Launched in 2017, Cardano is a third-generation blockchain and utilizes DPoS consensus (decentralized proof-of-stake). It is one of the closest competitors to Ethereum and the recent Alonzo hard fork upgrade strengthens its claim.
In the pursuit of becoming a sustainable blockchain platform, Cardano is working tirelessly to become the most preferred DeFi ecosystem. The Alonzo upgrade kicks-off its smart contract implementation (available for developments in the next phase or ‘era’). As expected, it is accelerating the adoption of DeFi solutions more than what we thought and predicted.
While we are at it, esteemed organizations such as the Ethiopian Ministry of Education are acknowledging Cardano’s potential. In fact, the ministry will use the blockchain to store records for five million Ethiopian students in a tamper-proof manner. Students, universities, and even organizations can access these records to verify the credentials. For an under-developed blockchain network, this isn’t just any other achievement.
ADA turns Unstoppable
In 2021, ADA, the native token of Cardano, achieved something rare. It managed to decouple from the Bitcoin price movements and establish its own rallies.
Over the last 6 months, ADA rallied while BTC, ETH and other altcoins dropped in market cap. This was a testimony of the project proceeding as per the roadmap thereby regaling the investors. For Cardano, the Alonzo that completed on September 12 is a major milestone. It actually puts many speculations to rest.
Introduction to Alonzo
Alonzo and what does it mean for Cardano?
Alonzo is a hard fork event that has introduced smart-contracts to the Cardano network. The introduction of smart contracts will allow developers and projects to fully utilize Cardano’s blockchain just the way they are using Ethereum currently.
Alonzo will give them the tools necessary to provide more comprehensive services to users such as DeFi Dapps, NFT services, crowdfunding, and more.
Is Alonzo well-tested?
Cardano blockchain is popular for its research-based well-executed roll-outs and Alonzo hard exemplified the same. Without any downtime, Alonzo's hard fork was executed on September 12. And the hard fork has been really successful. Within 24 hours, Cardano witnessed more than 100 smart contracts run on the network.
Alonzo roll-out was conducted in four phases to ensure that the Alonzo mainnet does not break anything that was already working.
During the Alonzo Blue phase, selected Cardano Stake Pool Operators (SPO), developers, 7 external European companies and 1 US company successfully tested building test smart contracts.
After successful completion of phase blue, Alonzo testnet successfully forked to Alonzo White on Jun 15. This phase of testnet allowed a close group of 500 users to deploy demo dApps and use smart contracts. It also supported the minting of NFTs.
On August 8, Cardano announced the successful spun-up Alonzo Purple- the first public Cardano Testnet to support smart contracts. It was the third and final stage of the Alonzo upgrade.
Alonzo mainnet was rolled out on September 12 and we might soon see dApps utilizing Cardano smart contracts to deliver innovative DeFi solutions.
Value Proposition of Alonzo
- Alonzo and Network fees
Many of us have had horrible experiences with Ethereum and Uniswap. Failed transactions, stuck transactions and simply high fees for everyday transfers. Crypto space no longer needs another high-fee Ethereum blockchain and Alonzo is trying to solve the same for Cardano.
How will Alonzo impact the network fees?
A smart contract is a larger transaction. Currently, a transaction on Cardano costs approximately 0.15ADA and then about 0.0044ADA per Kilobytes.
Let’s make an educated guess about the cost of execution of a smart contract on Cardano after Alonzo.
Average Smart contract size on Ethereum is 24KB. Let’s assume the same for Cardano.
That means a dApp transaction on Cardano is going to cost
0.15 ADA + (24KB*0.0044 ADA)
= 0.15 ADA + 0.1056 ADA
= 0.2556 ADA = $0.5112
Now take a look at Ethereum’s Average Transaction fees chart — $6.864.
That’s a huge gap and this will be possible only because of the Alonzo Hard fork. This means a lot for the DeFi users who have been struggling with infamous high-gas fees on Ethereum.
- No failed transaction fees
Another major advantage of Cardano Smart Contracts over Ethereum Smart Contract will be that you won’t pay fees in case a transaction fails. That is the advantage of the eUTxO model as compared to ETH’s account-based model.
In nutshell, Cardano seems to be strongly positioning itself as a low-fee Ethereum alternative just like Binance and Polygon. And we really need it because even after the London Hard Fork, Ethereum gas fees are yet to fall substantially.
- Alonzo and Cardano’s per transaction power efficiency
Cardano claims to be 21,000 times more energy-efficient than Bitcoin. In spite of this, Cardano’s per transaction energy consumption is close to 0.5 kWh of energy which is not low enough to make Cardano a green cryptocurrency.
But, with the Alonzo upgrade, this might change. That’s because Alonzo will make Cardano capable of building dApps. Because of these dApps, the number of transactions will increase. However, because Cardano is a Proof-of-stake chain no drastic increase in power consumption of the whole chain will happen. As a result, with the increasing number of transactions, Cardano’s per transaction energy consumption might decrease drastically.
- Alonzo and mainstream languages support
A couple of months ago on a Cardano360 episode, it was announced that close to Alonzo hard fork, which means early September 2021, basic language support for a couple of mainstream programming languages can be expected.
If this happens, it could further upgrade the position of Cardano as a game-changer in the crypto space. This would mean mainstream developers would be able to start developing DeFi solutions on Cardano.
What will happen after Alonzo?
Alonzo is not the final destination for Cardano. It will actually just mark the completion of the Goguen Era which was focused on smart contracts. Goguen will be followed by Basho and Voltaire
Basho — an era of Cardano optimization. Scalability and interoperability will be the focus which will be achieved with the introduction of side chains and with the second layer solution “Hydra”.
Cardano’s TPS has been questioned time and again. According to some basic calculations, Cardano currently runs at 7 TPS. Which is shockingly low.
But Hydra, the Cardano scalability solution is expected to theoretically scale Cardano up to 1 million TPS.
It is double the TPS of the current Visa network. Hydra is already in an advanced state of development.
While the team is working heads down on scalability and interoperability, a lot of work is being done for the last and the final Voltaire Era which positions Cardano as a fully decentralized network. It will introduce a voting and treasury system. Network participants will be able to use their stake and voting rights to influence the future development of the network.
The Future of Cardano
Most likely smart contract development will gain momentum with Cardano’s entry. Ultimately, the ideal DeFi landscape that ought to have multiple players will also grow.
According to Cardano creator Charles Hoskinson, the Alonzo upgrade has been a game-changing moment as it has transformed Cardano into a DeFi ready blockchain. But before Cardano becomes a thriving ecosystem of dApps, it needs to scale and that is what is being worked upon currently.