Hard fork and its stablecoin: what about Cardano (ADA) in 2024?
Although many Cardano indicators show negative dynamics, work on the protocol's development continues. We describe the main changes that have affected the Cardano ecosystem.
The team's plans for the development of Cardano
At the end of 2023, the team's plans to release a Cardano network hard fork called Chang became known. The hard fork is a significant update to the network, affecting both the structure and functionality of the blockchain protocol. The Chang hard fork was originally scheduled to take place in Q2 2024, but as of August of the same year, there is still no news about the update.
One important part of the Chang update is a decentralized governance mechanism for the Cardano protocol, including delegated representatives and the so-called "Cardano Constitution." Since 2017, the network, as well as related developments, has been managed by the Cardano Foundation, EMURGO, and Input Global, raising big questions about its decentralization. The Chang hard fork is expected to strip these organizations of their management rights, putting them in the hands of the community.
Another important component of the hard fork is an improved version of the Proof-of-Stake consensus algorithm on which the Cardano network is based, called Ouroboros Leios. This algorithm aims to increase the blockchain's scalability and throughput while maintaining its level of decentralization.
From a technological point of view, Cardano is an advanced protocol. However, as the situation with the Starknet and LayerZero projects has shown, holding a leading position in the crypto market is not enough as competition, and the number of launched protocols grow.
Although the Chang hard fork has not yet been launched, in June 2024, the Cardano team announced an update for nodes called Node 9.0 to prepare for the Voltaire fork. This fork is a milestone on the way to the launch of the Change hard fork.
Criticism of the Cardano ecosystem and financial performance
User activity on the Cardano network shows a negative trend, as evidenced by other metrics such as capitalization and ADA cryptocurrency price. This is mainly due to the lack of ecosystem development, particularly in the decentralized finance (DeFi) market.
Blockchains such as Cardano, Ethereum, Solana, or Tron, which utilize smart contract functionality, are largely tied to the DeFi ecosystem, which directly influences their development.
According to DeFi Llama, Cardano ranks just 29th among all blockchains regarding total blockchain value in DeFi protocols (TVL), less than $200 as of August 2023. Only 7 DeFi protocols in the Cardano ecosystem have TVLs over $10 million, and there are just over 20 in total. For comparison, Solana's TVL exceeds $4.9 billion, and Arbitrum's TVL is $2.7 billion. The number of DeFi protocols in Solana and Arbitrum networks is 157 and 685, respectively — this data is enough to compare the development of ecosystems.
Another problem of Cardano is that its native cryptocurrency, ADA, is not used much anywhere. For example, the Ethereum network cryptocurrency (ETH) is used in almost all major ecosystems, such as Solana, Avalanche, Arbitrum, Optimism, Cosmos, and many others, which provides a high demand for this digital asset. Although Cardano is still among the largest cryptocurrencies by capitalization, this network is not supported by any of the significant DeFi protocols, such as:
- Uniswap decentralized exchange,
- MakerDAO,
- the Aave credit protocol,
- Lido Finance liquid-staking protocol.
The value of the ADA cryptocurrency is still far from its all-time high (ATH) and is about 88% below that. In comparison, many leading altcoins have already approached their ATH in the spring-summer of 2024, and some have even updated it, which is a strong indicator of project development and investor interest in them.
Although Cardano's pace of development (often criticized in the crypto community) compared to other leading crypto ecosystems in the crypto industry leaves much to be desired, its team is still not standing and continues developing the protocol.
Stablecoin launch
In March 2024, Cardano launched its own stablecoin, USDM, on the Cardano network with the Mehen Finance team. The USDM stablecoin, as you can understand from the name, is pegged to the USD exchange rate at a 1:1 ratio. Unlike many other stablecoins, such as Tether (USDT) or USD Coin (USDC), which are backed by a basket of assets that includes, for example, gold and treasury bonds, the USDM stablecoin is 100% backed by fiat currency — the U.S. dollar.
At the same time, the issuance (issuance of tokens) of USDM is controlled not by central authorities, as in the case of the same USDT and USDC, but algorithmically: smart contracts and decentralized oracles.
