Cardano’s ADA lands spot in US Digital Asset Stockpile — Will it generate value?

The President of the United States Donald Trump will be inaugurated on March 2. mentioned Cardano ADAADATrump’s March 6 tweet that he would be adding cryptocurrencies into the US strategic crypto reserves. Trump’s 6 March executive order Clarified that altcoins will be included in the Digital Asset Stockpile under the “responsible stewardship” Treasury

The potential inclusion of ADA in a portfolio managed by the government surprised many and elicited harsh criticism at times. Many in the crypto-community questioned the inclusion of the token in the digital assets stockpile, despite the fact that it had loyal investors for many years.

We’ll analyze the blockchain and see if ADA fundamentals, utility, and its position in the US Digital Asset Stockpile are supported.

Digital Asset Stockpile in the US: A Case for ADA

Cardano was launched via ICO in 2017. It is now one of the most established smart contract platforms. The platform is unique in its research-driven development and use of a combined delegated-proof-of stake mechanism with an expanded UTXO account model.

Cardano’s ambition to be a platform of smart contracts is well-founded captured by X ‘Cardano_whale,’ who outlined the blockchain’s “non-negligible fees, voting power, decentralized consensus, all native token trading paired with it.”

The X Post emphasizes ADA’s utility. “most VC coins lack”Cardano’s governance decentralization and its decentralized nature are key features.

Cardano’s Project Catalyst, in fact, is the biggest decentralized crypto funding initiative. It allows community members to allocate treasury money from inflation and transaction fees democratically. Cardano also aims for a complete transition to onchain governance, as opposed to Ethereum, which is still reliant on offchain management to make major upgrades.

You can also find out more about the following: Plomin hard fork On Jan. 29, the world witnessed the beginning of the Transition to “full decentralized governance,” Cardano Foundation. The Cardano Foundation grants ADA holders “real voting power—on parameter changes, treasury withdrawals, hard forks, and the blockchain’s future.”

Cardano uses its native currency, ADA for governance, network fees and staking. Its maximum supply is 45 billion, with 31 billion initially distributed—26 billion sold in the public sale and 5 billion allocated to IOHK, Emurgo, and the Cardano Foundation. 

The rest of the 14 billion ADA was reserved to be released gradually through minting. ADA inflation decreases with the depletion of reserves, as 0.3% is distributed every five days as rewards. Current inflation rates are approximately 4% and there is a supply of 35.95 trillion ADA.

Other ADA metrics like fees and staking rates are far behind their competitors. 

Cardano’s slow activity should raise concern.

Cardano is still struggling to gain enough traction in the smart contract industry despite the fact that it has been around for years. ADA is not widely used in the crypto-ecosystem, which raises questions about its value.

Messari Q4 2020 State of Cardano According to the report, there were 42,900 active addresses each day. The blockchain averaged 71,500 transactions per day. The quarterly fees were $1.8m, which is in stark contrast with Ethereum’s $552m fees. CoinGecko.

Cardano had a real annualized staking rate of 0.7%, when adjusted for inflation in Q4 compared with Ethereum’s 2.73 %.

Related: Crypto fans are obsessed with longevity and biohacking: Here’s why

Other metrics of blockchain activity reinforce concerns about adding ADA in a government portfolio.

• Cardano is the 12th most popular blockchain in terms of developer count. According to Electric Capital report.

• Stablecoin’s market share amounts to just 0.01% out of the $224 billion total stablecoin cap. DefiLlama.

• Cardano’s DeFi eco-system is still underdeveloped. It accounts for only 0.3% of $169 Billion DeFi industry. Cardano will have a 12% share if you include the core stake, which doesn’t require any locking, and is therefore not included in TVL.

• Cardano DApp activity is low in comparison to that of other platforms for smart contracts. In Q4, it averaged just 14,300 daily DApp transactions—well outside the top 25 and a fraction of Solana’s 22 million. It is even more alarming that it has fallen 73% from the Q4 of 2023 when Cardano had 52,700 transactions per day. A drop of this magnitude is troubling for a blockchain still in the growth phase.

Can the potential of ADA justify a US investment?

The argument for ADA’s inclusion in the Strategic Crypto Reserve is less convincing than that of Ethereum or Solana. These blockchains are leaders in multiple categories. Cardano’s limited adoption and low staking incentive, combined with its low activity level, raises serious questions about ADA’s suitability as a government managed asset pool.

Cardano, with its focus on decentralization and ADA’s capped production limit, has a distinct advantage over the competition. These factors could increase adoption and relevance over time.

Projects such as those Atrium Lab is exploring Cardano’s native compatibility to Bitcoin via the eUTXO System, which may unlock a framework for DeFi and boost activity on Cardano.

Can this be sufficient to warrant ADA’s inclusion in the digital assets stockpile

David Nage is the portfolio manager at Arca Venture Capital. put it, 

“Like the rest of crypto, the Cardano ecosystem needs to find and support developers to create products and applications that millions of people enjoy and depend on. Then, they need brilliant storytellers to solidify the narrative behind it to build mass, sustainable audiences. After all that, putting ADA into a US national reserve begins to make more sense, in my opinion. It can be done.”

This article was written for informational and educational purposes only and does not constitute legal or investment advice. This article is solely for informational purposes. It does not represent or reflect Cointelegraph’s views.