ADA crashes following Alonzo upgrade

By Raffaele Redi

ADA’s price skyrocketed over the last couple of months, meaning the upgrade could be already priced in.

Cardano (ADA) cryptocurrency                                 
ADA introduced smart contracts and added support to NFT – Photo: Shutterstock.
                                

Cardano’s new era didn’t begin as planned on Monday (12 September) as the price of its crypto coin, ADA, fell in line with other key cryptocurrencies.

The fall came despite the third-largest crypto’s hard fork upgrade, dubbed Alonzo, which introduced smart contract functionality and support for non-fungible tokens (NFTs).

ADA dropped to below $2.40 in just a few hours, losing around 10% in the last 24 hours, and having failed on several occasions over the last few weeks to reach the $3 breakout investors were longing for.

Upgrade already priced in?

However, Vitaliy Kedyk, analyst and head of strategy at currency.com, suggested that the recent increase in ADA’s price could mean that the upgrade was already priced in.

“The price skyrocketed over the last couple of months. There’s an opinion on the market that the upgrade was already priced in. If you compare it to the history of Cardamon, that sentiment could be right,” he said.

“However, looking into a longer-term roadmap, Cardano is quite revolutionary with how they do things. They are, basically, pioneering smart contracts with Proof of Stake (PoS),” he added.

The long road to the ADA upgrade

Other platforms already provide their users with smart contracts, prompting some analysts to have expected this upgrade years earlier, claiming that ADA, with its $77.7bn market cap, is overvalued.

“It is yet to be seen. Smart contracts are a new opportunity for Cardano. After Alonzo, the creators and businesses are now able to play with it. But the adoption of Cardano’s smart contacts depends on businesses. If it takes off, the price will correlate,” said Kedyk.

“The value of ADA will derive from interesting applications built on top of the protocol, not the protocol itself. Although Cardano is behind Ethereum (ETH) in market adoption, it is worth mentioning that the former is definitely moving faster with its roadmap,” he added.

ADA support of NFTs could be costly

Ethreum’s support of NFTs brought about fees rising to $23.37 so Cardano’s own bet on non-fungible tokens could cost its users dear. The current ADA average transaction fee is $0.55 compared to just $0.02 one year ago.

However, Kedyk downplayed the risks to Cardano.

“Cardano is very early in development yet and has massive potential. What differentiates Cardano from Ethereum in my opinion is legacy. All Ethereum development has to happen with the legacy protocol. It, obviously, was not ready for the particular challenges it faced,” he said.

“With Cardano, on the other hand, the project is cleaner, if I may say. They can build from scratch, taking into consideration everything good and not just from the Ethereum history. I’d say they are succeeding so far,” he added.

As the interest in ADA grows, some are starting to see it as a possible ETH rival in the future.

Cardano ecosystem is rather modest compared to Ethereum. With Alonzo fork, the protocol starts to compete on a different level. We shall see who wins this one, Vitaliy Kedyk

The Alonzo upgrade explained by the ADA community

“The Alonzo upgrade will bring highly anticipated capabilities to Cardano through the integration of Plutus scripts onto the blockchain. These will allow the implementation of smart contracts on Cardano, enabling a host of new-use cases for decentralized applications (DApps) for the very first time,” explains Tim Harrison, communications director, in promoting the event on the Cardano official Twitter account.

According to Harrison, the Alonzo upgrade, named after the pioneering American mathematician Alonzo Church, was deployed using HFC technology used in previous upgrades.

By allowing Plutus scripts to be written and executed on-chain, the “new” decentralised application platform will enable numerous DApp and decentralised finance (DeFi) uses, from simple swap-type apps to decentralised exchanges (DEXs), and more complex computational programmes such as Oracle and crypto-backed algorithmic stable coins.

“So, we have one of the most decentralized, sustainable, robust, and advanced blockchain platforms in the world, run by a skilled community of stake pool operators (SPOs). We have a thriving NFT ecosystem, attracted by the ease and low-cost of minting,” said Harrison.

“Oh, and a roadmap for future governance through Voltaire and ultimate scalability through Basho and Hydra scaling. The future is bright and stretches far; we’ll continue to travel the long road together,” he added.

Warning on issues with DApps and certifications

Harrison also warned the community about some problems early DApps could face.

“It’s only just the beginning. Let us be clear. There will be bumps in the road. Early user experiences might not be perfect. Some early DApps will have issues. We’ll see some great development teams and some poor ones. This is a permissionless, decentralized blockchain, so this is inevitable. And a few DApps may prove insecure,” he said.

“Cardano’s secure layer 1 platform offers robustness and high assurance – and Plutus is designed to minimize the potential for exploits. But poor coding practice can always introduce risks for DApp users. Inevitably too, we can expect bad actors looking to take advantage via hacks, exploits, and the like,” he added.

“As a community, we need to be vigilant as our ecosystem matures. In fact, we believe that to mature across the industry as a whole, certification needs to be taken more seriously. At the summit, we’ll announce plans on how – along with several strategic partners – we’ll be supporting the creation of new standards and solutions,” said Harrison.

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