The ETH to ADA Migration?

Late to the Game?

Cardano is FINALLY launching smart contracts on September 12th.

Currently they have 0 live contracts, while Ethereum has 400,000.

ETH has a first mover's advantage - and people have radically different opinions on if that's important or not. The Cardano case is that they have 100s of peer-reviewed academic papers on the science behind their blockchain design. They're building a future-proof system. The company is often overlooked (despite an $82 billion valuation) because they haven't launched yet. "It's all theory, they're not building, wahhh."

I get that, but the development ethos of "build fast and break things" (which basically came from a Paola Alto frat house, with keg stands, and coding sprints between 11pm-5am), might not be the kind of style to use when building out a financial operating system that needs to be sustainable for centuries. In both BTC and ETH's cases, they launched quick, captured the market, and now are kind of stuck. It's slow and hard for them to work around some critical design issues. This is where ADA's advantage lies.

Capturing Microtransactions

Here's a reddit thread on it, with some bullet points I picked out:

  • The future won't have a single chain, but many interoperable chains (Polkadot?), used for specific functions.
  • Cardano's chain might be more useful for high volume microtransactions
  • Unless gas fees are fixed, you might see much of the NFT scene shift to Cardano

*ETH isn't quite living up to the vision of being used for small "in-game" style transactions. Need to expand in another post.

**For context: IOHK built an ERC-20 token converter, meaning projects can easily shift over to the Cardano Network.

Proof of Stake (ETH 3?)

Another case for Cardano is their proof of stake system. There is a slow and painful shift (at least this is what I hear from people screaming on the Internet) from "mining" (the good old energy guzzling way) to "staking."

My ELI5 explanation of staking is:

  • You lock your coins in a savings account
  • Once in a while your account is called upon to (automatically) verify an incoming chunk of transactions
  • You get rewarded for participating (7% per year annually?)

In proof of work systems (mining), over time, it becomes harder to stay profitable, which leads to "cartels." Proof of stake is a more sustainable and peer-to-peer way for a network to reach consensus. There are so many ways to design a POS network though. In the case of Lisk (I used to be a fanboy), they're system of "Delegated Proof-of-Stake," (which had a limited pool of 100 stakers), INSTANTLY devolved into cartels. EOS had a similar flaw (with only 20-30 delegates I think).

You might have heard of "ETH 2" - which is the plan to shift Ethereum from Proof of Work to Proof of Stake. I'm not 100% up to speed of what's going on (maybe 5% up to speed). Last I heard, it takes 32 ETH to participate (which, at time of writing, is near $100k.) This limits the amount of people who are securing and benefiting the network. With Cardano, there is no minimum threshold (fact check me), meaning, anyone with a cell phone can participate.

Let's just PRETEND, for one second, that Cardano's proof of stake (paired with smart contracts), is equivalent to an "ETH-3" (something a full generation ahead of ETH-2). Which position is better to be in?

  • 400,000 smart contracts, and friction to go from ETH-1 to ETH-2
  • No users yet, but launching ETH-3 next month, with a clear migration bridge

It will be neat to watch for sure. We'll see how important ETH's first mover advantage is, and we'll see if the years IOHK spent researching Cardano has a real effect within the market.

ETH Killer?

While there is still room for ADA to increase in value, much of it's potential is priced in... $82 BILLION market cap without a product! It's usage will grow radically, but that won't be reflected as much in price. That said, I think there's room for both ETH and ADA to reach a $1 trillion valuation. ($10k ETH + $30 ADA).

The term "ETH Killer" is a real misnomer, but, I still think there will be a psychological shock. There's an expectation that ETH will be the dominant programmable blockchain for the world. Even as other networks arise, the thought is that they will reference themselves to ETH. I think Cardano may be the first example where a competing network enters the space as an equal force of gravity.

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