1. Introduction

1.1 Background and Purpose

In the vast field of cryptocurrency, Cardano (ADA) occupies a pivotal position with its unique technical architecture, innovative ideas, and wide application prospects. Since its inception in 2015, Cardano has used its insights into the evolution of blockchain technology to create a more efficient, secure, and sustainable blockchain platform. It not only carries the mission of digital currency, but also tries to build an ecosystem covering smart contracts, decentralized applications (DApps) and other fields to meet the growing needs of the digital economy.

The emergence of Cardano aims to address many challenges faced by traditional blockchains, such as scalability, interoperability, and sustainability. Its unique layered architecture, Proof of Stake (PoS) consensus mechanism, and rigorous development driven by academic research set it apart from numerous crypto assets projects. With the continuous maturation and expansion of the crypto assets market, the development dynamics and future potential of Cardano have attracted the attention of investors, developers, and researchers.

2. Overview of Cardano (ADA)

2.1 Origin and development of the project

The Cardano project was founded in 2015 by Ethereum co-founder Charles Hoskinson. At that time, Charles Hoskinson left Ethereum due to disagreements with the Ethereum team on the direction of development, determined to build a more secure, scalable, and sustainable blockchain platform to solve the network congestion and lack of interoperability faced by Bitcoin and Ethereum, and the Cardano project was born. The project is named after the 16th-century Italian mathematician Gerolamo Cardano, and its token, ADA, is named after the 19th-century British aristocrat and mathematician Augusta Ada King, Countess Lovelace, who is believed to be the world’s first computer programmer.

In 2015, Charles Hoskinson and Jeremy Wood co-founded Input Output Hong Kong (IOHK), a company focused on blockchain technology. In September of the following year, the Cardano Foundation was incorporated in Switzerland to provide legal and financial support for the project. In 2017, Emurgo was incorporated in Japan and is primarily responsible for investing in startups and assisting businesses in developing blockchain technology.

On September 29, 2017, the Cardano settlement layer mainnet was launched, the Byron version was initiated, ADA tokens were officially issued, and users could trade and transfer. At the same time, the Daedalus wallet and Yoroi wallet were successively born, providing users with storage and transaction services. This stage marked the transition of the Cardano project from concept to practice, laying the initial groundwork for the blockchain infrastructure.

From 2017 to 2019, Cardano made important technological breakthroughs in the stage of technology accumulation and ecosystem construction. It introduces the Ouroboros consensus algorithm, which is the first proof-of-stake (PoS) protocol to pass academic review, providing an efficient and secure consensus mechanism for the network, greatly improving the performance and security of the network. During this period, the Cardano team also actively carried out technology accumulation and ecosystem construction work, including the opening of the Uroboros delegation, multisig transition, middleware development, consensus reward and fee mechanism design, etc., and set up a co-working space in Hong Kong, held conferences for developers and enterprises, and established partnerships with multiple institutions to promote the popularization and application of blockchain technology.

From 2019 to 2020, Cardano entered the stage of functional upgrade and ecosystem expansion. The launch of the Shelley version was an important milestone in this period, with the main goal of achieving full decentralization and autonomy of the network. This version introduces innovative features such as delegation election and reward distribution mechanism, which further improves the stability and security of the network. Subsequent versions of Basho focused on performance, security, and scalability, implementing the Uroboros Praos algorithm and optimizing the network layer to improve transaction processing speed and efficiency. At the same time, the Cardano ecosystem has expanded rapidly during this phase, and the Foundation has accumulated a large number of ADA tokens to fund projects, and has cooperated with a number of financial institutions, technology companies, and government departments to explore the application of blockchain in finance, supply chain, healthcare, and other fields.

Since 2020, Cardano has entered a stage of maturity and diversification. The main goal of the Goguen phase is to enable support for smart contracts and decentralized applications (DApps). By introducing virtual machine technologies such as IELE and Plutus, it provides developers with a rich programming language and toolset, which greatly promotes the development of smart contracts and DApps on the Cardano platform. In addition, Cardano has further improved its financial product system by launching USDM, the first stablecoin pegged to the US dollar, providing investors with more investment options and risk management tools. At the same time, Cardano continues to carry out technical upgrades and functional optimizations, such as the introduction of sidechain and sharding technology, to improve the scalability and throughput of the network and support larger-scale application scenarios.

2.2 Core Team and Organizational Structure of the Project

The development and operation of the Cardano project are mainly driven by three main entities, namely IOHK, the Cardano Foundation, and Emurgo, each of which has unique and critical responsibilities in the project.

• IOHK Corporation: Input Output Hong Kong is an organization focused on the research and development of blockchain technology, co-founded by Charles Hoskinson and Jeremy Wood. IOHK has a large and professional team of more than 100 people, including engineers, computer scientists, solution operation officers, etc. The company is mainly responsible for technology research and development in the Cardano project, and its technical strength and innovation ability provide solid technical support for the development of Cardano. For example, Cardano’s unique proof-of-stake (PoS) consensus algorithm, Ouroboros, was developed by the IOHK team after in-depth research and careful design, and the algorithm has been rigorously academically verified, laying the foundation for the security and efficiency of the Cardano network. In addition, IOHK is actively involved in the development and support of other blockchain projects, including Ethereum Classic, further demonstrating its technical influence and extensive experience in the blockchain space.

• Cardano Foundation: This is a non-profit organization based in Switzerland that plays a crucial role in the Cardano project. It is mainly responsible for the oversight of Cardano’s funds, ensuring the reasonable use and secure management of project funds. At the same time, the Cardano Foundation also undertakes the responsibility of protecting and promoting the Cardano protocol, establishing ecological regulations and standards to maintain the healthy and orderly development of the Cardano ecosystem. In terms of community building, the Foundation actively organizes various activities to promote communication and cooperation among community members, enhancing the cohesion and vitality of the community. Additionally, the Foundation is also responsible for communicating with governments on regulatory matters, creating favorable conditions for the compliant development of Cardano globally, and supporting Cardano in gaining recognition and support in different countries and regions.

• Emurgo: is a company from Japan that plays a key role in the ecological layout of the Cardano project. Emurgo is responsible for supporting and incubating other project teams in the ecosystem, connecting them to the Cardano ecosystem, and promoting the development of these projects by providing financial, technical, and marketing support, so as to enrich and improve the Cardano ecosystem. Due to Emurgo’s Japanese background, Cardano’s development in the Japanese market has paid off. In its early days, Cardano raised funds privately, with more than 90% of the funds coming from the Japanese market, which gave Cardano a large investor and user base in Japan. Emurgo actively promotes Cardano through partnerships with Japanese companies and various blockchain and cryptocurrency-related conferences in Japan, attracting many Japanese developers and enterprises to participate in the construction of the Cardano ecosystem.

3. Analysis of the technical principles of Cardano (ADA)

3.1 Proof of Stake (PoS) consensus mechanism (Ouroboros)

3.1.1 Algorithm Principles and Innovations

Cardano adopts the Ouroboros proof-of-stake consensus mechanism, which is unique in the field of blockchain technology, with profound algorithmic principles and significant innovations.

The traditional Proof of Work (PoW) mechanism, as adopted by Bitcoin, involves miners competing to solve complex mathematical problems to gain the right to record transactions and generate new blocks. This process requires a significant amount of computational resources and energy, and as the network scales, energy consumption becomes increasingly severe. In contrast, the Ouroboros mechanism takes a different approach by randomly selecting stakeholder as validating nodes to generate new blocks. In the Cardano network, stakeholders (i.e., ADA token holders) can stake their tokens, with the amount and duration of the stake determining their stake in the network. The larger the stake, the higher the probability of being selected as a validating node. Once selected, a validating node is responsible for generating new blocks and validating transactions on the network.

The innovation of Ouroboros is first reflected in the rigor and security of its algorithm. It is the first PoS protocol that has been rigorously academically verified and has a mathematical security proof. Through the design based on cryptography and game theory, Ouroboros is able to effectively resist most common attacks, including 51% attacks. In the traditional PoW mechanism, attackers with sufficient computing power may manipulate transaction records, double spend, etc. by controlling over 51% of the network’s computing power, thus compromising the security and stability of the network. In the Ouroboros mechanism, attackers need to control a large amount of stake to launch an attack, greatly increasing the cost and difficulty of the attack. This is because acquiring a large amount of stake requires holding a large amount of ADA tokens, and purchasing a large amount of tokens not only requires a huge amount of capital but is also constrained by market supply and demand dynamics.

Secondly, the Ouroboros mechanism is highly energy-efficient. Compared with the PoW mechanism, it does not require a large amount of computing resources for mining, thereby significantly reducing energy consumption. This makes the Cardano network more environmentally friendly and sustainable, meeting the global requirements for energy conservation, emission reduction, and sustainable development. Against the backdrop of current global energy shortages and increasing environmental awareness, this advantage of the Ouroboros mechanism stands out especially.

In addition, the Ouroboros mechanism also has the ability to dynamically adjust the network. As the number of staking nodes in the network increases, it can automatically adjust the selection probability of the validation nodes to ensure the security and fairness of the network. This dynamic adjustment capability enables the Cardano network to adapt to the constantly changing network environment, support more and more users to participate in the network, and enhance the decentralization of the network. In a decentralized network, the distribution and participation of nodes are important indicators of network health. The Ouroboros mechanism encourages more users to participate in staking by dynamically adjusting the selection probability of validation nodes, making the distribution of nodes in the network more even, reducing the control of a few nodes over the network, and increasing the degree of decentralization of the network.

3.1.2 Security and Scalability Analysis

From a security perspective, the Ouroboros mechanism provides a solid guarantee for the Cardano network through a unique design. Since validators are randomly selected based on stake, and the staked stake acts as a kind of “security deposit”, if the validator attempts to perform malicious behavior, such as tampering with transaction records or double-paying, its staked stake will be deducted, which restricts the behavior of validators from an economic perspective. This staking and punishment mechanism allows validators to actively maintain the security and stability of the network for their own benefit, thereby reducing the risk of attacks on the network.

When it comes to resisting 51% attacks, as mentioned earlier, the Ouroboros mechanism requires an attacker to control a significant amount of stake in order to launch an attack. This is different from the PoW mechanism, where attackers only need to control a large amount of computing power, and it is much more difficult to obtain a large amount of rights and interests than to obtain a large amount of computing power. Because in the PoS mechanism, the stake is related to the token holdings, and the acquisition of the token needs to be through legal transactions or mining (in the initial stage), unlike the computing power that can be quickly increased by purchasing a large number of mining machines. This makes it difficult for attackers to accumulate sufficient rights and interests to attack the network in a short period of time, thus ensuring the security of the network.

In terms of scalability, the Ouroboros mechanism has to some extent improved the transaction processing capability of the Cardano network. Compared to the PoW mechanism, it does not require a large amount of computation to compete for the right to keep accounts, so it can process more transactions in a unit of time. In the PoW mechanism, miners need to continuously perform complex mathematical calculations, which not only consumes a lot of time and energy but also significantly reduces the transaction processing speed when the network is congested. In the Ouroboros mechanism, the selection of verification nodes is relatively simple, only based on random stake determination, making the transaction processing more efficient and achieving a higher transaction throughput.

In addition, the Ouroboros mechanism supports the dynamic expansion of the network. As the number of users and transactions in the network increases, more nodes can participate in staking, increasing the verification capacity of the network. This dynamic scalability enables the Cardano network to adapt to growing business needs, making it possible for future large-scale adoption. When new users join the network and stake, the number of validators in the network increases accordingly, and the transaction processing capacity also increases, thus ensuring that the network can maintain efficient operation in the face of a large number of transactions.

However, it should be noted that although the Ouroboros mechanism has made significant progress in security and scalability, it may still face some challenges in practical applications. As the network scales rapidly, ensuring a more even distribution of validating nodes and avoiding situations where some validating nodes are concentrated control are issues that need to be further addressed. With the continuous development of blockchain technology, new attack vectors may also continue to emerge, and the Cardano network needs to continuously monitor and promptly update its security strategies to address potential security threats.

3.2 Layered Architecture Design

3.2.1 Separation Mechanism of Settlement Layer and Computation Layer

Cardano’s layered architecture design is one of the highlights of its technical architecture, in which the separation mechanism between the settlement layer and the computing layer provides a solid foundation for the efficient operation and functional expansion of the network.

The settlement layer, known as the Cardano Settlement Layer (CSL), is primarily responsible for processing token transactions. Its core mission is to ensure that transactions are completed safely and quickly. At the settlement layer, every transaction is recorded on the blockchain, and the immutability and consistency of the transaction are guaranteed through encryption technology and consensus mechanism. When a user makes a transfer of ADA tokens, the settlement layer verifies the legitimacy of the transaction, including whether the sender’s account balance is sufficient, whether the transaction is signed correctly, etc. Once verified, the transaction is packaged into a block and added to the blockchain to complete the settlement process. The settlement layer is designed to be efficient and stable, and it employs optimized algorithms and data structures to increase transaction processing speed and reduce transaction costs. In order to reduce the transaction confirmation time, the settlement layer adopts a fast block generation and verification mechanism, so that transactions can be confirmed in a short time. At the same time, through a reasonable fee mechanism, users are encouraged to choose the appropriate fee when trading to balance the load of the network.

The Computation Layer, or Cardano Computation Layer (CCL), focuses on executing smart contracts. It allows developers to customize different rules and logics, providing strong support for the development of decentralized applications (DApps). In the Computation Layer, smart contracts exist in the form of code, and when specific conditions are met, smart contracts will be automatically executed. Developers can use the programming interfaces and tools provided by the Computation Layer to write various complex smart contracts, implementing functions such as decentralized finance (DeFi) applications, digital identity verification, supply chain management, etc. When developing a DeFi lending application, developers can write smart contracts in the Computation Layer to define rules such as interest rates, repayment terms, collateral, etc. When a user initiates a lending request, the smart contract will automatically process based on the preset rules, achieving automation and decentralization in the lending process.

The settlement layer and the computation layer interact through standardized interfaces. This separation mechanism allows transaction processing and contract execution to be independent of each other without interference. When the settlement layer processes a large number of transactions, it will not affect the execution efficiency of the computation layer’s smart contracts; conversely, the execution of smart contracts on the computation layer will not hinder the transaction processing on the settlement layer. This independence greatly enhances the flexibility and efficiency of the network, enabling Cardano to support multiple different types of application scenarios simultaneously.

3.2.2 Layered architecture improves network performance

The layered architecture design brings many positive impacts to the performance of the Cardano network.

In terms of scalability, due to the separation of the settlement layer and the compute layer, transaction volume and smart contract processing power do not compete with each other for resources. In the traditional blockchain architecture, transaction processing and smart contract execution are usually carried out at the same layer, and when the transaction volume and the number of smart contracts in the network increase, there will be competition for resources, resulting in slower transaction processing speed and lower smart contract execution efficiency. Under Cardano’s hierarchical architecture, the settlement layer can focus on optimizing transaction processing and increasing transaction throughput. The computing layer can be optimized for the execution of smart contracts, improving the execution speed and efficiency of smart contracts. This allows the Cardano network to better handle large-scale use cases and support more users and transactions. When there are a large number of users trading ADA tokens at the same time and using Cardano-based DApps, the settlement layer can process transactions quickly, and the computing layer can efficiently execute smart contracts, thus guaranteeing the normal operation of the network and the user experience.

A layered architecture also facilitates modular upgrades to the network. Different layers can be independently upgraded or optimized without affecting the entire system. When performance optimization or functional improvements are needed for the settlement layer, the settlement layer can be upgraded separately without impacting the computation layer and other parts. Similarly, when the computation layer needs to introduce new smart contract functionality or improve execution efficiency, it can also be independently upgraded. This modular upgrade approach provides more flexibility for future protocol extensions and iterations, enabling Cardano to promptly adapt to changes in technological advancements and market demands. If new encryption algorithms or consensus mechanisms emerge, the settlement layer can be upgraded first to enhance transaction security and efficiency using new technologies; if developers propose new smart contract programming paradigms or tools, the computation layer can be upgraded accordingly to support new development requirements.

In addition, the layered architecture also enhances the security and stability of the network. By separating transaction processing and smart contract execution, potential security risks are reduced. If there is a vulnerability in the smart contracts of the computation layer, it will not directly affect the transaction security of the settlement layer; conversely, transaction issues at the settlement layer will not affect the smart contracts at the computation layer. This isolation mechanism enables the network to better protect users’ assets and data security in the face of various security threats. In the event of a smart contract attack, the settlement layer can still operate normally, ensuring that users’ token transactions are not affected; and in the event of an attack on the settlement layer, the smart contracts at the computation layer can continue to execute, ensuring the normal operation of DApps.

3.3 Haskell programming language and Plutus smart contracts

3.3.1 Features and Benefits of the Haskell Language

Haskell, as a functional programming language, plays a crucial role in the technical framework of Cardano, bringing many advantages to the development and operation of Cardano with its unique features.

Haskell has a high level of security. It has a strong static type system, which makes it possible to detect many type errors at the compile stage. In traditional programming languages, type errors are often not discovered until runtime, which can lead to program crashes or unpredictable results. In Haskell, with static type checking, the compiler can spot issues such as type mismatches at compile time, thus avoiding these potential errors. When defining a function, Haskell requires that the parameter type and return value type of the function be explicitly specified, so that the compiler can check that the function call conforms to the type specification at compile time. If the parameter type passed by the caller is inconsistent with the parameter type defined by the function, the compiler will immediately report an error and prompt the developer to modify it. This strict type-checking mechanism greatly improves the reliability of the code and reduces the number of program vulnerabilities caused by type errors.

Haskell’s certainty is also a big plus. It is a purely functional language, where functions are treated as first-class citizens, can be passed as arguments, as return values for functions, and have no side effects. This means that in Haskell, the same input will always get the same output, regardless of the external environment. When you write a function that calculates a mathematical expression, as long as the input parameters are the same, the result will be the same no matter when or where the function is called. This certainty makes the program predictable and transparent, easy to commission and maintain. In large projects, deterministic code is easier to understand and manage, because developers can accurately predict the behavior of functions, reducing the difficulty of debugging due to uncertainty.

Haskell also has a high degree of flexibility. It supports features such as higher-order functions, lazy evaluation, and type inference. Higher-order functions allow functions to accept other functions as parameters or return a function as a result, making it possible to write very flexible and highly reusable code snippets. Through higher-order functions, developers can achieve function composition and abstraction, improving code reusability. Lazy evaluation means that expressions in the code are only evaluated when their results are needed, reducing unnecessary calculations and making infinite data structures possible, such as infinite lists. When dealing with large data sets, lazy evaluation can avoid unnecessary computational overhead and improve program execution efficiency. Type inference makes programming more flexible and powerful, as programmers rarely need to explicitly declare data types. In most cases, the compiler can infer the correct types, significantly reducing code redundancy and improving programming efficiency.

3.3.2 Functions and applications of the Plutus smart contract platform

Plutus is Cardano’s native smart contract platform, built on Haskell, fully leveraging the advantages of the Haskell language, providing developers with rich functionality and powerful application support.

The Plutus platform has powerful capabilities for writing and executing smart contracts. Due to Haskell’s functional programming features, Plutus excels in expressing complex financial logic and ensuring code security. Developers can use the programming interfaces and tools provided by Plutus to write various complex smart contracts, implementing functions such as lending, trading, and asset management in decentralized finance (DeFi) applications. When writing a lending smart contract, developers can use Plutus’s functional programming features to clearly define the rules and processes of lending, including borrowing amount, interest rate, repayment period, collateral, etc. Through rigorous type checking and security verification, smart contracts are ensured to be free of vulnerabilities and errors during execution, safeguarding user funds.

The Plutus platform also supports formal verification. This means that the Plutus contract can be checked for security through a formal verification tool to ensure that the contract has been rigorously verified before deployment. Formal verification is a verification method based on mathematical logic, which can rigorously reason and prove the behavior of a smart contract to verify whether the contract meets the expected functional and security requirements. Through formal verification, potential vulnerabilities and risks in smart contracts, such as re-entrancy attacks, overflow vulnerabilities, etc., can be discovered, so that they can be fixed before the contract is deployed. This rigorous verification mechanism makes smart contracts on Cardano more secure and less error-prone, which is especially critical for financial use cases. In the decentralized finance space, smart contracts involve a large number of money transactions, and any one loophole can lead to the loss of users’ funds. The formal verification feature of the Plutus platform provides users with increased security and strengthens their trust in the Cardano platform.

In practice, the Plutus smart contract platform has been used in several fields. In the field of decentralized finance (DeFi), DeFi applications based on Plutus provide users with more convenient, efficient and secure financial services. Users can borrow, trade, manage and other operations in these applications to realize the appreciation and management of assets. In the field of digital identity verification, Plutus smart contracts can be used to build a decentralized identity verification system, through which users can prove their identity information and protect personal privacy. In the field of supply chain management, Plutus smart contracts can achieve transparency and traceability of the supply chain, and ensure the reliable origin and quality of goods by recording the flow information of goods.

3.4 Scalability and Hydra Protocol

3.4.1 The working principle of the Hydra protocol

The Hydra protocol is an important technology introduced by Cardano to improve scalability, and its unique working principle provides an innovative way to solve the scalability problem of blockchain.

The Hydra protocol uses a “head” mechanism to handle parallel transactions. Specifically, Hydra moves transaction processing from the main chain to multiple “headers”, each of which can be seen as a small sub-chain that processes a portion of the transaction. These “headers” are interconnected with the main chain, communicating and coordinating through specific protocols. When a user initiates a transaction, the transaction can be sent to one of the “headers” for processing, rather than directly on the main chain. Each “header” can process transactions independently, enabling parallel operations, which greatly improves the efficiency of transaction processing.

The core advantage of this mechanism is to reduce the burden on the main chain. In traditional blockchain architecture, all transactions need to be verified and processed on the main chain. As the transaction volume increases, the load on the main chain will become higher, resulting in slower transaction processing speeds and higher transaction costs. The Hydra protocol decentralizes transactions to multiple “heads”, allowing the main chain to only process key information such as updating the status of the “heads” and coordinating cross-head transactions, effectively reducing the burden on the main chain and improving the scalability of the entire network.

Each Hydra “header” can process up to thousands of transactions per second (TPS), theoretically each node can have a Hydra “header”, and the throughput of the entire network scales linearly as nodes increase. This means that as the number of nodes in the Cardano network increases, so does the network’s transaction processing capacity to meet growing business needs. When a new node joins the network and creates its own Hydra “header”, the network can process more transactions at the same time, achieving higher transaction throughput.

3.4.2 Impact of the Hydra Protocol on Cardano Scalability

The Hydra protocol has had a significant positive impact on the scalability of Cardano.

In terms of transaction speed, the Hydra protocol greatly improves the efficiency of transaction processing. Since transactions can be processed in parallel on multiple ‘heads,’ no longer limited by the processing power of the main chain, the transaction confirmation time is significantly reduced. In traditional blockchain networks, when the transaction volume is large, transactions may need to wait a long time to be confirmed, which can seriously affect user experience in scenarios with high requirements for transaction speed, such as instant payments, high-frequency trading, etc. With the support of the Hydra protocol, transactions in these scenarios can be processed quickly, achieving almost instant transaction confirmation, meeting users’ needs for transaction speed. In retail payment scenarios, when consumers use Cardano for payments, transactions can be quickly processed through Hydra ‘heads,’ achieving near-instant account credits, enhancing the convenience and smoothness of payments.

The Hydra protocol also significantly increases the network’s throughput. With the increase in the number of nodes, the network can handle more transactions, achieving linear scalability. This enables Cardano to support larger-scale use cases, attracting more users and developers. In the decentralized finance (DeFi) field, a large number of transactions need to be completed in a short period of time. The high throughput characteristics of the Hydra protocol enable Cardano to meet the transaction processing requirements of DeFi applications, providing strong support for the development of DeFi projects.

4. Cardano (ADA) market performance insights

4.1 Historical Price Trend Analysis

Since the launch of the Cardano mainnet in September 2017 and the official issuance of ADA tokens, its price trend has shown significant phased characteristics, reflecting the comprehensive impact of various factors such as market supply and demand, project development, and the macro environment of the cryptocurrency market.

At the beginning of the 2017-2018 bull market, ADA prices experienced a phase of rapid increases. In October 2017, ADA was listed for trading on the Bittrex exchange with an initial price of around $0.024. Subsequently, benefiting from the bull market in the cryptocurrency market as a whole, investors’ enthusiasm for emerging blockchain projects was high, and the price of ADA climbed rapidly. As of January 4, 2018, the price reached $0.9999, an increase of more than 30 times in just a few months. On the one hand, the price increase during this period is due to the innovative technical concept of the Cardano project that has attracted the attention of a large number of investors, and its unique hierarchical architecture, proof-of-stake consensus mechanism and other technical highlights make it stand out among many blockchain projects; On the other hand, the boom in the entire cryptocurrency market has also provided a favorable market environment for the rise of ADA prices, and the sharp rise in the price of Bitcoin has driven the investment enthusiasm of the entire market, and investors have flocked to emerging cryptocurrency projects, driving the price of ADA to soar.

However, as the cryptocurrency market entered a bear market from 2018 to 2020, the price of ADA also plummeted significantly. The overall market panic spread, and investors sold off their cryptocurrency assets, causing the price of ADA to plummet. By August 31, 2020, the price had dropped to $0.1173, a decrease of over 88% from its peak in January 2018. During this period, although the Cardano project continued to advance in technical research and development, market confidence in cryptocurrency was severely shaken, leading investors to become more cautious and demand for ADA plummeted, making it difficult to maintain a high price.

In 2020-2021, with the recovery of the crypto market, ADA ushered in a new round of upward trend. In the second half of 2020, changes in the global economic situation and adjustments in various countries’ monetary policies led investors to seek new investment channels, once again drawing attention to the crypto market. During this period, the Cardano project achieved significant technological breakthroughs, such as the launch of the Shelley version, achieving complete decentralization and autonomy of the network, further enhancing the stability and security of the network. These technological advancements have strengthened investors’ confidence in the Cardano project, driving the rise of ADA prices. In September 2021, ADA prices reached a historical high of $3.10, and its market value also grew significantly, entering the top ten in the crypto market value rankings. During this phase, ADA’s price increase was not only influenced by the overall market recovery but also benefited from the continuous improvement in the project’s own technological progress and ecosystem development, attracting more investors and developers to participate in the Cardano ecosystem.

After November 2021, the cryptocurrency market entered another period of adjustment, and ADA prices also experienced a significant pullback. The gradual tightening of regulatory policies on cryptocurrencies by the market, coupled with increased uncertainty in the macroeconomic environment, has led to a decrease in investors’ risk appetite for cryptocurrencies. Although the Cardano project is still developing, the overall downward pressure in the market has made it difficult for ADA prices to stand alone. By July 2022, the price had dropped to around $0.47, a decrease of over 85% from the high point in September 2021. During this period, market panic and investor selling behavior had a significant impact on ADA prices. Despite the continuous progress of the Cardano project in technology and ecology, it is difficult to reverse the downward trend in prices in the short term.

In recent years, ADA prices have fluctuated in the range of $0.2 - $0.8. The market’s attitude towards cryptocurrencies is gradually becoming more rational, and investors are paying more attention to the fundamentals and long-term development potential of the project. During this period, the Cardano project continued to promote technological upgrades and ecological construction, such as the introduction of sidechains, sharding technology, etc., to improve the scalability and throughput of the network; At the same time, it actively expands application scenarios and cooperates with a number of financial institutions, technology companies and government departments to explore the application of blockchain in finance, supply chain, medical and other fields. These efforts have supported the price of ADA to some extent, but the uncertainty in the market remains, and price fluctuations are more frequent. In the future, the trend of ADA prices will continue to be influenced by various factors such as market supply and demand, project development, and the macroeconomic and regulatory environment.

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5. Cardano (ADA) ecosystem scan

5.1 Application Scenarios and Cases

5.1.1 Decentralized Finance (DeFi) Applications

In the field of decentralized finance (DeFi), Cardano, with its advanced technical architecture and smart contract functionality, provides users with a wide range of financial services, demonstrating strong application potential.

When it comes to lending, Fluid Finance is a decentralized lending platform built on top of Cardano. The platform allows users to lend out other assets by depositing them as collateral. Smart contracts play a key role in this process, automating the enforcement of lending rules to ensure the fairness and security of transactions. Users can borrow funds without going through traditional financial institutions, which greatly reduces the cost and threshold of borrowing. For example, if an entrepreneur needs capital to start a project, he can lend the required funds with his ADA tokens as collateral on the Fluid Finance platform. This decentralized lending model provides users with a more convenient and efficient financing channel.

In the field of trading, SundaeSwap is a decentralized exchange (DEX) with significant influence in the Cardano ecosystem. It is based on the Cardano blockchain and adopts the Automated Market Maker (AMM) model, enabling decentralized trading of assets. Users can freely trade various digital assets on SundaeSwap, enjoying a trading experience with low fees and high liquidity. Unlike traditional centralized exchanges, SundaeSwap’s trading process is completely transparent, with all transaction records stored on the blockchain, providing better security for users’ assets. When trading ADA and other tokens on SundaeSwap, transaction information is recorded on the blockchain in real-time, allowing anyone to query and ensuring the fairness and transparency of the transactions.

5.1.2 Non-Fungible Token (NFT) Applications

In the field of non-fungible tokens (NFTs), Cardano, with its unique technical advantages and innovative application models, demonstrates a vibrant development vitality, bringing new opportunities and changes to the minting and trading of NFTs.

In terms of NFT minting, Cardano provides creators with a convenient and efficient minting platform with its powerful smart contract functionality. CNFT.ioFor example, it is a well-known NFT minting and trading market in the Cardano ecosystem. Creators can easily create their own NFT works on this platform, whether it’s digital artwork, music, videos, or other forms of creative content, all of which can be transformed into unique NFT assets through smart contracts. In CNFT.ioAbove, a digital artist can upload their artwork to the platform, set the attributes of the NFT through smart contracts, such as the limited edition quantity, copyright information, etc., and then mint it as an NFT artwork. This minting method is not only simple and efficient but also ensures the authenticity and uniqueness of the NFT, providing creators with better channels for creation and monetization.

5.1.3 Applications in other fields (e.g. identity authentication, supply chain, etc.)

Cardano’s applications are not limited to DeFi and NFT fields, but have also made significant progress in areas such as identity authentication and supply chain management, bringing innovative solutions and efficient application practices to these fields.

In the field of identity authentication, Atala PRISM is a decentralized digital identity solution launched by Cardano. It utilizes the immutable and decentralized characteristics of blockchain technology to provide users with secure and autonomous identity management services. Users can create their digital identities on the Atala PRISM platform, store personal information on the blockchain, and control this information through private keys. In scenarios such as online transactions and app login, users do not need to disclose too much personal information to third parties, and can simply verify their identity through digital identity. When shopping online, users can use the digital identity provided by Atala PRISM for identity verification. Merchants can only obtain necessary information authorized by users, such as shipping address and contact information, without accessing other private information of users. This decentralized identity authentication method effectively protects the privacy and security of users, and improves the efficiency and reliability of identity verification.

5.2 Partners and Collaborative Projects

Throughout its history, Cardano has worked extensively with governments, businesses, and institutions, and through a series of collaborative projects, it has not only promoted the adoption of its own technology, but also injected strong impetus into the prosperity of the ecosystem.

In terms of working with the government, Cardano has an important cooperation agreement with the Ethiopian government. Together, the two companies are committed to using blockchain technology to create a decentralized credential recognition solution for Ethiopia’s education system. The project aims to solve the problems of opaque information and easy tampering in the traditional academic qualification authentication process, and realize the efficiency, security and traceability of academic qualification authentication by recording students’ academic information on the Cardano blockchain. In this project, schools in Ethiopia can upload students’ academic certificates, transcripts and other information to the Cardano blockchain, and students only need to provide the link of academic information on the blockchain in the process of job search and further education, and relevant institutions can verify the authenticity of the information through the blockchain, without the need for tedious manual verification. This collaborative project not only improves the informatization of Ethiopia’s education system, but also sets a successful example for Cardano to be used in the government sector, providing valuable lessons for future cooperation with other governments.

5.3 Community Construction and Development

5.3.1 Community Size and Activity

Cardano’s community is large and active, which provides a strong impetus and support for the project’s continued growth.

In terms of the number of community members, as of September 2024, the total number of Cardano wallets is estimated to have exceeded [X], reflecting Cardano’s broad user base around the world. These users come from different countries and regions, covering all ages and career fields, and they are actively participating in the construction of the Cardano ecosystem and contributing to the development of the project. In technical forums and community groups, it’s not uncommon to see users from all over the world sharing their experiences and insights on using Cardano, as well as suggestions for the future development of the project.

5.3.2 Community governance and participation mechanisms

Cardano has established a comprehensive community governance and participation mechanism, encouraging coin holders to actively participate in project decision-making and development, ensuring the democracy and sustainability of the community.

Coin holders can participate in major decisions of the project through the voting mechanism. Cardano employs a method called “stake-weighted voting,” where a holder’s voting weight is proportional to the number of ADA tokens they hold. Users who hold more ADA tokens have a greater say in voting, and this mechanism ensures that decisions reflect the interests of the majority of token holders. When deciding on major matters such as the direction of upgrades to the Cardano network, the development of new features, and other major matters, proposals will be released to the community, and holders can vote through their wallets or a dedicated voting platform to express their opinions and preferences. This voting mechanism allows community members to participate directly in the decision-making process of the project, enhancing their sense of identity and responsibility for the project.

6. Future Forecast of Cardano (ADA)

6.1 Technology Development Roadmap Outlook

Cardano’s technical development roadmap is well-planned, with clear goals and tasks for each stage from Byron to Voltaire. The progress of these stages will have a profound impact on its technological upgrade.

As the initial stage of Cardano, the main goal of the Byron phase is to realize the foundation of the blockchain network, including the creation of a settlement layer and wallet, and the issuance of ADA tokens to lay the foundation for subsequent development. The successful launch of this phase marks Cardano’s move from concept to practice, and the initial construction of the basic framework of the blockchain. During the Byron phase, Cardano established a basic network architecture to implement the trading and transfer functions of ADA tokens, providing users with a preliminary digital currency trading platform. Although it is relatively simple in terms of functionality, it provides a foundation for subsequent technical upgrades and functional expansions.

The Shelley phase is an important turning point in the development of Cardano, with its core goal of achieving full decentralization and autonomy of the network. This phase introduces innovative features such as delegation, reward distribution mechanisms, further enhancing the stability and security of the network. By introducing the Ouroboros proof-of-stake consensus algorithm, Cardano achieves decentralized management of nodes, enabling more users to participate in network validation and maintenance, enhancing the network’s resilience to attacks and decentralization. In the Shelley phase, Cardano also optimizes network performance, improves transaction processing speed and efficiency, providing better technical support for subsequent application development and ecosystem construction.

The Goguen phase focuses on supporting smart contracts and decentralized applications (DApps). By introducing virtual machine technologies such as IELE and Plutus, it provides developers with a rich set of programming languages and tools, greatly promoting the development of smart contracts and DApps on the Cardano platform. In the Goguen phase, developers can use the Plutus platform to write various complex smart contracts, realizing applications such as decentralized finance (DeFi) and non-fungible tokens (NFT). This greatly expands the application scenarios of Cardano, attracting more developers and users to participate in the Cardano ecosystem.

The Basho phase focuses on performance, security, and scalability. The implementation of the Uloporos Praos algorithm and the optimization of the network layer effectively improve the speed and efficiency of transaction processing. The Basho phase also introduces sidechains, sharding technologies, and more, which further improves the scalability of the network and enables it to support larger-scale application scenarios. During the Basho phase, Cardano improved the network’s throughput and transaction processing speed by optimizing the network architecture and algorithms, reducing transaction costs. The introduction of sidechain and sharding technology enables Cardano to process multiple transactions at the same time, improving the concurrent processing capacity of the network and providing the possibility for large-scale business applications.

The Voltaire phase is the final phase of Cardano’s roadmap, with the goal of adding governance, voting, and financial management features to Cardano. By implementing these features, Cardano will become a more complete decentralized ecosystem, where users can participate in the governance and decision-making of the network, and achieve a more fair and transparent network environment. In the Voltaire phase, Cardano will establish a decentralized governance mechanism, and users can participate in the decision-making of the network through voting, and decide the direction and rules of the network. Cardano will also improve the financial management function to achieve the effective management and allocation of network funds, and provide a guarantee for the sustainable development of the ecosystem.

With the gradual realization of the goals of each stage, Cardano is expected to make greater breakthroughs in technology. In terms of scalability, Cardano is expected to achieve higher transaction throughput and lower transaction costs by continuously optimizing the Hydra protocol and introducing new technologies to meet the needs of large-scale business applications. In terms of security, Cardano will provide users with more secure and reliable services by continuously improving the security and stability of smart contracts and strengthening the network’s defense mechanisms. In terms of interoperability, Cardano will actively explore the connection and interaction with other blockchains, realize cross-chain asset transfer and data sharing, and expand its application scenarios and market space.

6.2 Market Outlook Forecast

Taking into account various factors, Cardano (ADA) is full of opportunities and also faces certain challenges in the future market prospects, and the trend of price, market value, and market share is influenced by a variety of factors.

From the price trend perspective, ADA has a certain potential for price increase. With the continuous upgrade of Cardano technology and the expansion of its application scenarios, its value is expected to be further recognized. If Cardano can successfully achieve the various targets in the roadmap, solve key issues such as scalability, smart contract security, attract more developers and users, then the demand for ADA will increase, thereby driving the price up. If Cardano makes greater breakthroughs in decentralized finance (DeFi), non-fungible tokens (NFTs), and other fields, expands its application scenarios, more users and investors will have demand for ADA, thereby driving the price up. The overall trend of the global economic environment and the cryptocurrency market will also have a significant impact on ADA prices. If the global economic situation stabilizes, cryptocurrency market regulatory policies become clearer, and market confidence in cryptocurrencies is restored, then ADA prices will face a more favorable market environment and are expected to rise. However, market uncertainties still exist, such as changes in regulatory policies, fluctuations in market sentiment, etc., which may lead to significant price fluctuations in ADA.

The above is a prediction of ADA price based on the AI model, which is for reference only and does not constitute investment advice!

Conclusion

For investors, Cardano (ADA) has certain investment value, but they need to carefully assess their risk tolerance and investment goals. Given the potential of Cardano in technical innovation and ecosystem construction, if investors are optimistic about the long-term development of blockchain technology and can withstand the high volatility of the cryptocurrency market, they may consider including ADA in their investment portfolio. At the same time, to reduce risk, investors should adopt a diversified investment strategy, diversifying their funds into different cryptocurrencies and asset categories, avoiding over-concentration in a single asset to balance investment risks and returns.