The Cardano DeFi summer has arrived

The Cardano ecosystem is experiencing a DeFi summer. It is a period that can be compared to the arrival of Ethereum on the scene. Every statistic you look at is rising. The number of newly launched apps is growing and this is starting to accelerate. This is attracting new users to the ecosystem. As a result, Total Value Locked (TVL) is growing as well as the number of transactions, fees collected, network load, etc. Cardano is stress tested and doing very well so far. And this is just the beginning. Some long-awaited apps are yet to launch. Seeing this growth during the ongoing crypto winter is very promising. The Cardano ecosystem is poised to explode during the next bull market. If everything works out as expected, Cardano will become a project that stays on the scene for a very long time. Cardano has tremendous power to retain users who join.

TLDR

Cardano is not an EVM clone. The developers had to understand the Extended-UTXO model and deal with concurrency. It is an achievement that so many great applications have been created so quickly. Evolution is very fast and Cardano is experiencing organic growth.

The developers needed time

Who remembers the Alonzo hard fork? Cardano gained the ability to deploy a smart contract (Plutus script) in September 2021. It was a time when there was concurrency FUD, or that no one would develop new applications on Cardano because Plutus/Haskell was too complex. Despite all this, the first major DEX SundaeSwap was launched as early as January 2022. The IOG team has delivered several significant network upgrades that have made development easier and the use of resources more efficient.

Soon new DEX and other applications started to appear. 2022 can be considered the year when DeFi services started to emerge on Cardano. 2023 will very likely be a year of growth and adoption.

It is important to note that Cardano is not an EVM copy, but a completely original SC platform. Third-party developers had to learn everything from scratch. The documentation was not ideal. Many tools had yet to be developed.

In the case of EVM-compatible platforms, it is much easier for developers, because they already know how to write applications for the account-based model, and they have learned Solidity. There are many tools and open-source projects to be inspired by. Developers often just need to basically copy and slightly modify an existing project and deploy it on a new platform.

In the case of Cardano, developers must become familiar with the Extended-UTXO model and deal with concurrency. Writing an application for Cardano requires a slightly different mindset than what developers have been used to so far if they have been creating on EVM chains. There are known cases where developers have tried to copy a concept from Ethereum, failed with this approach, and abandoned the project.

It is admirable that so many Cardano apps have been created in one and a half years. Cardano is becoming an attractive platform for development and new teams are coming on board all the time. The new teams will have much easier starting conditions. There are even new programming languages for writing smart contracts for Cardano such as Aiken, Eopsin, Helios, and others. This is rapid evolution. Cardano is experiencing organic growth.

The Catalyst team has announced Fund 10, so new projects can apply for funding. The previous funds have certainly helped many projects get off the ground.

The numbers speak for themselves

I remember last crypto winter with the drop in market capitalization, interest in DeFi also dropped. Teams took advantage of the bear market for development and everything exploded during the bull run. It is not usual that activity increases during a bear market and it is obvious that something is changing in the whole blockchain industry. The Cardano ecosystem is not the only one in which we can observe increased activity. DeFi is becoming less dependent on Bitcoin, and it is possible that there will be a decoupling of SC platforms from dependence on Bitcoin market capitalization soon.

As of January 2023, Cardano's TVL has increased by more than 100% from 200M ADA to 470M ADA. In USD terms, it will grow from 50M to 175M USD.

At the time of writing, only the 4 largest DEXs had a volume in the last 24 hours of around 60M ADA (22M USD). The TVL of the 4 exchanges, namely MinSwap, WingRiders, MuesliSwap, and SundaeSwap is around 100M USD. The volume of all DEXs in the Cardano ecosystem occasionally gets into the top 10.

The biggest DEX Minswap makes new ATH regularly. For example, the daily volume was 55M ADA (20M USD) in the last 24 hours.

Cardano has collected 15K USD in fees in the last 24 hours. With this amount of transactions, it may soon be common to collect roughly 100K USD (now about 260,000 ADA) per epoch (5 days). 20% of the fees collected will go to Cardano treasury and 80% to SPOs/staking rewards.

The overcollateralized stablecoin DJED is also doing well. There are currently about 3.6M DJEDs in circulation. Stablecoin has maintained its stability against the USD very well and proved its quality during the collapse of the market value of USDC stablecoin. The Djed project is expanding to other platforms including Ethereum.

The number of stakers is at ATH (1.28M) similar to the number of wallets (4.1M, 2.25M with amount).

The number of transactions per 24 hours also makes the new ATH and it is realistic that breaking the magic 100,000 mark will be the daily standard. The number of active users is also growing and common to see numbers around 60,000.

Cardano ranks in the top 10 in terms of trading volume with NFTs.

We're still at the beginning

Cardano is still at the beginning. It's important to note that many people will adopt the platform after other, more adventurous users have tried it. The biggest influx can be expected when cryptocurrencies start to be more talked about in the media, which will be during the bull market. I dare say that we will see a leap forward in the number of users and new fans of the project. Every fan will very likely start to stake ADA.

Is the current growth a result of interest in meme coins? Partly, yes, and that's fine. Ethereum and every other platform started similarly. Now Bitcoin is slowly becoming (to some extent) a token-issuing platform and there is a meme coin mania going on. This may be helping the platforms as well. Importantly, Cardano is undergoing an important stress test and is reaching its limits in terms of network throughput. The IOG team should start thinking about adjusting the parameters (block size).

You can come to the Cardano ecosystem for speculation or meme coins, but it's important to stay as loyal ADA holders who know that through holding ADA you are building a decentralized platform that will belong to the people. The more people become aware of this and use DeFi services, the stronger the Cardano ecosystem will be.

In the past, many platforms have come and gone quickly. The reasons have varied. Either they were "VC" projects with unfair coin distribution, or they were created quickly, i.e. poorly and with little emphasis on decentralization. Such projects had no chance of surviving more than one bear market. Cardano will see a third bull market and is more than likely to survive a third crypto winter.

The community and especially the users are the only thing that can keep blockchain projects economically alive in the long term. Cardano has a huge community and the number of users is constantly growing. Often community members are also users, which is the best option.

Conclusion

The growth of the Cardano ecosystem is underway and probably unstoppable at the moment. It is a definite advantage that not many significant new L1 projects have emerged during this crypto winter. I only registered a few "VC" projects, which will probably end up like previous attempts to quickly deliver an above-average scalable network with low decentralization.

The growth of the Cardano ecosystem is organic. The team and VC funds are not artificially inflating TVL. Transaction fees are low compared to Bitcoin or Ethereum, but still relatively high in the context of other more scalable platforms. Still, people willingly pay them to use Cardano.

If you think that the Cardano ecosystem is still small compared to the competition, believe that the important thing is the trend. VC funds can inflate TVL or even do wash trading, but they can't make their project attractive to users for whom decentralization is a key feature. Cardano is growing unstoppably.