In the first post of this series, I outlined the process I use to assess the viability of a project as an investment. I highly recommend you read that article first in order to contextualize the following assessment of Cardano. What follows is an example of the practical implementation of that process with Cardano (ADA) as the crypto in focus. Please note, this is a subjective assessment and therefore reflects my own bias – DYOR!
Step One: Snapshot: CoinCheckup
Algorithm Aggregate Scores for Cardano (not to be given undue weight -DYOR) :
Clearly, price action has been very bearish for ADA over the last six months. With current price sitting near all-time lows. From a pure technical chart analysis – Cardano remains firmly within a bear trend.
Step Two: Problems Addressed
Essentially Cardano is iterative in nature – it claims to offer a better solution. To be easier for developers to use (Haskell language based), to be more secure and audited (academic peer review system), to be scalable (through sidechains), and to be more efficient than PoW through Proof of Stake Mining – Ouroboros. It wishes to be both a currency ADA and a base level platform for the deployment of dApps. In their own words:
Cardano is home to the ADA cryptocurrency, which can be used to send and receive digital funds. This digital cash represents the future of money, making possible fast, direct transfers that are guaranteed to be secure through the use of cryptography. Cardano is more than just a cryptocurrency, however, it is a technological platform that will be capable of running financial applications currently used every day by individuals, organizations and governments all around the world. The platform is being constructed in layers, which gives the system the flexibility to be more easily maintained and allow for upgrades by way of soft forks. After the settlement layer that will run Ada is complete, a separate computing layer will be built to handle smart contracts, the digital legal agreements that will underpin future commerce and business. Cardano will also run decentralized applications, or dApps, services not controlled by any single party but instead operate on a blockchain.
Source: Cardano Website
Speed: currently around 257 TPS hardly world beating.
Security and proof of concept: Steady, academic peer-reviewed progress along a number of development strands – very impressive to date.
Scalability / Interoperability and Sustainability: promised only to date
Ease of Development: Haskel does indeed seem to a blockchain developer favoured language.
Step Three: Is Cardano new?
Well, it’s not a simple BTC clone and does offer a new consensus model Ouroboros. It has a grand vision, but many other cryptos do too. Its primary distinguishing feature, in my opinion, is a multi-strand dedication to code review and peer validation. Cardano doesn’t launch first and then band-aid fixes later. In contrast to many other current crypto projects, Cardano is extremely measured in its roll-out and development. This is both it’s greatest strength and a potential future weakness as it risks being left behind by the competition. EOS, for example, has a clear current advantage in TPS (3996 at the time of writing), a lead which seems set to only become larger as time goes on.
Step Four: How is the Team?
At first glance, Cardano seems to suffer from the ‘great man’ liability of overdependence on one key individual in this case Charles Hoskinson (Co-Founder of Ethereum). Dig a little deeper, however, and you uncover a large extremely capable team of developers.
The Cardano ecosystem is split into 3 parts:
The Cardano Foundation which focuses on partnerships, general adoption and marketing. A recent rift has emerged with IOHK and Emurgo essentially rescinding the role of the Foundation due to a range of issues. This has still to play out and is certainly a possible bearish indicator going forward as the Foundation holds a significant portion of ADA.
Emurgo which develops, supports and incubates commercial ventures for smooth integration on the Cardano Ecosystem. It appears to have the smallest team, but in this case, I like that the balance is tilted firmly towards the development arm of Cardano.
On balance, this is a team that has and likely will continue to deliver both in terms of tech development and project adoption and implementation.
Step Five: Tokenomics – outlook very good contingent on Cardano’s overall success.
ADA is meaningfully integrated into Cardano architecture and is utilized in both the settlement layer (payment) and computing layer (dApps etc.). An incentivized staking system is planned. Should Cardano succeed it seems entirely reasonable to expect the token to appreciate along with it. The supply is immense at 45 billion with a current supply of 25.93 billion, so this may create a downward pressure on token price.
Step 6: Community Activity: Very Active
While not the largest community in crypto, Cardano like EOS has a very active and dedicated support base. It also has an exceptionally high profile with a very large number of articles and video content focused on it.
Step 7: Current Activity: Very active but slow and a long long way to go.
The Cardano project is a substantial undertaking and its roadmap reflects that ambition. Generally, deadlines aren’t offered but each area of development is tracked and clearly explained. Cardano easily has the best roadmap in crypto in terms of clarity and level of detail offered at both technical and non-technical levels. The project issues weekly technical reports and a monthly video roadmap update. GitHub is very active across a range of areas.
However, there have been delays with The Shelley Testnet being pushed back again and looking likely to be Q1 2019. Development is concurrent across 5 strands titled Byron / Shelley / Goguen / Basho and Voltaire. Bryon and Shelley show significant progress with Goguen underway while Basho and Voltaire are at a very early stage.
Hardware storage still isn’t available and though shown as 50% completed on the roadmap, is a big omission and should be taken into account if you are considering purchasing ADA. The Daedalus wallet has been plagued with performance and syncing issues though they do seem largely addressed at this point. Yoroi a lightweight browser enabled wallet was released just a couple of weeks ago.
Overall Personal Investment Thesis:
Short-term excellent return on investment opportunity. Dollar cost average in every month between $0.02 and $0.18. Profit target x5 investment entry (due to exceptional short-term price opportunity).
ADA was $0.02 at ICO with an all-time high of $1.33. As an active, hyped and high-profile project there is a lot of potential upside available at the current price of $0.07. In a bull run, new retail investors are likely to perceive ADA as ‘cheap’. A possible listing on Coinspot would also likely lead to a price uptick especially in a positive market.
In a direct comparison I would rate Cardano behind EOS as a long-term investment option but ahead of EOS for short-term (3 to 6 month) upside potential. I plan to hold only 25% of my current ADA beyond $0.35 as price contraction seems very likely in the medium term.
Reasons to be cautious:
The project is years away from completion and stands a significant chance of being left behind despite producing an excellent end product.
Cardano’s very complexity may baffle investors as they strive to ‘get their head around it.’
Much of the tech is still in early development and scalability is entirely unproven at this point.
The fallout from the Cardano Foundation / Emurgo-IOHK split is a real possible and ongoing issue that could result in damaging FUD around the entire project.
Cardano price is in freefall and may well fall under $0.02 – that’s a lot of potential loss to accept.
Long-term the massive supply will exert significant downward pressure on token price.
And there you have it, DYOR in practice. In this case, ADA is found to be a dollar cost average buy. This reflects research spanning Cardano since its ICO but remains entirely subjective. Remember this is only my judgement and reflects my investment thesis which may not suit you. As always questions, comments, and critiques welcome.