Cardano was established by the Ethereum co-founder, hence the two cryptocurrencies have certain similarities. Smart contracts, for example, are digital agreements that employ blockchain technology to verify transactions, and both enable the construction of smart contracts. Smart contracts, according to some investors, have the potential to alter society, particularly the legal business.
Cardano is a more energy-efficient cryptocurrency than Bitcoin. During the cryptocurrency mining process, Bitcoin uses a proof-of-work protocol. That means Bitcoin miners must use high-powered computers to solve increasingly tough puzzles in order to verify transactions and earn tokens. That’s a lot of energy, and Bitcoin has attracted a lot of it.
While Cardano offers many advantages, it also has several disadvantages, the most notable of which is that it is not as well-known as its competitors. Bitcoin is the most widely used cryptocurrency and has the most well-known name, providing it a competitive advantage in the crypto market.
Ethereum is the second most popular cryptocurrency, and it shares many of Cardano’s benefits. It not only hosts smart contracts, but it also plans to switch to a proof-of-stake network. Non-fungible tokens and the decentralized finance movement are also found on Ethereum, providing it a greater real-world use than Cardano.
Is It a Safe Investment?
The fact that Cardano has yet to provide anything is by far the greatest risk of investing in ADA. We still don’t have smart contracts, and we won’t have dApps without them. This makes investing in Cardano, more than any other cryptocurrency, extremely risky. When comparing Cardano to Bitcoin, remember that Bitcoin already works as it should, but Cardano has a lot of promises to keep. There’s always the possibility that once Cardano is fully operational, it will be a disaster. If this happens, the price will very certainly fall. Cardano, on the other hand, is rather secure.
A third danger is Cardano’s delayed development, which is due in large part to its peer-review method. Because it is so slow, it is relatively easy for competitors to catch up anytime it introduces something new. Cardano was one of the first initiatives to propose a second-layer blockchain to help with congestion. It was such a popular concept that it was integrated into other projects (e.g., Binance Coin has two chains – the Binance Chain and the Binance Smart Chain – one for regular transactions and the other for smart contracts). This makes it more difficult for Cardano to stay ahead of the pack. In many ways, it appears that Cardano is catching up to the rest of the team.
Only invest in Cardano if you feel it will outperform the market in the coming years or decades. Investing isn’t a get-rich-quick scheme, so stay away from fashionable assets that promise big returns in the near term.
Nobody knows whether cryptocurrencies will succeed in the long run, but if you believe in their long-term potential, be prepared to ride through the waves of volatility with your investments. Bitcoin’s value has dropped by more than 80% in the past, and Ethereum’s value has dropped by around 95% on occasion. Cryptocurrency may not be the best investment for you if you’re not okay with short-term volatility.