Do you have to spend money on Cardano now? – coloured idiot

Advertisements

Cryptocurrency has made waves in the investment world this year, with big names like Bitcoin (CRYPTO: BTC) and ether (CRYPTO: ETH) makes headlines regularly.

One of the newer players in the crypto space is Cardano (CRYPTO: NO), and it has steadily gained traction among investors. In the past month, Cardano’s price has skyrocketed more than 55% – compared to Ethereum’s 4% gain and Bitcoin’s 1% decline.

Cardano may be the new crypto on the block, but it has some big advantages. But is now the right time to invest?

Person using a laptop and looking at charts

Image source: Getty Images.

The advantages of Cardano

Cardano was created by the co-founder of Ethereum, so the two cryptocurrencies share some functions. For example, both enable the development of smart contracts, which are digital agreements that use blockchain technology to verify transactions. Some investors believe that smart contracts have the potential to revolutionize society, especially the legal industry.

Compared to Bitcoin, Cardano is more energy efficient. Bitcoin uses a proof-of-work protocol during the cryptocurrency mining process. That means Bitcoin miners have to use powerful computers to solve increasingly difficult puzzles, verify transactions, and earn tokens. This is extremely energy intensive and Bitcoin has drawn criticism for its environmental impact.

Cardano, on the other hand, uses a proof-of-stake protocol that requires miners to risk their own crypto holdings to verify transactions. This leads to faster transaction times and significantly lower energy consumption.

Where it comes up short

While Cardano has many advantages, it also has disadvantages – most notably that it is not as well known as its competitors. Bitcoin is the most popular cryptocurrency and has the most notoriety, which gives it the first mover advantage in the crypto space.

Ethereum is the second most popular cryptocurrency and has many of the same advantages as Cardano. Not only does it host smart contracts, but it plans to move to a proof-of-stake network. Ethereum is also home to non-fungible tokens and the decentralized financial movement, which gives it more real use than Cardano.

Of course, this doesn’t necessarily mean that Cardano won’t find ways to outperform its competitors on the road. It’s still a relatively new cryptocurrency with growth potential. Also, cryptocurrency is not a zero sum game, so it is possible for multiple currencies to coexist with their own perks.

Is Cardano right for you?

Before investing anywhere – whether you are buying cryptocurrency or stocks – make sure you have a long-term perspective.

You should only invest in Cardano if you think it will do well over the next few years or decades. Investing is not a get-rich-quick tactic so try not to get caught up in trending investments that could make big bucks in the short term.

Nobody knows for sure if the cryptocurrency will succeed, but if you believe in its long-term potential, be ready to hold your investments through waves of volatility. Bitcoin has lost more than 80% of its value in the past, and the value of Ethereum has occasionally fallen nearly 95%. If you’re not comfortable with short-term volatility, cryptocurrency may not be the right investment for you.

Will Cardano eventually become a mainstream form of currency? Nobody really knows. It has its advantages, but is currently still highly speculative. If you believe in its potential, it could make a solid long-term investment. Otherwise, there are many other investment options.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.

Leave a Reply

Your email address will not be published. Required fields are marked *

Contact Us