What does Cardano mean for DeFI?

By September 15, 2021September 17th, 20214 minute read
What does Cardano mean for DeFI?

Note: This blog is written by an external blogger. The views and opinions expressed within this post belong solely to the author.

Cardano’s smart contracts were live on September 12 2021. Last Monday, Charles Hoskinson, the developer of Cardano, revealed a timetable for the long-awaited upgrade to the popular cryptocurrency platform known as Alonzo.

Cardano (ADA) is a cryptocurrency that promises to address real-world issues by utilizing blockchain technology. It has collaborated with the Ethiopian government, for example, to track the educational development of 5 million children on its network. The project will provide each student with a tamper-proof academic record, which might aid in their job search or study abroad.

Cardano has adopted a methodical approach to its development. Prior to implementation, the team believes in extensive study and testing. It may surprise you to discover that this is not the standard in cryptocurrency; in the rush to make the most of blockchain technology, many currencies launch products first and then enhance them as they go.

The Major Upgrade

The network will shortly implement the Alonzo Hard Fork, the third significant update in Cardano’s Shelly era. The coin has five major stages of growth, frequently referred to as “eras” – Byron, Shelley, Goguen, Basho, and Voltaire — all of which will improve the entire network’s functionality. Alonzo is the platform’s final significant upgrade for the Shelley period, ushering it into the Goguen era.

The Alonzo update is divided into three stages: Blue, White, and Purple. They will be followed by Alonzo Red and Alonzo Black, who will add more users to the networks and repair any issues that may have arisen.

Like those seen on the Ethereum network, smart contracts will be introduced to the network by Alonzo Blue.

Smart contract capabilities are a significant step forward for Cardano, allowing it to compete with other programmable blockchains and significantly increase the possible solutions it can provide to its partners.

How will Cardano create a new generation of DeFi?

Cardano is unique not just in terms of speed and decentralization but also in its development environment. Most Ethereum competitors, such as Binance Smart Chain and Polygon, are still Ethereum Virtual Machine-based, which means they can execute Ethereum-specific code without modification. Smart contracts for Ethereum and EVM-based chains are written in Solidity, a programming language akin to Javascript, another prominent web development language. 

Since the debut of Ethereum and Solidity five years ago, it has accumulated a sizable developer community. There are now many tutorials, videos, and workshops available to assist developers in getting started with the language.

Cardano will not have any support for EVMs at first. Developers will have to write smart contracts in Plutus, a new and simple smart contract language, as well as Haskell, a programming language that has been available since 1990 but has yet to find widespread use.

The usage of Plutus instead of Solidity is very critical for the growth of Cardano’s ecosystem. On the one hand, this implies that popular Ethereum dApps like Uniswap, Aave, and Compound, as well as any other Ethereum dApp, will be difficult to port over to Cardano. This might result in a lack of liquidity on Cardano in its initial months, discouraging some users from switching to the platform.

However, Cardano provides a clean slate for both developers and consumers and is certain to feature original and never-before-seen applications, as opposed to Binance Smart Chain, whose EVM compatibility implies that all of its main dApps are just clones of current Ethereum dApps.

Though early development on the platform may be sluggish, we may expect to see the next generation of DeFi built on Cardano, which may lead to the construction of the next Uniswaps and Aaves, as well as other applications that have not yet been envisioned. Furthermore, because Plutus provides greater simplicity of development and built-in security verification techniques, we should see fewer application vulnerabilities and hacks, resulting in less negative news that delays uptake.

Additionally, the yield farming possibilities could be quite lucrative, particularly following September 12. Governance token projects must attract consumers to utilize not just their platform but also Cardano itself; thus, they will give out tokens for basic tasks such as holding ADA, providing liquidity on their platform, or even borrowing money.

Cardano’s completely new DeFi ecosystem will provide developers and consumers with a brand new smart contract environment, complete with new projects, coins, and features. The added advantage here is the plethora of knowledge and experience that Ethereum lacked back when it debuted. 

While it remains to be seen whether this ecosystem is enticing enough to make Cardano and ADA as valuable as Ethereum, competition within the smart contract space is certainly beneficial, as it encourages all projects to continuously develop and upgrade, resulting in a better experience for everyone.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
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Rony Roy

Rony Roy

Rony Roy is an electrical engineer who turned tech author in the Cryptocurrency space. He got block-chained in 2012 and fell in love with tech and its use-cases and has been writing his way through problems since 2016.

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