However, Cardano is third-generation as it has even more usability. More-or-less everything Ethereum can do, but more. It’s not suddenly on the same level as Ethereum and Bitcoin because not as many people have heard of it.

A lot, really. But some of the most exciting aspects are in the final stage of Cardano’s launch plans (it hasn’t yet launched or finalised all of its features). The ​‘Voltaire’ era (Cardano has given names to all of its update phases, Voltaire is the final one). It aims to ensure a voting and treasury system is in place. The idea is that people who own ADA will be able to make improvement proposals, which other stakeholders can vote on.

Therefore people who own ADA have full autonomy over how Cardano continues to be used. There’s also a proof-of-stake element that makes Cardano a little different to the proof-of-work method many other blockchains, such as Bitcoin, use.

So with proof of work, miners try and solve a complex sum, and the fastest miner to do it gets the reward. This means to get the most returns, you need the most powerful (and therefore energy consuming) gear. With proof-of-stake it’s essentially chosen at random, but the more you’ve staked, the more probability you have of winning. So it’s fairer, and better for the planet (because everyone isn’t scrambling to be first).

In short, it’s just a better system – and it’s better to the extent that Ethereum is working on moving from proof-of-work (where miners race to create new blocks for the blockchain the fastest) to proof-of-stake (where the more you stake in the new block, the more likely you’re going to be the miner who creates it) for Ether 2, the updated version of Ether.

Timing, basically. Cardano has had a super-lengthy research and release period, which is still ongoing, and has generally been a bit of a slow burner. The risk is that people have Ethereum, and while there are a few new bits going on with Cardano, it’s just that people might not really care enough about the new features, and are happy keeping the coins they already have.

As it’s still in the middle of its research phases, technically it isn’t a fully-formed blockchain or token yet. So a lot of the good stuff and value is all potential (the developers have outlined their aims) as opposed to results. There’s also every chance an existing coin develops all of these features quicker. You can see Cardano’s ​‘roadmap’ here.

Yup, it’s an altcoin. They are very volatile, like all crypto. One Cardano is (at the time of writing) worth £2.02, by contrast, one bitcoin is £34,466. So it costs a lot less, meaning people are taking punts and selling small gains in profit constantly, and aren’t shitting themselves about doing so, and therefore, the coin is going to fluctuate a lot. That’s without the usual issues of new launches, social media propaganda (for or against) the token and more.

If you’re considering investing in Cardano (ADA), make sure you do research first. This article isn’t financial advice, it’s just some reportage. However, should you decide to go through with it, you can get Cardano on most cryptocurrency exchanges, and even more mainstream brokerage companies like eToro.

As always, good luck!

Speak to a Financial Conduct Authority registered financial adviser before taking financial advice, and think carefully before making any decision.