In August 2021, Cardano’s founder, Charles Hoskinson, announced that smart contracts will be available on the network after the Alonzo hard fork is completed. Along with that, he stated that the new version of the blockchain will have improved infrastructure and allow various new decentralized platforms to launch on it. In this Cardano review, we will take a look at the new upgrades coming to the network and analyze their potential impact on the price of ADA. Moreover, we will try to evaluate the consequences of the hard fork and assess the new functionalities of the platform.
The Alonzo upgrade
Earlier this August, the team behind ADA launched a public testnet, expected to host more than 150 new developers and a number of new exchanges before the hard fork combinator event. The main purpose of the testnet is to prepare for the integration of smart contracts, signaling that the Alonzo Purple upgrade will soon come to pass.
The Alonzo hard fork is considered to be the start of the “Goguen” era for the Cardano network. After the initial Shelley phase of development, in which Cardano became a decentralized blockchain, the upgrade of the platform will bring wider functionality to the network, including the long-awaited integration of smart contracts for DeFi applications. The Alonzo upgrade was set out to launch in three consecutive phases – Blue, White, and Purple.
Alonzo Blue launched in May 2021, enabling the deployment of Plutus smart contract scripts and the involvement of early adopters and staking pool operators. The Alonzo White hard fork followed in mid-July, allowing 500 developers, validators, and SPOs access to smart contract features. After the test phase of Alonzo Purple ends, a significant Hard Fork Combinator event will occur, and the full integration of the new upgrades will be completed. Each of these pre-planned events usually affects the price of the cryptocurrency.
During a live stream on July 30, the founder of Cardano, provided further information about the combinator event. According to Hoskinson, there will be two parallel tracks leading up to the hard fork. The first is said to provide “Alonzo capabilities to the node”, while the second is about integrating the required infrastructure for building dApps. He further clarified that the infrastructure necessary for the hard fork will probably be built in the August-September time frame.
The introduction of smart contracts
Right after the Alonzo Purple hard fork is completed, smart contracts will be executable on the blockchain. If everything goes according to the plan, their integration is expected to have a positive effect on the network by bringing up both the number of use-cases and the price of ADA. However, Hoskinson did note that there are a lot of new integration partners involved, and the upgrade will have ‘numerous stages’ to avoid damaging the infrastructure around it. This, on the other hand, could slow down the whole process and further postpone the completion of the hard fork.
The reason why smart contracts are so important for Cardano is that they will allow the network to catch up to second-generation blockchains like Ethereum and EOS. The Alonzo Purple fork is considered to be the biggest and most important upgrade on Cardano, increasing the utility of ADA tokens and providing the cryptocurrency with sustainable value.
The DeFi race
Cardano has been considered to be one of the main competitors of Ethereum, aiming to solve the scalability issues currently faced by some of the major programmable ecosystems. Currently, the Cardano blockchain can process around 1 million transactions per second, while Ethereum can handle about 30 transactions per second (Eth 2.0 is expected to bring up this number to 100,000). While Ethereum is known for developing new technology as it goes along, the need for new infrastructure has resulted in rolling out the much-needed Ethereum 2.0 upgrade. The development of Cardano, on the other hand, is peer-reviewed at each step along the way, which slows down the testing processes.
Up until now, the biggest advantage of Ethereum was the integration of smart contracts, which are a key component behind ICOs, non-fungible tokens (NFTs) and dApps. More than 80% of all dApps are currently running on the Ethereum network.
After the Alonzo Purple upgrade is complete, Cardano should be able to sustain numerous new DeFi platforms, along with already providing better transaction speed and energy-cost validation. This could skyrocket the price of ADA by significantly increasing the utility of the network. According to the company, some decentralized platforms are already preparing to go live once the upgrade is completed. Cardax, which recently raised $1.5 million in a community sale, will be the first decentralized exchange to launch on Cardano.
The integration of smart contract functionality into the Cardano network will allow developers to create various new DeFi applications in its ecosystem. This could both widen the reach of the company and attract a lot of new users. While many experts have argued that Cardano has been falling behind in technological innovation, the completion of the Alonzo upgrade will not only help the platform catch up to its competitors but also provide the necessary foundation for the future scaling of the network. If the developer team manages to keep up with the promised time frame, we might even witness ADA going mainstream (along with BTC and ETH) with a potential spike in its price. If, on the other hand, Cardano postpones the much-required technological upgrade, this could result in a significant backlash from the community and bring negative consequences to both the company’s reputation and the value of the cryptocurrency.
Nothing on this website should be perceived as financial, investment or trading advice. We urge you to do your own research prior to investing and we highly recommend that you consult a certified financial advisor.
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