Analytics Companies Don't Understand Crypto

Published 26.1.2024

K33 presents itself as an analytical company focusing on cryptocurrencies. It targets professional investors. They recently released a research note titled ‘Why you should sell all your ADA (Cardano)’. This note was only 2 pages long, which is surprising in itself. I would expect more from an analytics company. The content is even more shocking. Analysts claim that nothing is happening on Cardano. That 90K transactions are not significant. The reason for selling ADA is primarily the absence of a USD-backed stablecoin. They compare Cardano with NEO, IOTA, and EOS projects. They consider peer review and research-driven development unnecessary luxuries for financial protocols. Let's use this opportunity and look at it from a slightly different perspective that perhaps the analysts from K33 are missing.

Why do analysts overlook decentralization?

I understand that many users overlook decentralization. TPS and smooth UX are more decisive factors for some of them. But can decentralization be overlooked by analysts? I would consider that a mistake.

I don't plan to explain what is driving the crypto industry and that decentralization is the most important thing in the long run.

It amazes me that not only analysts from K33 but also many others are unable to measure this critical feature and compare individual projects with each other.

I dare say that Ouroboros PoS is the best implementation of this consensus in the crypto industry. Liquid staking is a better solution than having to use third parties like Lido in the Ethereum ecosystem. The impact of liquid staking on the quality of decentralization is obvious.

Cardano has 1.33M stakers. This is a significant number if you consider that there will be on the order of 10 to 100 thousand miners in the Bitcoin network. In terms of the number of participants on the network consensus, Cardano is doing very well and has very likely surpassed Bitcoin in this key metric.

Have analysts compared the number of consensus participants across different networks?

Staking is a somewhat passive activity, similar to PoW mining. On the other hand, it seems to me to be proof that part of the crypto community is interested in decentralization and is willing to bet their capital on it.

I don't understand why analysts from K33 don't perceive Cardano's decentralization positively. If they tried staking on all PoS platforms, they would have to admit that Cardano has an edge.

They should know that IOTA is still a centralized project and that NEO and EOS have a fixed number of block producers. Logically, a large community around these projects never formed.

It's All About Transactions

K33 analysts argue that there is such a thing as meaningful and less meaningful transactions. If they looked at some research on this topic, they would find that most transactions with native tokens are transactions associated with centralized exchanges. For payments, BTC, ETH, and also ADA are used marginally.

Tokens have greatly helped increase traffic on blockchain networks. With the tokenization of real assets, the importance of tokens will grow.

So what is a meaningful transaction?

It seems that only transactions with USD-backed stablecoin are meaningful in the view of K33. It makes some sense from a payment perspective. However, DeFi is currently not only about stablecoins across all ecosystems. I consider swapping native coins for DeFi project tokens as meaningful transactions.

What is important is technology testing. The market value and meaning of tokens are often secondary. Tokenization of real assets can take place on a platform where tokens have existed for several years and can be effectively swapped.

TVL on Cardano grew organically in a bear market, which is not quite usual. Cardano recently entered the top 10 in this metric for the first time. I don't want to believe that someone who advises people to sell ADA will not notice this.

TVL can grow through several high-volume transactions. But that's not the case with Cardano.

The biggest gripe of K33 analysts is that Cardano does not have USDT and USDC. That's true, but the following text from the note is nonsense:

‘No USDT or USDC in a network generally means that no meaningful DeFi occurs, AND that Tether and Circle attest to this because if something went on, they would issue stablecoins there. ‘

They claim that Circle and Tether are not interested in deploying stablecoins on Cardano because nothing is happening in DeFi.

Crypto experts should know the real reasons.

They should know what native assets are and that this feature currently does not allow Circle and Tether companies to retain control over stablecoins belonging to users. It is not possible to freeze accounts or blacklist addresses on Cardano. They should also know how much these companies charge for deploying stablecoins to the network.

It's not that they don't want to use Cardano, but that regulation probably won't allow them (or their interest in controlling assets) and that no one has paid them an 8-figure sum.

Other SC platforms are regulatory-friendly. Cardano is not. I can understand that some analysts can evaluate it so that regulatory-friendly platforms are closer to adoption. However, they do not see the fact that the principles of decentralization are being trampled on.

Cardano will have USD-backed stablecoins in the future. Mehen USDM will likely be launched soon. The deal with Circle and Tether is still in play. It is possible to add functionality that will allow USDC and USDT to be deployed on Cardano.

I don't understand why analysts think it is impossible to get USDC and USDT to Cardano. They probably don't know anything about what's going on in the background.

The biggest mistake made by K33 analysts is their misunderstanding of the UTxO model and its inability to count the number of real transactions on Cardano. This topic has been described and explained many times.

A significant number of Cardano transactions do not involve interaction between 2 users but between multiple users. K33 analysts should know that there are almost as many SC transactions as ordinary transactions. Moreover, even a non-SC transaction is not necessarily an interaction between only 2 participants.

Cardano intentionally works in such a way that it is possible to insert multiple user operations into one transaction. This saves space and fees.

A regular Cardano block looks similar to the image below.

Although there are 32 normal transactions in the block (this is what TPS tells you), note that 311 UTxOs were transferred and 88 transfers to foreign accounts took place.

Analysts cannot rely on TPS statistics in the case of Cardano. This is unsuitable (inaccurate) for Cardano. If they want to count the number of user operations, they would have to do a quality on-chain analysis.

Half of the transactions that take place in Cardano could be multiplied by a certain constant. I guess that it could be a number between 2 and 8.

90,000 transactions can realistically be something between 150,000 and 500,000 transactions. Experts should be able to measure it.

It is a pity that there are no available tools in the Cardano ecosystem that would more accurately display the number of user operations. As far as I know, this is currently possible only through some homemade tools.

Transaction properties vary significantly across SC platforms. If analysts had researched SC platforms more, they would have found out that some of them have high fees that users have to pay even if they fail. This commonly happens on Ethereum.

On others, fees are predictable and fixed. Additionally, these transactions always succeed if they pass local validation. This is how Cardano works.

I believe the K33 analysts are hearing about this for the first time. From a user perspective, this is a major advantage in favor of Cardano.

Science Works

It is ridiculous that an analytical company considers a research-driven project, peer reviews, and the use of formal methods in development to be unnecessary luxuries.

You can find this in the research note from K33:

‘The scientific mumbo-jumbo story will fool more people into Cardano, but the best bet is that they are growing ever fewer by the day.‘

If they haven't seen the number of DeFi hacks in the past years and the amounts stolen funds because of it, they are amateurs. If they think it's ok for the financial world of the future or that ‘time will improve it’, they shouldn't be recommending anything to anyone.

Several public opinion polls have shown that hacks in DeFi are one of the leading barriers to adoption. DeFi on Cardano is small compared to, say, Ethereum. Nevertheless, I dare to say that it is a significant success that there has not yet been a hack in the Cardano ecosystem.

Vulnerabilities in the source code of smart contracts and scripts are primarily the responsibility of third-party developers. However, the design of the protocol and the characteristics of the platform contribute to some extent to how secure applications are built on them.

The programming language, available tools, and the ability to use formal methods for development and testing affect the quality of the resulting applications.

The research-driven approach and experts from individual fields in the IOG team contributed to the fact that Cardano is doing so well in security. This is no accident.

All IT giants such as Amazon, Google, Meta, or Microsoft use the same development approach as the IOG team for key parts of the software. Formal methods are commonly used for software for NASA, hospitals, nuclear power plants, and other mission-critical applications.

One of the reasons why IT giants manage to maintain their position is enough money to pay the best brains in the world who can develop the most effective solution for the given problem. The blockchain industry is full of challenges and complex technological obstacles.

Software built for banks and financial institutions is also mission-critical. Very strict standards must be followed during development. Development is very slow and expensive. Similar to Cardano.

Solana routinely requires reboots. Ethereum has had several network incidents in the past. In one of them, the network was unable to finalize transactions. Cardano has never had such problems. It is not a coincidence. It's about how the project is developed.

The ambitions of the crypto industry are very high. Everyone wants money to be on the blockchain and real assets to be tokenized. We want DeFi to be an alternative to mainstream financial services. This will never happen unless services on the blockchain are 100% secure, reliable, cheap, fast, predictable, and economically sustainable in the long term.

I'm afraid that analytics firms don't know anything about how important a team is to a blockchain project. Blockchain is a technology. Protocols must be maintained and improved by someone. I believe that the future success of projects will depend on technological dominance. The key to technological dominance is a team.

The IOG team has more than 600 members from 60 countries and cooperates with several universities. Cardano has a project treasury to fund future development.

If someone can perceive the blockchain project in all its complexity, he cannot recommend you to sell ADA just because of the temporary absence of stablecoins. It is ridiculous.

People Are Rooting For Cardano

The success of blockchain projects is a mix of technology and community. Both are important. Blockchain is built from the bottom up, by the people for the people. Adoption is primarily decided by people, not by any institutions or governments. We might see that. Currently, people vote on success by holding the project's coins.

You can find many analyses that show that Cardano is a popular project, similar to Solana or Ripple. Younger projects are not doing so badly compared to Bitcoin and Ethereum. Bitcoin is not a dominant project that would be held by 10 times more people than Ethereum. The differences are shrinking. Comparing Cardano to older projects such as NEO, EOS or IOTA has no justification and is quite out of line.

When I stopped following the IOTA project, it wasn't even a SC platform. The NEO team just copied/pasted EVM. Only 5 applications were created on this platform. EOS failed mainly because of cartel agreements between block producers.

Cardano is in a completely different position. The community builds various tools. Hundreds of teams build apps. But most importantly, the community sees that the team is gradually delivering what it promised and the technology is gradually improving. Cardano is getting better every year. Just look at the contents of the upgrades. This cannot be said about the above-mentioned projects. Maybe only the IOTA team is still active.

People cheer for Cardano despite it not having a USD-backed stablecoin. They know it's only a matter of time. The reasons why people trust Cardano are technology (staking, native assets, Plutus platform, etc.), team, decentralization (including planned on-chain governance), and a large community.

In research note K33 they wrote:

‘Things never happen overnight, and these processes often take years to play out fully. Still, all price signals also point to Ada gradually disappearing from the crypto map. Ada has not rallied in line with other ‘stronger’ smart contract tokens when markets have improved, which is a strong indicator of a dying coin. ‘

They probably believe that the crypto industry is mature enough that the market capitalization reflects the quality of the technology and adoption. I'm afraid they are wrong.

Market capitalization currently signals almost nothing. The market is driven by speculation, narratives, and whales. Crypto is still a fringe affair for a few enthusiasts. Even though roughly more than 500M people hold cryptocurrencies, most of them (roughly 95%) do not have their wallets.

Most people who hold crypto today have not made any on-chain transactions. They do not have their own experience of using blockchains. They haven't tried DeFi applications or Lightning Network. What I mean by this is that most people so far have made a choice based on some narratives or speculations. Only a smaller tens of millions of people have direct experience with blockchain.

The main waves of adoption are yet to come. I estimate that it will be at least a decade before 10% of the population uses crypto daily. And by the way, by that time Cardano will have several USD-backed stablecoins.

Analysts sometimes get carried away by the current state and don't see too far into the future. This is to be expected from people who do not know the history of crypto well enough.

People who got rich on Ethereum are happy to pay 0.1 ETH per transaction. I can guarantee you that people who are going to join the crypto industry will never pay so much for a transaction. And now we could start talking about scalability and the future. The IOG team has a great plan for this. But let's save that for another time.


A research note from K33 is of worse quality than an article from a B-grade crypto media. I perceive it as evidence that they are not able to do quality research, do not understand the technologies behind crypto, and have no idea about what is important for a blockchain project.

Their argument for selling ADA is based only on the absence of a stablecoin. They naively assume that there will never be USDC on Cardano.

They don't understand why the IOG team decided to build Cardano in the same way as software for banks or NASA. They do not consider staking as a relevant activity.

It is rare to see so many misunderstandings and wrong conclusions in 2 pages of text.

After reading the report from Messari, which strongly promoted Solana, this is another example of how analysts perceive the world of cryptocurrencies. In the case of Messari, it started to make sense when Ryan Selkis publicly admitted that he had SOL in his portfolio.

The crypto industry is young and everyone is learning. Few people can claim to be an expert at something. However, I feel that similar analyses and reports like the one from Messari or K33 only serve to market the projects they have in their portfolio. The bias is too visible for my taste. The conclusions are far from being objective. They are based on sketchy information without a wider context.

Many things could be criticized about Cardano. But this applies to every existing ecosystem. Some projects are ahead of Cardano in some features. In something else, Cardano has an edge. Comparison is very difficult, if not impossible.

It is not possible to overlook the fundamentals of the project and advise people to sell the ADA because of one thing they consider important. I'm not going to listen to this advice.


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