Cardano (ADA 3.11%) is a proof-of-stake blockchain with a reputation for its carefully researched development. It's one of the cryptos that's been mentioned as part of the U.S. Digital Asset Stockpile. Plus, Grayscale, a leading crypto asset manager, has applied to create a spot Cardano ETF, which would further legitimize the asset.
Unfortunately, Cardano has struggled to keep momentum in recent years. Critics say it's been overtaken by newer cryptocurrencies such as Solana.
That could change in the coming months. New developments could inject some much-needed energy into Cardano, making this a good time to buy. Here are three reasons why.
1. Cardano is solving its governance issues
Cardano's main man, Charles Hoskinson, admits (with the benefit of hindsight) that the whole project could have been better structured from the start. Without getting into Cardano's "dirty laundry," he said Cardano tripped over itself governance-wise, which has stopped it from getting stuff done. That includes things like getting listed on exchanges and accessing venture capital.
Hoskinson is particularly open about challenges in working with the Cardano Foundation. For example, in a livestream about what 2025 might hold, he said a 2021 deal to integrate Circle onto Cardano didn't get executed. He stressed the need for a different structure.
That's a work in process. In December, the community ratified a new constitution, which was subsequently approved on-chain and implemented. This marks a shift in power for the Cardano ecosystem and opens the way, for example, for the community to make budget decisions. A new constitutional committee will be elected this year, in another step toward decentralized governance.
CRYPTO: ADA
Key Data Points
2. The Midnight sidechain is due in November
Midnight is a Cardano sidechain -- which means it's a separate, yet connected, blockchain. Hoskinson said its November launch will be Cardano's "single biggest economic event." While Midnight can operate independently of Cardano, Hoskinson believes it, and other connected projects, could create billions of dollars worth of value for the Cardano ecosystem.
Midnight is focused on data protection. Apps built on Midnight can use both shielded and unshielded data, which will be fundamental for many real-world blockchain applications. Transactions that are recorded on public blockchains are pseudonymous. Given that several companies already specialize in linking blockchain addresses to people and companies, it's clear that pseudonymous is very different from anonymous.
For example, let's say stablecoin usage goes mainstream. Companies won't be keen to use the blockchain for payments if their transactions, such as big deals or salaries, could become public knowledge. Similarly, if real estate deals get tokenized on the blockchain, stakeholders need to control what's public and private.
Image source: Getty Images.
3. Midnight is helping Cardano build relationships
The Cardano team is using Midnight as a key outreach tool. For example, in May, Input Output (one of the companies behind Cardano) announced a partnership with Brave Internet. It means Midnight, Cardano, and Cardano-native assets will all be integrated into Brave wallets. Hoskinson says this is one of many deals they've negotiated on the back of Midnight.
The Midnight airdrop reflects that same commitment to outreach. The plan is to reach 37 million addresses on Cardano and seven other ecosystems, including Ethereum and Solana. Hoskinson believes this will put a spotlight on Cardano and its technology.
Finally, Midnight facilitates interoperability -- cross-chain communication. In addition to developing Cardano's own Inter-Blockchain Communication capabilities, sidechains like Midnight enable cross-chain transactions. Hoskinson is particularly excited about the potential for a Bitcoin, Cardano, and Midnight triumvirate to solve various problems in the financial world.
A lot could happen between now and November
I've highlighted three shifts that could all be game changers for Cardano long-term. Cardano has always stood out as a safe pair of hands with a focus on real-world utility. Now could be a great opportunity to pick it up at over 75% less than its all-time high. If it can deliver even some of what's in the pipeline, Cardano could be on the cusp of something big.
That said, the very fact that some of these changes are necessary is concerning. Cryptocurrency is a fast-moving world, and few projects can afford to lose several years of integration opportunities because of internal issues. Plus, there's a chance Midnight may not deliver everything Hoskinson hopes. And the governance model is untested, which could bring its own bottlenecks.
Cardano is at an exciting crossroads, but it's still important to be cautious and ensure that crypto only makes up a small portion of your portfolio. All cryptocurrencies carry risk and uncertainty, more so when we're talking about projects that haven't yet launched.
