28.11.2024
In the crypto ecosystem, there are projects where the team works in the shadows, while others are overshadowed by their creator. In a world where decentralization is a core principle, how much influence can a single individual wield over a blockchain's destiny?
Whenever we hear a proper name or a foundation associated with a crypto blockchain project, we cannot help but feel a dose of skepticism about its core values of decentralization, regardless of how involved the figure might be in the project.
For instance, when we think of Ethereum, we surely think of Vitalik Buterin, or if we think of TRON, we immediately associate it with Justin Sun. One of the central problems with FTX and Binance was precisely the public visibility (and rivalry) of their respective CEOs, Sam Bankman-Fried and CZ.
When we mention Cardano, we also likely think of Charles Hoskinson, the predominant figure behind this blockchain, which, after many ups and downs, has remained in the Top 10 by market capitalization.
The problem with this crypto caudillismo (strongman leadership), at first glance, is that it does not align with the core values of decentralization, non-dependence, and freedom from interference by a central authority figure. However, it also implies that, just as in public companies, the vision and leadership of a CEO are fundamental, this same dynamic is being transferred to the realm of the crypto ecosystem.
Recently, we have seen $ADA, Cardano’s native token, surge from $0.33 to over $1.00, tripling its market capitalization following a live stream by Hoskinson. In this event, he stated that after Trump’s victory in the recent U.S. elections, he would be working closely with lawmakers in Washington, D.C., and individuals close to the next administration to "help foster" U.S. crypto policies.
Cardano recent FOMO drove its market cap from $11.7B to $37.3B.
Despite its advancements and contributions to the blockchain industry, Cardano has been consistently criticized throughout the years. Some of the main critiques of the network are its slow development, which likely comes from this emphasis on peer-reviewed research, as well as its slowed ecosystem development and some concerns that the network is not as decentralized as it claims to be.
The Vision Behind Cardano
Hoskinson founded Cardano with the idea of creating a blockchain that would address some of the key concerns within the blockchain industry at the time—namely around scalability and sustainability. At the time, Ethereum ran on a Proof-of-Work mechanism that, while decentralized, meant that it was limited in both scalability and sustainability.
Cardano’s founding ethos was to create a blockchain network that emphasized scientific, peer-reviewed, research-based development and an inclusive financial system that would allow anyone to participate. Blockchain has the potential to create financial inclusivity in developing nations, making it a desirable technology in countries like Ethiopia, which has partnered with Cardano
The network uses a layered architecture that serves two functions. The first layer supports its native cryptocurrency, $ADA, while the second layer supports smart contracts that enable the creation of dApps on the network. Separating these computations allows for scalability and flexibility while maintaining the security features that make blockchain development desirable in the first place.
While decentralization is a key factor in its development, there are some concerns that too much of the network’s decision-making and governance relies on Hoskinson and Input Output Hong Kong (IOHK), Cardano’s development company.
Ouroboros.
Cardano’s consensus mechanism, called Ouroboros, is an evolving project that is under consistent development to make the Cardano network faster and more secure. Its most recent update, Ouroboros Genesis, allows anyone who holds ADA to participate in network validation by creating a staking pool. This makes the network much more decentralized, which increases overall security.
In 2021 the Alonzo hard fork brought smart contracts to Cardano, while the 2022 Vasil fork brought improvements to the network’s overall efficiency. This shows that Cardano is focused on improving the network, though it may not be focused on the kind of ecosystem growth that Ethereum and Solana are working on.
As of October 2024, a new version of Ouroboros, called Hydra, is currently in development. This version will focus on scalability by enabling multi-chain functionality to increase throughput and improve transaction speeds. Cardano also recently integrated with Bitcoin OS, which allows users to access Bitcoin liquidity for use within the Cardano ecosystem. This expands Cardao’s overall accessibility, making it easier for users.
Grail Bridge.
While Bitcoin remains one of the most successful cryptocurrencies to-date, it has a limited use-case as a blockchain. One of the primary flaws with Bitcoin is that it doesn’t support smart contracts on its own, making it useful only as a store of value currency and not a blockchain that can be used to build upon in the ways that Cardano or Ethereum can. That is, at least, until BitcoinOS was launched in January 2024.
BitcoinOS created the framework to allow limited, basic smart-contracts to be built on the network, along with (and more importantly) interoperability that would allow Bitcoin to interoperate more easily with other blockchains. BitcoinOS’s smart contract capabilities are extremely limited, making interoperability the primary feature that would enhance Bitcoin’s usability rather than offering a full-scale smart contract capability.
In October 2024, BitcoinOS announced the Grail Bridge, a bridging solution that allows Bitcoin and Cardano to interoperate for the first time, meaning they can easily and securely send assets and information from one network to another. The Grail Bridge was developed through a partnership with EMURGO, one of the founding entities of Cardano, and BitcoinOS.
Interoperability is one of the key aspects of a successful blockchain ecosystem. Alone, many blockchain networks cannot scale to a global level without the support of a layer-2 scaling solution or the ability to interoperate with another network. The Grail Bridge is a significant step in the blockchain industry as it resolves issues that prevented Bitcoin from scaling to support a global digital economy.
Linking Bitcoin and Cardano through an interoperability bridge like the Grail Bridge is important because it allows Bitcoin users to easily access Cardano’s DeFi ecosystem without swapping crypto from Bitcoin to $ADA first, or without using centralized exchanges. This also represents a significant step for Cardano, which has struggled in the past to see rapid ecosystem growth in comparison to competitors such as Ethereum and Solana.
Criticisms of Cardano
-Community and Adoption Issues.
Despite its growth over the years, Cardano still has a relatively modest ecosystem in comparison to other networks like Ethereum or Solana. This is likely due to the more scientific and academic approach to development, and the fact that Cardano’s programming language, Plutus, is quite complex being based on the Haskell programming language. The complexity of Plutus makes Cardano more secure, but makes programming on the network a challenge for developers.
Total Value Locked (TVL) in Cardano DeFi protocols has increased in the last 12 months, which indicates that there are more users bringing more money into the Cardano ecosystem. This reflects Cardano’s more gradual approach to growth, focusing more on peer-reviewed research and development rather than growth for the sake of growth.
-Technical Critiques
Cardano’s upcoming Hydra upgrade promises to improve scalability even further, which could allow for more ecosystem development in the coming years. While critics argue that its slow development is a drawback, Cardano’s more mindful approach to growth could signal long-term success and the ability to weed out bad actors from the ecosystem development space. Critics have also raised concerns for Cardano’s throughput speeds, which can handle up to 1,000 transactions per second (although the average is much lower at around 250 per second), but this will likely improve with upcoming upgrades to the network.
Some criticisms of other blockchains that are experiencing rapid ecosystem development are the rapid trend cycles like what we see in the meme coin space on the Solana blockchain or NFTs, which enabled a lot of scams in the last several years. While these issues are still possible on Cardano, its peer-reviewed approach may deter that kind of ecosystem development. Instead, the network seems to be focused on fostering an ecosystem of enterprise solutions.
Cardano’s partnership with Ethiopia’s government to overhaul its education system in 2021 is a good example of this. Cardano may be considering ways that blockchain can bring meaningful change to developing nations, rather than fostering a consumer ecosystem in the United States and Europe. Meme coins and NFTs have been hot in the blockchain news cycle in recent years, but the quiet developments going on in the enterprise space will likely outperform in terms of longevity.
This approach to a more mindful, strategic development is a delicate game—particularly in an industry where investors are used to seeing rapid expansion and development. While the more academic approach to growth may indicate that Cardano is planning to achieve long-term growth in the blockchain space, it may deter some investors who have legitimate concerns that Cardano could be outperformed by competing blockchain networks.
These are concerns that Hoskinson has addressed many times, often saying things like “People in our industry are so used to scams, rug pulls, and evil founders that they can't comprehend an honest ecosystem or the best efforts of so many thousands of people.” In response to these criticisms, Cardano has marketed its mindful growth approach, likely to reassure investors that growth is happening and that rapid ecosystem expansion is not always a good thing.
But perhaps the greatest criticism stems from the idea of a blockchain having such a visible face—a "CEO" who often acts as a hero or a martyr. While the political and lobbying efforts made by the crypto community and its prominent figures to advocate for a fairer and more favorable environment for the growth and development of the ecosystem are commendable, this cannot become a benchmark that favors some and harms others, creating an uneven playing field.
If this happens, we risk the balance tipping toward those who seek to collaborate with authorities in a way that makes them servile in exchange for benefits and privileges. This goes against one of crypto's core principles—decentralization—which is precisely intended to prevent coercion by political or economic powers.
We will never stop praising Satoshi's legacy: stepping aside to avoid the tug of war between disruptive technology and established power. Satoshi simply let the technology speak for itself and defend itself—even, and perhaps especially, through their absence.