Cardano (ADA) is now the seventh-largest crypto asset by market capitalisation, valued at US$36 billion (AU$48 billion). Impressive as it may seem, its price is still 70% lower than its all-time high of US$3.10 (AU$4.1) reached seven months ago.
Since its launch in 2017, ADA has made bold promises but has been slow to fulfil them. With the much-awaited Alonzo update, they pushed to integrate smart contracts into the network last year. With all in place, Cardano was poised to become one of the market’s top-leading Defi chains.
However, the opposite occurred. Adoption was generally slow, and the total value locked (TVL) in ADA’s smart contracts failed to grow at the predicted rate. Combining this with the market’s overall downward tendency, it’s clear to see a staggering decline in its price.
Despite a few months of struggles, ADA is now thriving with a vibrant community, and for a good reason. According to Santiment, Cardano is presently one of the most active crypto projects on GitHub. This shows that developers are actively trying to better the network’s technology. Hydra, a layer 2 scaling solution, is one of their primary efforts.
What’s Layer 2 and how it solves the scalability issue?
How do the layer 2 solutions tackle the scalability issue? Source: moralis
Scalability is one of the most critical issues faced by the crypto sector. As more individuals enter the space, the demand for transactions increases, resulting in sky-high gas fees. A blockchain network has a capacity limit on the number of transactions fit inside a single block, leading to the limited transactions per second (TPS) that can be handled.
A layer 2 solution helps transactions to be aggregated, synthesised off-chain and posted to the mainnet. Thus, gas fees are spread among hundreds of transactions, multiplying the number of TPS processed by a blockchain.
In essence, Hydra will accelerate and reduce the cost of Cardano and its whole Defi ecosystem. Though still under development, it is making significant progress. Since last week, the Hydra protocol has been successfully functioning on Cardano’s testnet.
Another positive thing to note is the increasing TVL. Since February, the total value locked behind the Cardano project has tripled, hitting over US$300 million (AU$400 million) yesterday. This implies that capital is being poured into Cardano’s decentralised systems. The Minswap DEX is now the top-leading dApp, accounting for 61% of the TVL.
Cardano seems to be gaining momentum in the Defi area. If the ecosystem continues to flourish, people will quickly identify it as a viable option, and the demand will increase. The good news is that the team is thinking long term and has already begun to prepare the network for widespread deployment.