A little-known digital token linked to the Cardano blockchain has just become the third-largest virtual currency in the world as network developers look to ride the boom in decentralised finance.
What is ADA?
ADA is an ERC20-compliant token that is pegged 1:1 to the value of the Cardano cryptocurrency. The two tokens are being used as off-ramps by developers to develop blockchain projects. The token’s main functions include the development of apps that use the Cardano platform to reward users and prevent spam, and it is also the currency for Bancor’s planned “Community Support Token” (CS Token). The first product to launch based on the Bancor protocol is pegged Ethereum, although a similar mechanism is used to allow for ADA and Cardano to trade against each other without tying the token to the blockchain’s value.
What is Cardano?
Cardano, a third-generation cryptocurrency, was released last year by a team of researchers who previously worked on the ZCash team at the base of the Ziftr network. Dubbed "the Ethereum killer" by some cryptocurrency enthusiasts, Cardano was created to address what many users perceived as flaws in the smart contract implementation of Ethereum, by building on the same blockchain with additional features. Founded on ADA tokens, the ICO for the Cardano project was launched in July 2017. By March, the value of the entire token base had reached the value of US$2 billion, and Cardano was widely considered to be the future of blockchain technology. Partly the result of its record-setting ICO, Cardano's market capitalisation was already up to US$1.
The ADA Token
The ADA Token is a virtual currency created in May 2018. The currency is designed to function as a method of payment on the Cardano blockchain, and has now eclipsed the Digix Gold Token (DGD) in terms of market capitalisation, according to data from Coinmarketcap.com, which is operated by data provider Coinmarketcap.com. In a report by Fortune Magazine, ADA Token was said to be the third-largest cryptocurrency on the market, behind Bitcoin (BTC) and Ethereum (ETH) in terms of market cap. Eileen Park, co-founder of ICO advisory and investment firm Playground Global, who previously served as the Senior Managing Director of Yahoo! Ventures, is one of the early believers in the potential of ADA, having backed the token in its early stages.
The ADA Blockchain
ADA's price has risen over 14% to $0.3070 at the time of writing, placing it as the third-largest virtual currency behind Bitcoin and Ethereum (at $39.00 and $313.17 respectively). The ADA token was designed for transaction on the Cardano blockchain, which has gained huge traction with its reputation as a provably-scalable smart contracts platform. "ADA has over 1,100 coins out there," Darryl Packer, one of the project's creators, told Forbes in September. "You would have to get very lucky to have the big spikes like Ethereum. We are in a steady decline, but I think the market will stabilize and then you'll see some volume once Cardano does launch.
Why Invest in the ADA Token?
ADA tokens have started trading at just under USD$1.20 on the second day of its much-hyped Initial Coin Offering (ICO), which has so far raised more than $30 million dollars (approximately R720 million) for the development of the Cardano project. The Cardano project aims to decentralise the existing financial system, by building a new platform that is open, compatible and built on an independent foundation that will have its own currency, which is linked to the Cardano blockchain. ADA is an open-source, generic smart contract platform. The smart contract language built into the ADA protocol is Turing-complete, meaning that it is able to be used to perform anything from powering a secure contract to moving money.
After a volatile 2017, cryptocurrency markets are beginning to settle into a two-tier dynamic, with low-price niche coins commanding attention at the expense of more established (and increasingly popular) players. This slow transition to greater decentralisation is directly linked to Cardano’s successes as an underappreciated project. The $0.1 digital currency started the year at a high of $0.36 USD. However, it is worth noting that this was after a significant spike in the first weeks of the year, when its market capitalisation peaked at $7.7 billion. Its market cap currently stands at $9 billion. Cardano is built on the principles of smart contracts – a Blockchain technology which encourages trust, transparency and consensus through immutability.