In this Cardano update, you’ll learn how Cardano is scaling in June, which is next month. There’s a hard fight coming, there’s a bunch of improvements, but there are also other scaling solutions that are going to be happening this year and into next year to make Cardano truly scalable for the long term, so I’m going to talk about that. I’m going to talk about some of the short-term activities that Cardano is going through to incentivize people to come onto the platform. We’re going to look at the stats and how it compares with the other blockchains.
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Cardano fundamentals
Right now, we’re seeing Cardano around 80 cents. It’s really come off. We had it around a dollar as resistance, but it’s come off there with the rest of the market.
All coins are really taking a massive battering right now. We don’t have much we can do about it. It’s just the way the market is. If you want to try and play this kind of divergence of fundamentals versus price, then obviously long-term investors do want to pick up certain favored projects during this time.
Cardano means that TVL is something that’s used to, you know, gather a general overview. Going up is obviously a good thing. Prices coming off of all of the tokens on Cardano mean that TVL is just not going to be rising at this time, right when we’re seeing a sell-off in the market. But what’s interesting to see is number one, the number of applications that are now being tracked by DeFi Llama, which is slowly growing over time.
And then looking at each one individually, what we’re seeing here is wing riders with crazy growth versus the others, and there’s one simple reason for that, and that is stable coins. Let’s get onto the wing riders and just have a look right here at what they’re doing.
Cardano DeX volume
This is a decentralized exchange. It’s going to be exactly the same as, you know, the PancakeSwap or other chains. It’s just an exchange of tokens, but one of the main reasons why they’re adding TVL and trading volume versus everything else, are the stable coins in the Cardano ecosystem. You can see that here they’re actually trading with more volume than anything else. That’s not a surprise.
Stable coins are the backbone of liquidity, and we’ll get onto Wave Financial, who are going to be injecting liquidity into these decks as well, which is really important for Cardano and its growth. Without stable coins, you really don’t have anything. So when you see MELD, WMT, they’re small projects in themselves. Trading them against ADA is really difficult. You’re trading one risk asset for another, and it’s just not really what most traders want to do. So what you can see right now is really the main volume. You can see the 24 hour volume. You know, ADA/USDT and ADA/USDC are the main kinds of volume drivers, and for a decentralized exchange, if you don’t have a stable coin, it really is impossible to grow.
We see Sunday swapper min swap yet to include stable coins. Cardano’s decentralized stablecoin is on the way, but they need to get USDT and USDC on their platforms because that’s what most people want to trade. Wing Riders is definitely beating them out because they already have these stable coins. It is going to grow. I just want to compare this as well. You can see the 24 hour volume of the most liquid pair right here. It is AADA/USDC $166,000 worth of trades in the last day, which is great for a very new deck on Cordano, which isn’t as established, as you may be aware, any of the other chains, such as Finance, Binance, or Ethereum, have fees of around $500. You add liquidity yourself, so if you go over to your portfolio, you can add liquidity, and then you will get some of these fees, so you can provide ADA and USDC. There’s a lot of things you need to know about in terms of impermanent loss because this is not a stable coin pair. We’re not going to go over that now, but obviously adding fees and adding volume is good for us as well as liquidity providers, if you want to do that.
To very quickly compare this with Pancake Swap, which is really one of the biggest decks, probably second only to UniSwap in terms of volume, Cardano and Cardano DeXs have a very long way to go. You can actually see this stable coin pair USDT/BUSD on Pancake Swap. You know, doing what $76 million over the last week, eight million dollars’ worth of trade in the last 24 hours, and then you’re going up to finance coin against the US dollar tether, 46 million dollars’ worth of trade in the last 24 hours. Wing Riders are way off from something like a Pancake Swap in terms of volume, so there’s a lot of room to grow here. To kind of look at Binance Chain versus Cardano, the Binance chain has so much scale compared to Cardano. So there’s a long way to go for Cardano to really justify its valuation here even though it is, you know, half the price of Binance Chain or less. So Cardano is doing way less than the binary chain in terms of volume and its DeXs, so there’s a long way to go for Cardano to kind of prove that it has a lot of volume and that’s where investors really get excited.
Cardano liquidity injection
One thing that’s happening very soon as well, to this end, is actually a really good positive note here is that wave financial. They’re basically a big backer and a liquidity provider for the Cardano blockchain and they are going to be injecting an initial hundred million dollars of liquidity onto these DeXs, possibly some other DeXs that launch as well, which is fantastic. So you can see here they have liquidity with millions in line to support new decentralized finance platforms launched in the Cardinal ecosystem, starting with an initial $100 million.
‘Our new fund will support the new DeXs lending protocols and stable coin issuers building on Cardano.’
You can see down here. Wave will be using the ADA yield fund to provide liquidity to these pairs. So that’s how you know token pairs for DeFi lenders. There’ll also be a similar form of support to augment liquidity to facilitate lending. Obviously on lending protocols that really haven’t launched yet, they’re going to be launching, you know, just after the June hard fork, so you know, in two months’ time, you’ll see these lending protocols come on. They’ll have a hundred million dollars initially as liquidity to kind of bootstrap liquidity and then we should see Cardano trying to scale from there.
Cardano June upgrades
Now coming to the June hard fork, there’s a couple of upgrades that are going to make it easier for developers to basically scale transactions and take out a lot of unnecessary code in those transactions, so scaling the blockchain.
There’s two things I really want to talk about with Cardano in June. One is reference inputs and one is reference scripts. Cardano developers are really excited about this, basically making the blockchain way more efficient. The model that Cardano uses is very different from Ethereum’s and most other chains’, so they have to go about things a little bit differently, but you can see they have an improvement proposal called CIP-31 which introduces a new mechanism for accessing information in datums, which is like data you know within the transaction to identify it as a reference input. Reference inputs allow looking at an output without spending it. So right now, essentially, if you want to reference the data, you have to spend the UTXO that it’s associated with, but with reference inputs, essentially, you can see here, they will facilitate access to information stored on the blockchain without the need for spending and recreating UTXOs. They’ll have this data or this information actually on the blockchain. Instead of referencing it every single time and having to spend it, you won’t have to do that. It’s just going to make things a little bit easier and, you know, take down a lot of the, you know, kind of double information that you know, put through with a transaction.
Then you have reference scripts, which come from reference inputs. The script referencing proposal eliminates the need to send frequently used scripts to the chain every time they’re used. Instead, scripts will be available in a persistent way on the chain. This means that the transaction using the script will not need to include the script itself as long as it references the output. This just makes everything a little bit more streamlined and avoids having to reference the same thing over and over.
Scaling problems
This is why I think Cardano is still in the mix here in terms of being successful. So why do they concentrate so much on scaling? Because it’s the only way that we can really reach a genuine global scale. Pretty much every layer one is clogged up and is looking for ways to try and increase the scale, so no shade at Solana right here, but these are some of the problems that all of these L1s are facing.
Solana has really gone for fast transactions and cheap transactions, but if you know about the blockchain trilemma, what you have to give up is security. So security comes obviously at a cost. If it’s very cheap on your blockchain, bots are going to swarm and do dos attacks on your blockchain rather than something like Ethereum, which is incredibly expensive. It’s financially beneficial to attack Solana because the transactions are so cheap, and so you give up this security and Solana goes dark for seven hours. This is really unpalatable if you’re looking for security and something that is reliable to go down for seven hours. This is not the first time. There is no shade at Solana. We’re trying to meet a need from consumers who want fast, cheap transactions, and they’ve had to give up this security. In the meantime, maybe they can work to, you know, grow that as well.
Obviously we’ve had the other side of the metaverse launch on Ethereum and then the other side of things that have concentrated solely on security, so they’re having to give up cost. You see, during the other launch, the average gas cost on OpenSea was $4,000. You know, that was probably the peak right there. A few hundred dollars just to send a transaction is just absolutely outrageous.
If you want security, then you’re going to have to pay for it. If you want cheap transactions, you’re going to pay for it with security, so Layer 2 scaling solutions are really the answer here, and that’s mainly for Ethereum. You know, a theorem of building this with, you know, optimism and arbitrary, which are optimistic Rollups, and then you have a lot of different ZCO Rollup technologies as well. L2 roll-up technology is the way forward. Cardano is working on this as well as a few different projects. You have the Orbis Project here, which is working on ZK-Rollups, and then you have Milk Commodore, which is working on ZK-Rollups as well, trying to be an EVM-chain on top of Cardano as a layer two and then maybe having a L3as well. This is the only way that we can reach scale with blockchains. You can’t just start an L1 and say that it’s cheaper than the rest, it just doesn’t work because eventually it will clog up with the technology, so layer two for Ethereum and for Cardano. If you’re doing research with chains, if they’re not working on some sort of layer two, um, they really are behind because this is the way that the industry is going.
[This article is a transcription of a video made by MoneyZG]
Original video: https://youtu.be/a8Qq8vfyMtI ]
