Fantom (FTM -3.73%) and Cardano (ADA -2.79%) are cryptocurrencies trading at low price points in the $1 to $2 range and both are Proof of Stake assets. Proof of Stake is the consensus mechanism that requires owners of a cryptocurrency to 'stake' their coins to validate transactions on the network. Both have seen some large gains in price recently. But which is the better buy for investors going forward? Let's compare these two Proof of Stake assets on a few key points.
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Follow the total value locked
Total Value Locked (TVL) is a measure of the value of all assets locked in, or committed to, a decentralized finance (DeFi) platform. The more value locked in a network, the healthier the network is and the more value investors see in it.
Investors can divide the coin's market capitalization by TVL to get a feel for whether the asset is undervalued or overvalued. This practice provides a number similar to the price-to-book value of a traditional company. In traditional finance, book value is essentially the value of the company if it were liquidated, so investors look at price-to-book value as a gauge to measure valuation.
Comparing Fantom and Cardano based on this metric results in a huge advantage for Fantom. With a market cap of $5 billion and a TVL of $10 billion, Fantom's market cap to total value locked is just under 0.5, Meanwhile, Cardano has a market cap of $35 billion and a TVL of under $100 million, meaning that Cardano's market cap to TVL is over 350. Fantom has a clear and pronounced advantage in terms of valuation. Further highlighting this gap is the fact that Fantom has racked up $10 billion in total value locked in just two years of existence, whereas Cardano has been around since 2017 and has under $100 million in total value locked.
Both user bases growing rapidly but one has an edge
As of December 2021, Cardano had 2.5 million unique wallet addresses, a 1,200% increase from 190,000 the year before. On the other hand, Fantom went from 5,000 unique wallet addresses in January 2021 to about 1.5 million by the end of the year, representing a 300X increase in unique users.
While Cardano has 1 million more users, I am giving Fantom the advantage here because it has amassed its users in a much shorter period of time. Both cryptos are growing at an impressive clip, but Fantom has a better growth rate.
Fantom leads in dApp development
The development of decentralized apps (dApps) on Cardano has been fairly limited to date, although in fairness to Cardano, it only began enabling smart contracts in September. Notable apps on Cardano are limited to Empowa, a project that wants to help build affordable housing in Africa, and Sundaeswap, a decentralized exchange built on Cardano. These projects may have their merits but have not attracted significant funds thus far.
Meanwhile, Fantom has seen a surge in dApp development over the past year, with dApps like decentralized exchange SpookySwap and stablecoin platform Tomb.finance attracting over $1.5 billion in TVL each. Other prominent applications include decentralized investment platform Beethoven X and yield optimizer Beefy.
And the winner is...
Both Cardano and Fantom are growing their networks at enviable rates. While Cardano has a clear advantage in terms of total users, Fantom is growing its user base at a much faster pace and is gaining on Cardano. Furthermore, Fantom is enjoying an explosion of development on its platform while Cardano seems to still be finding its footing in this department. In terms of valuation based on total value locked in the platforms compared to their market caps, Fantom looks like a markedly better value. Based on these criteria, I believe Fantom is a better buy right now and expect it to outperform Cardano going forward.
