Preface
Since its launch in 2017, Cardano (ADA) has grown into a PoS network that aims to push the limits of blockchain technology. As a platform committed to security, scalability, and functionality, Cardano is more than just a cryptocurrency, but provides a powerful environment for developers and users to build decentralized applications and systems. Through close collaboration with organizations such as Input Output Global (IOG), the Cardano Foundation, and EMURGO, Cardano has taken a major step on its roadmap to enter the fray in areas such as smart contracts, defi, and NFTs.
This article will take you deep into the latest developments, key data and network features of Cardano, explore the use cases of ADA and its role in the entire crypto economy. Whether you are a developer, investor or enthusiast of blockchain technology, this article will provide you with comprehensive insights into the Cardano ecosystem, from governance innovation to financial health to the dynamic growth of DeFi, and look forward to the future of Cardano towards its ultimate goal - the Voltaire era.
About Cardano
Cardano is a PoS layer 1 network launched in 2017. Its goal is to provide security, scalability, and functionality to decentralized applications and systems built on its network. In addition to community support from developers, node operators, and the project, Cardano is also supported by Input Output Global (IOG), the Cardano Foundation, EMURGO, and others. Together, these organizations drive network development, adoption, and funding, leading Cardano to the final stage of its roadmap - the Voltaire Era.
Cardano takes a unique approach to development compared to other smart contract networks. The Ouroboros consensus mechanism allows for delegation of stake, while the extended eUTXO accounting model facilitates native token transfers, scalability, and decentralization.
With a loyal group of users and developers, Cardano has proven its staying power. After supporting smart contracts through the 2021 Alonzo hard fork, Cardano began to compete in more traditional crypto markets such as DeFi and NFTs.
Key data
Profitability data
ADA is the native asset of Cardano and serves as the main medium of exchange for transactions on the network. It has four main network-level use cases:
(i) Settlement of network transaction fees: ADA is used to pay for transactions conducted on the Cardano network.
(ii) Register a stake pool: Users can use ADA to register a stake pool, participate in network consensus, and become a stake pool operator (SPO).
(iii) Staking: Whether as a stake pool operator or a delegator, staking ADA can help protect network security and earn token rewards.
(iv) Rewarding voters and funding projects: In Project Catalyst, ADA is used to reward voters and fund projects.
The maximum supply of ADA is 45 billion, and the circulating supply will experience inflation before reaching this maximum. After every five-day epoch, 0.3% of the ADA reserve (uncirculated ADA) is allocated to SPOs as rewards. This "inflation" tends to zero as the reserve is consumed and the circulating supply approaches 45 billion.
The annualized effective staking yield takes into account the dilution of value due to inflation. In the third quarter, the annualized effective staking yield was 0.6%, but this may vary depending on the different stake pools.
In Q3, ADA’s price fell by 4.8% to $0.37. Correspondingly, ADA’s total market capitalization fell by 6.9% quarter-over-quarter to $13 billion. The slight difference in total market capitalization is due to a 2.2% decrease in circulating supply. Due to the price drop, ADA’s total circulating market capitalization ranking dropped from 10th to 11th in Q3.
On Cardano, each transaction incurs a network transaction fee, which is used to process the transaction and cover storage costs. Fees are calculated by a minimum fee plus a variable fee based on the size of the transaction. Revenue (in USD) fell 31.2% quarter-over-quarter to $510,000, while revenue (in ADA) fell 14.2% quarter-over-quarter to 1.4 million ADA. This difference is due to the decline in the price of ADA throughout the quarter.
Currently, 20% of Cardano’s transaction fees go into the treasury. Cardano’s treasury balance (in ADA) fell by 1.2% month-on-month to 1.55 billion ADA, but the dollar value of the treasury increased by 3% to $622.92 million.
Daily activity data
In Q3, Cardano’s average daily transaction volume fell by 15.9% quarter-on-quarter to 43,200, while the average number of daily active addresses (DAAs) also fell by 14.5% to 27,200. Cardano’s average transaction fee remained the same at $0.13. However, the average transaction fee (in ADA) fell by 17.9% quarter-on-quarter to 0.54.
The ratio of transactions to active addresses (txs/DAAs) fell 1.7% month-over-month to 1.59. An increase in this ratio generally means that activity is more evenly distributed among users; conversely, a decrease in the ratio indicates an increase in “heavy users.”
Total stake (ADA) and ADA’s staking ratio decreased by 0.3% and 4.1% month-on-month, respectively. Total stake (in USD) decreased by 5.1% month-on-month to $8.5 billion, due to the decline in ADA’s price. Total stake (in USD) represents the economic security of the network.
Governance and Forks
In April 2024, Cardano announced the Chang hard fork, a two-phase network upgrade designed to enable on-chain governance and complete the core goals of the final roadmap phase of Cardano. Voltaire is the final step towards the self-sustainability of Cardano through on-chain voting and off-chain mechanisms and institutions such as the member base organization Intersect.
Phase 1: Begins after the Chang hard fork on September 1, 2024. This phase kicks off a technical bootstrapping period, setting the stage for decentralized voting and governance actions.
Provisional Cardano Constitution: To fill the gap until a real constitution is iterated through the Cardano Constitution Workshop and approved at the Cardano Constitution Assembly in Buenos Aires, Argentina in December 2024.
Interim Constitutional Committee (ICC): Composed of seven members, three of whom are elected by vote. In the first phase, the ICC has veto power over certain on-chain governance actions.
Phase 2: will see cardano’s on-chain governance come fully online as the Cardano Constitution is completed and ratified. This phase will empower ADA token holders to direct technical changes and treasury withdrawals, in part by introducing a new user role, delegated representatives. ADA token holders will be able to delegate governance power to DReps and SPOs, who can vote on governance proposals on their behalf.
Sign up for DRep: Open, requires a one-time deposit of 500 ADA.
Once Phase 2 is complete, DReps, the SPO, and the Constitutional Council will govern all areas of the network through an on-chain voting and treasury system based on CIP-1694. This will transfer responsibility from the IOG, the Cardano Foundation, and EMURGO, the three institutions that have historically held all seven governance (genesis) keys together. Actions that can be governed include matters related to the Constitutional Council, parameter changes, constitution updates, hard fork initiations, protocol parameter changes, and treasury withdrawals.
Intersect SanchoNet
Testing related to CIP-1694 continues on SanchoNet, a test network launched in Q3 2023 that is intended to serve as a sandbox to test and build processes and tools for Cardano on-chain governance. Developers use this testnet to launch new infrastructure (such as wallets and voting explorers), SPOs can test voting and proposals, and details about DReps can also be discussed here.
SanchoNet and the wider Voltaire outreach are led by Intersect, a membership-based organization serving the cardano ecosystem that combines the strengths of community members, SPOs, and project teams. Intersect was established to bring together ADA token holders under a common vision for a more transparent, collaborative, and innovative cardano ecosystem.
Intersect maintains over 60 code repositories, including the full cardano Haskell code, and drives cardano’s open source approach through various standing committees and working groups. In addition, Intersect is working on creating an open product roadmap, an annual budget process, and has been operating a grant program where projects are awarded for developing governance-related areas such as education and the DRep platform.
DeFi
In Q3, Cardano’s DeFi total locked value (TVL, in USD) grew by 13.3% quarter-over-quarter to $231.6 million, while its DeFi diversity score increased by 12.5% to 9. There were also a lot of changes in the TVL of the various protocols in Q3.
Minswap’s TVL increased slightly by 4.4% month-on-month to USD 58.6 million.
Liqwid’s TVL increased dramatically by 77.2% to $47.1 million, surpassing Indigo, whose TVL fell 19.7% month-over-month to $38.4 million.
Smaller protocols like Splash Protocol and SundaeSwap grew 76% and 26% to $16.9 million and $16 million, respectively.
Indigo is a synthetic asset issuer that provides iUSD, iBTC, and iETH. A week after the end of the third quarter, Indigo completed its upgrade to V2.1. This upgrade introduced an algorithmic interest rate, which splits the interest between the treasury and INDY stakers, as well as some other improvements.
Splash is a decentralized exchange (DEX) that launched in July, after raising 17.2 million ADA in the SPLASH token sale in May. Splash is also working on snek.fun, a protocol similar to pump.fun on Solana that allows users to easily launch and trade tokens. The app launched in September and saw over 2,230 tokens created and 4.5 million (ADA) traded on its first day.
SundaeSwap continued its momentum from Q2 with the launch of its V3 upgrade, which introduced a dynamic fee model and increased transaction capacity. A 90-day trading fee waiver was included at launch, which expired in August, and a proposal to increase fees was passed in September. SundaeSwap’s revenue is distributed to SUNDAE token holders, SundaeSwap’s treasury, Sundae Labs, and others.
Ada Token Unlock
Recently, Cardano (ADA) will unlock tokens this week. It is expected to unlock about 16.84 million ADA tokens, which account for 0.05% of the existing circulation.
Future Outlook
Cardano was launched in 2017 as a PoS layer 1 network, aiming to provide a secure, scalable and feature-rich platform to support decentralized applications and systems. Through its unique Ouroboros consensus mechanism and extended eUTXO model, Cardano has demonstrated competitiveness in the fields of smart contracts, DeFi and NFT.
With the implementation of the Alonzo hard fork in 2021, Cardano's development has entered a new stage after supporting smart contracts. In the future, Cardano will achieve full on-chain governance and self-sustainability through the Chang hard fork, ushering in the Voltaire era. By introducing new governance mechanisms, improving the diversity of the DeFi ecosystem and TVL growth, Cardano is expected to continue to consolidate its position in the blockchain industry and promote the further development of its ecosystem through continuous technological innovation and community governance.
