Altcoins Intermediate

Vasil hard fork: A game-changer for Cardano and its investors?

Cardano vasil hard fork

Key Takeaways

  • Cardano is a fully-loaded smart-contract-driven ecosystem.
  • Price gains during post-previous upgrades show that the upcoming Vasil hard fork might be good news for investors.
  • The Vasil hard fork is expected to bring more players into the Cardano ecosystem, pushing the demand for ADA higher.

Bitcoin is love, but there is a blockchain project that’s faster, more eco-friendly, secure, general-purpose, and in line with the Web 3.0 BUIDLing vision. That’s Cardano for you. So the fact that there are some major changes soon being made to a cryptocurrency as important as Cardano should make you sit up and ask: What are these changes? And what should you, as an investor, expect and focus on?

The broader context

We know that Cardano is a fully-loaded smart-contract-driven ecosystem with the following highlights at present:

  • Over $78.91 million in Total Value Locked (TVL), as reported by DeFi Llama
  • Highest-ever TVL of $326 million, recorded in the month of March 2022
  • Close to 100 full-fledged decentralized projects exist on Cardano so far
  • Over 1,000 projects under development
  • More than 5,000 native NFT projects
  • A standard transaction speed of 250 TPS

However, things weren’t always so great for Cardano. Till September 2021, it lacked smart contract functionality. And that made it impossible for self-deploying DeFi and NFT projects to thrive.

But how exactly did Cardano get where it is now? And why the Vasil hard fork (its biggest upgrade ever, coming up in August, tentatively)? To find the answers, some more history may come in handy.

Previous upgrades and their outcomes

Progress is good and Cardano is making some. Like every other reputed blockchain, Cardano has had its share of upgrades over the past few years. But why, as an investor, should you be interested? Because looking at the upgrades closely, especially from the price and volume perspectives, can help you prepare for Vasil.

Upgrade 1: Daedalus

When it happened: The whole of 2017 (updates keep coming in periodically).

Changes it brought: This upgrade opened the doors to ADA’s popular desktop wallet, Daedalus. The quick transaction wallet Yoroi also made it to the network, and ADA was listed on 30 exchanges.

Time Frame (End of 2017) Post-Upgrade Gains (From 31 Dec 2017)
Week 1 ↑54%
Week 2 ↑25%

Impact on price: The initial price spike (in Week 1) was worth considering.

Upgrade 2: Staking pools

When it happened: Launched on 29 July 2020.

Changes it brought: Staking rewards finally showed up on Cardano. With this upgrade, a blockchain code was changed for the first time and a hard-fork-like movement was identified.

Time Frame Post-Upgrade Gains (From 29 July 2020)
Week 1 ↑3%
Week 20 ↑32%

Impact on price: The gains took time to come but they eventually did, laying the foundation for the all-time highs that followed.

Upgrade 3: Alonzo Hard Fork

When it happened: Announced in August 2021.

Changes it brought: Implementation of full-fledged smart contract functionality to help developers develop resourceful dApps.

Time Frame (keeping the announcement date in mind) Post-Upgrade Gains (From 12 August 2021)
Week 1 ↑15%
Week 2 ↑60%
Week 4 ↑70% (All-time high of $3.10)

Impact on price: ADA scaled its current all-time high of $3.10 during this phase. This signifies that with bigger upgrades, even the announcements are sometimes enough to drive the prices through the roof.

Cardano followed a different peaking strategy with each of the three major upgrades. The first upgrade saw immediate gains, and the second upgrade came with delayed yet sustained gains. Massive gains preceded the Alonzo upgrade.

Vasil Fork: An upgrade to make Cardano better, bigger, and bolder

Cardano already has smart contracts. So what is the Vasil hard fork going to differently? Here’s what the aims of the fork are:

  1. Achieve the dream of 1,00,000 transactions per second. Vasil introduces the pipelining technique (that’s multiple avenues and sub-chains making the transactions faster). Consider pipelines to be the multiple highway lanes. More space means less congestion, simple! It enables transactions faster for projects that run smart contracts.
  2. Equip Cardano better for DeFi projects and usefulness. The Vasil fork will improve existing smart contracts, allowing DeFi app developers to focus on better liquidity, setting liquidation limits, and fixing any gaps in app security.
  3. Launch the Cardano Improvement Proposal (CIP). CIP refers to Cardano-specific standards or rules that token makers, project BUIDLers, and others need to follow. CIP will bring in more developers and enhance transparency and improve security.
  4. Take the next step toward Cardano’s year 2030 dream of turning deflationary. A deflationary cryptocurrency is one where the demand exceeds its supply. It might help to delve into ADA’s tokenomics to understand the larger impact of the Vasil hard fork. The section below should help.

Current tokenomics and what might change with Vasil

ADA has a fixed supply of 45 billion. Right now, 76% of these tokens are in circulation. With the Vasil hard fork bringing more players (developers) into the Cardano ecosystem, the demand for ADA tokens is going to increase. And that is expected to bring in a higher supply.

With demand and supply growing neck-to-neck, ADA’s inflation rate will start dropping exponentially. As per the current projections, inflation is expected to drop to 0.9% by the end of 2030.

The Vasil hard fork is thus a stepping stone toward lowering ADA’s inflation rate significantly.

DeFi in Cardano: Why investors should be aware of it

With Vasil approaching, it is natural to keep a close eye on Cardano’s price action. But here’s another useful thing to keep in mind: indirect or passive precursors to the ecosystem’s growth.

What does that mean?

Well, Terra’s meltdown left many projects in the lurch. Developers, especially the DeFi ones, are looking for a new home. And with Cardano planning to make smart contracts more usable, there has never been a more opportune moment.

As of now, there are several DeFi projects being built or already in existence on Cardano. Here are a few of them:

  1. Acta Finance: Meant for generating and maximizing passive income via staking
  2. Astarter: A complete suite of decentralized financial services
  3. Coinlink: Blockchain aggregator with cross-chain financial capabilities (Cardano-Ethereum-Polygon)

In time, many more such projects are expected to make a debut.

What’s in it for investors: DeFi’s growing popularity will increase the TVL. Plus, lending protocols coming into the mix will motivate people to stake more ADA, therefore pushing the prices high. Cardano staking pools will help intra-ecosystem exchanges with liquidity, which will bring in more people.

Wrap-up

Cardano has always been research-oriented, and it managed to stay in the top 10 for a long time. Now, with it assuming the 8th rank globally (5th if we exclude stablecoins), it seems the right time for the blockchain to scale—both in terms of usability and capabilities. The Vasil hard fork is a step in that direction.

With Vasil, here’s how things are changing. There were over 70,000 new ADA wallet additions over the past 30 days (as of 20 May 2022). This means people are either buying or HODLing. That’s the common voice speaking, we think.

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user’s own risk.

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