What is Cardano?

The Cardano project was co-created by Ethereum Co-Founder Charles Hoskinson and is public, open source blockchain platform for building and running smart contracts and other decentralized protocols. You can think of Cardano as the third generation in the evolution of blockchain technology with Bitcoin representing the first generation and Ethereum representing the second. Today, Cardano/ADA is the third largest cryptocurrency in the world and is focused on solving issues currently faced by Bitcoin and Ethereum which is scalability, interoperability, and sustainability.

How is it different from Bitcoin and Ethereum?

Bitcoin and Ethereum run on proof of work consensus algorithms which requires an enormous amount of electricity and can be viewed by some developers as unsustainable from an environmental and financial perspective. Cardano on the other hand, uses a unique proof of stake consensus mechanism called Ouroboros. This technology is much more environmentally friendly, decreases energy usage and is faster than its competitors to process transactions.

How do you view Cardano as an investment asset? Is Cardano a good investment right now in 2021?

In my opinion Cardano is a promising investment for investors who have the ability to buy and hold for several years and who can also apply an ad hoc buying style. Unlike dollar cost averaging where you automate your purchases by one amount and frequency (typically once per month), ad hoc investing means investors make purchases each time they see an abrupt 5-10% price pullback. If you combine a buy/hold approach with a buy the price dip mindset, I believe investors could see favorable results.

What specific role would Cardano play in a diversified portfolio?

In my opinion, Cardano can provide uncorrelated returns compared to traditional asset classes such stocks, bonds, and real estate. Cardano could also provide diversification for investors who hold other cryptocurrencies such as Bitcoin and Ethereum.

How has Cardano performed versus other asset classes and cryptocurrencies?

According to Coinbase, Cardano has generated a 1-year return of 2,400%. To put this into perspective, Ethereum generated 892.67% while Bitcoin generated 344.52% during the same 1-yr period. (Source: Coinbase – September 8th, 2021, at 4:32pm)

Could you tell me a bit about Cardano’s upcoming smart contracts protocol (Alonzo upgrade) and how it will impact the coin’s value and utility (such as DeFi and NFTs)?

On September 12th, 2021, Cardano will launch smart contracts on the public testnet, bringing the much- anticipated upgrade to the public. This upgrade is called Alonzo and will allow Cardano to become a major player in the DeFi space by incorporating smart contract functionality, facilitating automated cryptocurrency lending and trading. I believe this long-anticipated wait for the Alonzo Hard Fork upgrade will bring forth a surge of interest and have developers strongly consider building their DeFi applications on the network. This scenario should create a positive momentum and drive up the price of ADA.

Is Cardano safe? A few words about the risks that investors should know?

From what we know so far, Cardano is a secure blockchain network. At this time, the most common risk discussed among developers is the possibility of a 51% attack. If a single person or a collaborating group of people controls more than half of the network’s total hash power, a successful 51% attack can be executed. It is worth mentioning that most of the 51% attacks to date have targeted smaller cryptocurrencies, or blockchains with a minority dominance in their respective mining algorithms. This means, at least in my opinion, larger cryptocurrencies are far less likely to experience a 51% attack. For example, Bitcoin has been live for more than 10 years with 99.98% up time and zero known security breaches.

Investing is all about risk versus reward. Would you say Cardano’s performance reward is worth the risk?

Yes, I do. If you can stretch out the extreme volatility of Cardano by spreading this risk over many years with a buy/hold approach and a buy the price dip mindset, I believe investors could experience a very attractive risk/reward outcome.

What percentage or portion of your portfolio should be allocated to Cardano /Cryptocurrencies? What part of your portfolio should they occupy?

It really depends on how much of your portfolio do you consider to be illiquid. In other words, what percentage of your portfolio would you consider immovable for a few years? For most investors that number should not exceed 10% of your total portfolio.

Is Cardano, and cryptocurrencies in general, more suited to investors of a certain temperament, demography, life stage or time horizon?

If you view Cardano as a hyper growth asset class combined with extreme volatility and do not need access to these funds for at least 5 years, Cardano is worth the consideration for your portfolio.

What are some of the ways Canadians can buy Cardano with Canadian dollars? Which would you say is the safest way to buy Cardano?

Today, Canadian investors cannot hold Cardano inside their TFSA, RRSP or Non-Registered investment accounts. In order to buy and hold Cardano you will need to do so either through an exchange such as Coinbase or Binance or by holding the asset on a security key. In my opinion, the easiest and safest way to buy/hold and convert crypto to other crypto holdings is through an exchange. Security features involving how crypto is stored can be even more secure if investors apply a 2-Step verification process in addition to their username and password.

Does the prospect of rising inflation increase the lure of Cardano?

I believe so, however I do not believe investors are buying Cardano for inflationary reasons. Instead, I believe investors are buy Cardano with the expectation for ultra high growth potential.

Any additional thoughts on Cardano?

Cardano is being built to accommodate a broad range of use cases that include industries such as education, retail, agriculture, government, finance, and health care. For example, Cardano has formed a partnership with the Ethiopian government to track the educational progress of 5 million students on its network. The project will give each student a tamper-proof academic record that could help them get jobs or study abroad.

On September 25-26th, Cardano is hosting a free virtual summit and the world is invited to attend. Ironically, this major event follows 2 weeks after the launch of Cardano’s smart contract functionality. Rumors among multiple chat forums seem to believe a major announcement will be made during the summit however this should not be taken seriously. I certainly would not base any of my investment decisions on a rumor however it is worth pointing out that Cardano is certainly a popular discussion among the crypto community.