- Summary:
- Learn why Cardano with their new Alonzo hard fork, might unseat Ethereum as the number one platform to develop new crypto apps.
Over the past year, there have been many blockchains claiming to be able to unseat ETH as the King of Smart Contracts. While it is still unknown whether the new challengers will eventually be able to take over ETH’s leadership position, many have seen good traction in their ecosystem, which then subsequently sent the price of their native tokens soaring. The likes of BNB for Binance Smart Chain, and SOL for Solana blockchain, have performed exceptionally well this year after their networks went live this year.
Ethereum is now being challenged by the Cardano blockchain
Since its launch in 2017, Cardano has provided much faster transactions at lower fees than ETH. The inability to provide smart contracts has held them back, but Charles Hoskinson, the founder of Cardano, recently announced plans to support them in its upcoming May hard-fork called Alonzo, to upgrade the Cardano blockchain to support smart contracts.
As if this was not enough, IOHK, the technology firm and code maintainer of Cardano, last week further revealed that a new erc20 ‘converter’ will be on its way. This ‘converter’ product will allow clients on ETH to bring erc20 tokens issued on ETH to the Cardano blockchain. This sounds like a dangerous proposition to ETH where high fees and network congestions have plagued the blockchain badly and caused many clients to consider a move to other cheaper blockchains. Thus far, Layer-2 solution MATIC has been a key beneficiary in that it still resides on ETH, making it easier for current ETH clients to move. Moving to other blockchains independent of ETH, however, is not so straightforward. Herein comes the Cardano killer product.
This new product unveiled by Cardano will remove the barrier and make it easy for ETH clients to switch blockchain, which is a clever move if Cardano’s plan is to snatch clients away from ETH. The Cardano team seems to have ETH in mind when they devised this product and looks to be trying to challenge ETH head-on.
How this product works is: the clients’ erc20 tokens, after being converted, would then run on Cardano’s Ouroboros proof-of-stake consensus mechanism—which relies on a network of speakers and validators who maintain the network and process transactions with far lower fees compared with ETH. Users would be able to ‘convert’ their respective erc20 tokens, move them across to Cardano, and use those ‘converted’ tokens as a special native token on Cardano that has the same value, and works just like an erc20 token on Cardano. Should users wish to switch their tokens back to the ETH blockchain, a function allows them to burn their tokens on Cardano and receive back the original erc20 ones for use on the Ethereum network.
The product will see its first trial usage for SingularityNET, a current ETH client, with the converted token called “AGIX.” An initial testnet will be conducted for SingularityNET to allow its users to assess the process of migration while working with AGIX tokens both on the Cardano testnet as well as on the ETH ‘Kovan’ testnet, the default trial-bed for ETH-based projects to test how their tokens will behave on the ETH mainnet.
While the product sounds really attractive, its impact and popularity remain to be seen and we will need to see more trials done on ETH clients to be able to assess how likely ETH clients will take up the proposition. Particularly, it will be critical to see how much cost reduction users get, and how much faster a transaction becomes on the Cardano blockchain.
If the testnet results are a success, I would expect the price of the ADA token to surge in anticipation of many new projects onboarding the Cardano blockchain, just like how we have seen MATIC token price surge due to a huge influx of new users on their blockchain.
However, I expect the Cardano team to greatly promote the product even before we see results from the testnet, knowing how vocal they have been on various media platforms and even on youtube. The team is likely to make a loud noise as soon as the testnet kicks off, which will inevitably drive the price of ADA up significantly again. This could happen anytime from now.
Just the week before, when the Cardano team announced that it was planning to launch the Alonzo hard fork, the price of ADA skyrocketed 80% from $1.50 to a high of $2.50 even when the team didn’t commit to a start date. The broad sell-off in the crypto market subsequently took its price back down to $1.30, where it is finding strong support and dip buyers have been accumulating.
With the launch date for Alonzo hard fork anticipated to be before the end of May, and the erc20 ‘converter’ testnet expected to commence at the same time, or soon after Alonzo, there could be a lot of upside for the ADA token as influencers hype up the token again should the crypto market starts to recover from the selloff. A price level of $3 or more would not be far off in that event.
However, whether that upside can be sustained depends very much on how users will take to the blockchain post mainnet, which could still be some time away. I would suggest traders ride the wave up when it happens, but take some profits should price double again to near $3.00. However, a slide below the April 23, 2021 low of $0.9224 could cause traders to send the ADA price much lower.