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Can Cardano ever be the #1 project?

Published 11.5.2023

It would be healthy for the blockchain industry if the projects in the top 3 changed regularly from time to time. Competition is good for technological progress. It would force teams to innovate faster, which would benefit users. Things that the entire blockchain industry has been waiting for years would be delivered sooner.

If you trust a project and it is useful to you, you should theoretically not care what position it is in. The obsession with market capitalization is strongly present in the cryptocurrency world and arouses a lot of passion, but in reality, it doesn't matter that much. We believe that changing the order of the top 3 projects would attract media attention in the short term, but after a while people would get used to it and it would cease to be an interesting topic for the majority of the population.

Bitcoin is dominant and many believe it will remain so forever. However, if Bitcoin were replaced by another project, it would shatter some false narratives and we believe it would have a positive impact. People like to speculate about when Ethereum will replace Bitcoin in the top position by market capitalization. The chances are quite high. Can Cardano ever become the #1 project too?

We say up front that we don't know and we don't consider it important. However, we offer some interesting points of view.

TLDR

Technological progress is gradually eroding the old narratives. It is common for current innovations to become outdated and conservative over time. What is conservative is often replaced by more efficient ones. It is necessary to abandon the old narratives and perceive reality. The number of users of DeFi services and tokens is constantly growing.

How technology is changing narratives

Technological progress can change almost everything. Sometimes even things you think should have happened differently.

Bitcoin has a dominant position mainly because of narratives and promises of a better future. However, technological progress is undermining these narratives from all sides and it is possible that one day they will cease to be valid. The loss of trust in the narratives and delivery of technologies that meet the expectations people had of Bitcoin may strengthen the position of competing projects. This is a perfectly natural development in all industries where there is healthy competition.

What Bitcoin narratives are being eroded by technological progress?

Bitcoin has always been seen as a project that will innovate very conservatively. Taproot (and also SegWit) made the Ordinals project and BRC-20 possible. Now Bitcoin has ended up with the worst possible solution for tokens in the blockchain industry.

Bitcoin has ceased to be a simple protocol that does one thing best of all. Now it has started to look like a smart contract platform. The ability to mint tokens has a profound effect on transaction settlement (the mem pool is full), network fees, block size, distribution of blocks in the network, etc. Suddenly there are a lot of meme coins on Bitcoin, which could have a negative impact on the project's reputation if the mania doesn't die down quickly.

It has always been said that Bitcoin is the most decentralized network and that Proof-of-Stake (PoS) will never work. The 2 dominant pools produce more than 50% of the blocks and mining tends to become increasingly centralized. You can stake ADA on Cardano through PoS consensus for almost 3 years. Cardano is more decentralized than Bitcoin. Other blockchains are using other PoS implementations without major problems.

It was said that every bitcoiner would mine BTC at home, but this option is economically unaffordable for most people because mining is mostly unprofitable. Instead, anyone in the world can stake ADA with low entry costs and nearly no risk.

It was said that BTC would be the best-decentralized money, but people don't use it much because of its high volatility. They see it as a store of value. Stablecoins will probably become the most used decentralized money on the Internet. Algorithmic stablecoins, where ADA can be used as a reserve currency, will be one of the most decentralized stablecoins.

Bitcoin was said to have the largest network effect, but Ethereum has been beating Bitcoin in the number of transactions for several years. In the number of hodlers, the difference is not that big.

Bitcoiners like to say that smart contracts and tokens are not useful, but the number of users keeps growing. DeFi is seen as a relevant industry that is not going anywhere and will continue to grow in importance.

We could go on, but it's not that important. The vast majority of narratives surrounding Bitcoin are exaggerated, untrue, or otherwise distorted. Most of them can easily be refuted or at least objectively doubted. What is worth noting is that technological progress is gradually disrupting old narratives and changing reality. It may take a long time to change the old narrative, but it has to happen at some point if the objective reality is different from what the narrative describes.

Don't live in the past and perceive reality

It is easy to ignore reality if you live in the grips of the past and want to believe the narratives circulating in your bubble. Personally, I am a fan of many projects, including Bitcoin. I try to evaluate reality as unbiased and objective as possible. Of course, I can fail at this, as can everyone around me.

Ignoring technological progress is very tricky as the blockchain industry has grown on it. Bitcoin is sometimes referred to as a revolutionary invention. This is a bit of an exaggeration, as it is essentially just a well-designed protocol using technologies from the past. It is important to note that the IOG team and other projects are currently creating the technologies of the future.

The first computers consumed a lot of power, were huge, and were inefficient. Every mobile phone has significantly more computing power and capability than the first mainframe computers. Bitcoin is very similar to a mainframe computer. Does anyone really believe that humanity can't innovate blockchain? Does anyone really believe that people will willingly pay high fees when there are more efficient blockchains that can do more and are significantly more efficient and cheaper to use?

When I look at the history, I just can't believe it. History repeats itself and it has never happened that a technology has not been replaced by a better one. My parents used very different tools, services, and technologies than my generation. The younger generation is not very interested in the services (protocols) used by the older generation.

My parents used cash. My generation uses digital money (internet banking) and cash. The current young generation is likely to use CBDC, cryptocurrencies, and stablecoins. Maybe even corporate money. Cash may stop being used. Is that wrong? Not if we can create some technological alternative.

Could Bitcoin be the final stage in the evolution of money?

Maybe yes, maybe no. Nobody knows. But it is unlikely that evolution can ever be stopped and that all the people in the world use only one form of money. Humans aren't like that. They like to experiment with something new and better.

Anything that is innovative now will become rigid over time. Everything that is rigid will be replaced by something more efficient. This cycle is unstoppable and that's a good thing.

Technological progress and innovation in the Cardano project may be temporarily ignored and overlooked, but one day this will turn around. It is only a matter of time. It's hard to predict if it will take 3 years, 5 years, or 10 years, but it will happen. People will naturally appreciate innovation because it will be beneficial for them economically and from a user perspective.

No one will write a letter when they can use email. No one will look for a phone booth if they have a cell phone in their hand. No one will light a candle when there is a light bulb. All the historical forms of these things still exist today and have a romantic feel, but most people use more modern versions.

For some reason, people are afraid that if Bitcoin is not first in market capitalization, it will be a big problem. There is no reason for these fears. Yes, it's true that it could shake some people's confidence. However, if you use BTC and believe that PoW is the best possible and safest consensus, that belief cannot be shaken because Bitcoin is no longer first in the rankings. Tata's concern makes no sense.

For example, do you need to know the market capitalization of Apple, Amazon, Meta, or Google before you use them? Do you think these companies have a higher or lower market capitalization than gold or the fiat currency you use? You probably don't care. I would even bet that most of you use social networks and don't own gold. Do you have to own gold to search for information on Google?

The obsession with market capitalization makes no sense in terms of the utility of individual blockchain projects. Cardano has DeFi services available for everybody in the world. You can use them if you need to without having to figure out market capitalization.

The reality is that many blockchain projects will be useful regardless of how successful Bitcoin is and the ranking of each project in the various charts. Users will naturally look for the most useful services and use what suits them best. I imagine people will routinely use Cardano to swap BTC for stablecoin or to buy NFTs.

Wait, is a Bitcoin fan really ever going to buy an NFT? Sure, and why not? Some Bitcoin maximalists try to impose on others the notion that a true Bitcoiner must never use another blockchain or DeFi service. That is so incredibly naive and stupid. Fortunately, most people are smart enough to make up their own minds and distinguish between ideology and reality. A Bitcoiner can be a fan of an NFT project or use DeFi instead of a centralized service.

Can Cardano ever be #1?

We believe so because it is consistent with our worldview and experience. However, we don't know if and when it will happen, and we certainly don't see it as an important thing.

We believe that technological progress is an important driver of adoption. We see this as a more important aspect than narratives. While we can speculate whether the current adoption rate is low or high, we believe it would be significantly higher if the blockchain industry were more mature.

Adoption is hampered by clearly definable problems such as scalability, poor user-friendliness, high volatility, expensive fees, poor integration with existing services, hacks in DeFi, etc. These are all things that are solvable through technological progress. It is therefore logical that the project that will deliver these changes will be adopted by the masses.

It is certainly not necessarily true that the most technologically advanced project will have the highest market capitalization. On the other hand, the adoption rate of a technology leader and its network effect can be expected to be one of the highest. A high network effect is one of the important prerequisites for success and therefore also for a high market capitalization.

Bitcoin is definitely not a technological leader. Ordinals and BRC-20 are clear evidence that Bitcoin is years behind Cardano. It is important to note that it is difficult for competitors to catch up with the technology leaders in the blockchain industry. Open-source nature is the norm in the blockchain industry, at least at the level of successful blockchain projects. All of Cardano's academic studies and source code are open and available to everyone in the world. Still, we believe that it is not easy to easily and quickly catch up with Cardano's technological lead.

Whatever project people will perceive as more useful, efficient, integrated with existing systems, and accessible, deserves to be #1.

There is a theoretical possibility that the digital gold narrative will keep Bitcoin in the top position forever. Should all technological development on other platforms be halted based on this assumption? Certainly not.

Competition between projects is important to make sure that the current leader deserves to remain the leader. It is necessary to constantly challenge the leader and compare its advantages and disadvantages with emerging projects. Once the leader is replaced, humanity will probably take a big technological step forward. In fact, that's what we all want.

If Cardano or Ethereum fails, let's wish for someone else to succeed. If someone succeeds, let's wish they are replaced again.

It's good for Cardano to be aiming for #1. As we have mentioned many times, this is not important for the success and usefulness of the project, but it is healthy for the blockchain industry.

People are competitive and because they cannot predict the future, they at least like to speculate about it. Speculation and self-fulfilling prophecy can be one of the catalysts for change. It may be that Bitcoin will be around too long time, its adoption will stagnate, people will use DeFi more, and will love staking. Boredom, new opportunities, a desire for a change, financial speculation by VC funds, significant adoption at the government level, and many other factors may influence the ranking of the top 3 projects.

Conclusion

Never bet against technology. The IOG team has published dozens of academic papers related to blockchain technologies. The results of these papers are gradually making their way into the Cardano protocol and being implemented using formal methods. Cardano is undoubtedly a very well-designed protocol, including all the functionalities it has. A huge advantage is that the protocol is easily upgradeable, i.e. open for further changes. Cardano can be a similarly successful project as Google or Microsoft. This is definitely not the case for many blockchain projects. It's very hard to predict if this approach can get Cardano to #1, but we can at least wish it for the good of the blockchain industry and for all users. However, no matter what project is currently #1, decentralization should win. The common goal is to get rid of inefficient and expensive middlemen. Let the #1 project be the one that does this best.

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