Cardano’s strange phenomenon: a small ecosystem but a high market value

As a project launched in 2015, Cardano (ADA) has experienced several rounds of bull and bear markets in the crypto industry. However, it was not until September last year that it supported smart contract deployment for the first time, becoming a true DApp platform.

Over the past six months, Cardano has been in the initial stage of building its on-chain ecosystem. According to data from DeFiLlama on March 23, the total locked value (TVL) of DeFi applications on the Cardano network exceeded $300 million, with the vast majority of TVL provided by two DEXs, indicating that the network is still in a relatively early stage of development.

Currently, Cardano’s on-chain TVL ranks 24th among all public chains, but its native token ADA ranks 7th in the crypto asset market capitalization rankings. This ranking has declined. At the end of August last year, ADA once ranked third in this list.

The huge contrast between the token market value and the development of the ecosystem has made ADA controversial. In the view of industry insiders, as the crypto asset market grows, if ADA wants to maintain a high market value, it will inevitably need to promote the value of the project itself, and it is particularly important to accelerate the construction of the on-chain ecosystem.

However, the current public chain sector is no longer the market with only a few public chains such as ETH, EOS and Tron. Cardano is facing unprecedented competitive pressure on the road to "catching up" with their high market value.

Cardano’s on-chain TVL exceeds $300 million, with DEX dominating

In the crypto asset industry, ADA’s asset code is more well-known than the Cardano public chain it is attached to. As Cardano’s on-chain native token, its market value has always been at the top of the crypto asset market value rankings. In the public chain war, Cardano’s on-chain ecological applications are lackluster, and this contrast has left a deep impression on its followers.

In the blockchain field, Cardano is a real "old brand". It was founded in 2015 and has claimed to be a third-generation blockchain platform since its inception, focusing on solving problems related to on-chain scalability, operability and sustainability. Its core founder, Charles Hoskinson, is also well-known in the crypto circle. He is not only the co-founder of Ethereum, but also co-founded the first generation of decentralized exchange BitShares with EOS founder Daniel Larimer (nickname BM).

Such a blockchain with a star halo always seems to be particularly slow in building on-chain applications. In 2021, when new public chains such as Solana and Avalanche were making waves, Cardano finally supported the deployment of smart contracts for the first time through the Alonzo hard fork upgrade on September 13. At that time, the crypto market had turned from bullish to declining, and Cardano's operation was considered by the outside world to be "getting up early and arriving late."

Recently, the Cardano on-chain ecosystem has improved. According to DeFiLlama data on March 23, the total locked value (TVL) of DeFi applications on the Cardano network exceeded US$300 million, an increase of 6.76% in 24 hours.

In addition, Messari data showed that Cardano's on-chain transaction volume reached US$68.76 billion on the 23rd, surpassing the Bitcoin ($15.9 billion) and Ethereum ($36 billion) networks.

Cardano's daily on-chain transaction volume reached $68.76 billion

The active on-chain ecosystem has brought Cardano back into the spotlight.

Judging from the data of Cardano chain applications collected by DeFiLlama, DEX protocols are still the main providers of TVL for its network. On March 23, the top three applications in terms of TVL on Cardano chain were Minswap, SundaeSwap and MuesliSwap, with TVL of USD 194 million, USD 112 million and USD 1.67 million respectively. The TVL of the first two accounts for more than 99% of the TVL on Cardano chain.

This data shows that Cardano is still in its early stages of development. Its TVL structure is similar to that of most public chains in their early stages, with DEX launching first and then various track applications gradually filling in.

It is worth noting that, since mainstream crypto wallets such as Metamask do not support Cardano, users still have a certain threshold to access the public chain. According to users who have experienced DEX on Cardano, there will be lags when conducting transactions, and the user experience still needs to be optimized.

The node pledge rate of ADA lock-up reached 71.64%

In any case, for Cardano, the launch of smart contracts and the initial construction of on-chain applications is a good start. With the recent development momentum, Cardano is currently ranked 24th on the public chain TVL list, surpassing Kusama and EOS.

Cardano’s on-chain TVL ranks 24th among public chains

According to its official blog announcement, Cardano also intends to increase transaction throughput this summer. This is mainly due to the significant increase in user activity caused by the use of smart contracts. At the same time, the average transaction size has increased due to script transactions carrying code. This shows that there is a demand for on-chain interaction on this chain, and the increase in demand also exposes the chain's own insufficient ability to meet it, which is why users report that the use of Cardano on-chain applications is lagging.

Researchers at the public chain believe that more applications are expected to be built on Cardano, and in order to keep up with this high demand, the system’s current transaction throughput must be increased.

Perhaps due to the increase in on-chain adoption, the market price of ADA has also risen recently. In the week from March 16 to 23, ADA rose from $0.8 to $0.97, an increase of 21.25%.

However, it should be noted that compared with before the launch of smart contracts, ADA's market value ranking has declined. Currently, ADA ranks 7th in the crypto asset market value ranking, with a circulating market value of 32.665 billion US dollars. At the end of August last year, ADA's market value once ranked third in the market value list, second only to BTC and ETH.

In the view of ADA followers, the decline in ADA's market value ranking is, on the one hand, because the benefits of the launch of smart contracts have been realized and the market hype sentiment has declined; on the other hand, the crypto asset market has also undergone a round of reshuffle during the decline, and now ADA's position is closer to the market's rational expectations.

In fact, although ADA has long been ranked in the top ten of the crypto asset market capitalization rankings, it has always been considered a "weird" asset in the eyes of many insiders. This is mainly because people always find it difficult to find the value support for the high market value of ADA.

During the 7-year development process, Cardano, which claims to be blockchain 3.0, did not launch smart contracts until last year, which was considered an unsatisfactory performance in the eyes of investors. Even though it has begun to build an on-chain ecosystem, it is surprising that it ranks 7th in the crypto asset market value ranking given its current size.

There has always been a voice in the community that believes that the large gap between market value and project development is related to the centralization of ADA tokens and the control of giant whales.

According to data from Staking Rewards, there are currently $23.8 billion worth of ADA staked in the Cardano network. Most of this stake is used as a verification node for the PoS network. Its network staking rate has reached 71.64%, leading the public chains. This also shows that ADA has been centrally locked up and has controlled the market circulation to a certain extent.

In the view of industry insiders, as the crypto asset market grows, if ADA wants to maintain a high market value, locking up funds is not a long-term solution. It is more important to accelerate the construction of the on-chain ecosystem, and promoting ecological prosperity also requires market supply of ADA.

According to the future ecosystem map announced by the Cardano community, project parties are deploying in multiple sectors such as lending, launchers, oracles, stablecoins, wallets, games, NFT, etc. Among them, the NFT track is the most popular, and dozens of teams such as CNFT, BitBunny, and PunksterArt are planning or have already developed projects on Cardano.

However, Cardano, which is late to the game, has to face the competitive pressure from multiple emerging public chains in the market. After all, the current market is no longer the market with only a few public chains such as ETH, EOS and Tron. There are still many uncertainties for Cardano to match its high market value.