Cardano (ADA) is currently the 7th biggest crypto asset by market capitalization with a $36 billion valuation. Although impressive, its price is still 70% down from its all-time high of $3.10 hit 7 months ago.
Since its inception in 2017, ADA has been promising big things but taking time to deliver them. Last year, with the much-anticipated Alonzo upgrade, they finally drove to introduce smart contracts to the network. With that set and done, Cardano was ready to become one of the top DeFi chains in the market. Nevertheless, the opposite happened. In general, adoption was low and the total value locked (TVL) on ADA’s smart contracts didn’t grow as expected. You add that to a general downtrend in the market and you get a staggering decrease in its price.
Despite a harsh couple of months, ADA is now going strong with a vigorous community, and with good reasons. According to a report by Santiment, one of the crypto projects with the most activity on GitHub is currently Cardano. This means that developers are working hard to improve the network’s technology. One of the leading projects being Hydra, a layer 2 scaling solution.
What’s a Layer 2 and why do we need them?
One of the most important problems in the crypto industry right now is scalability. As more people enter the space, the demand for transactions rises, which makes gas prices skyrocket. A blockchain network has a limit for how many transactions can fit inside each block. Therefore, there is a max number of transactions per second (TPS) they can process.
A layer 2 solution allows for transactions to be aggregated and synthesized off-chain and then posted together to the mainnet. In that way, the gas fees are divided between hundreds of transactions. This technique effectively multiplies the TPS that a blockchain can process.
In essence, Hydra will make Cardano, and its whole DeFi ecosystem, faster and cheaper. Although it is still in development, progress is being made. As of last week, the Hydra protocol is successfully running on Cardano’s testnet.
Apart from the impressive development taking place behind Cardano, another bullish pattern is the growing TVL. The total value locked behind this project has tripled since February, surpassing $300 million yesterday. This means more and more capital is flowing towards decentralized protocols inside Cardano. The leading dApp right now is the Minswap DEX, holding 61% of the TVL.
Cardano seems to finally be getting some traction in the DeFi space. If the ecosystem keeps growing, soon people will recognize it as a viable alternative and the demand will swell. The good thing is that the team is playing the long-term game and already preparing the network for massive adoption.