The technical limitation is one of the inherent obstacles keeping when cardano will blow up. Cardano’s Plutus smart-contract platform presently processes only 50 to 100 transactions per second, significantly fewer than the 650 on Solana and the 7,000 on Polygon. As such, the amount of Dapps on its network (127) is only 1/20 of BSC’s (2,540). In the third quarter of 2023, the average daily volume of Cardano chain was only 83,000, whereas for the same period on Ethereum Layer2 network Arbitrum, it was 2.3 million with a 27 times difference. Developer research shows the Plutus toolchain takes three times the time to learn as Solidity, and fresh projects take on average four months to start up (only six weeks in the Ethereum ecosystem), while only 14 new Dapps were produced in 2023 compared to 89 fresh projects on Avalanche within the same time period. Furthermore, Hydra’s expansion plan has been delayed until the second quarter of 2024 for deployment. Its theoretical TPS (Transactions per second) is a mere 1,000, whereas StarkNet’s competing Quantum Leap technology is already at 12,000 TPS.
The ecosystem weakness directly affects the probability of when will cardado explode. As of December 2023, Cardano’s DeFi value locked was a low $210 million, ranking 15th among public chains, and had less than a 0.3% market share, much less than Solana’s $1.35 billion (1.8%). The dominant top DEX Minswap has an average daily volume of only 13 million US dollars and an average liquidity pool depth of 800,000 US dollars. But there are 47 projects in Uniswap V3 where there is more than one pool liquidity of 50 million US dollars. While the NFT market posted 320 million US dollars worth of sales, the JPG Store’s platform transaction fee is up to 2.5%, or five times the cost of OpenSea, and this causes 70% of creators to leave for cheaper chains. More alarming is the fact that the number of active developers on the Cardano network has fallen by 22% in the past year (from 1,800 to 1,404), while active Polygon developers increased by 47% to 5,200 during the same period. The ecosystem project churn rate stands at 35% (29 projects moved to other chains in 2023).
The market perception and regulatory weaknesses also slow down when will cardano explode. In June 2023, after the US SEC added ADA to the “Potential Securities” list, its daily trading volume on US exchanges declined by 62%, down from 120 million US dollars to 45 million US dollars. The institutional investor percentage of holdings is only 3.7%, which is less than Bitcoin at 18% and Ethereum at 12%, as 98% of the compliant Custody platforms (i.e., Coinbase Custody) have not yet supported ADA staking services. While the Cardano Foundation pays 15 million US dollars a year to build compliance, the EU MiCA regulation requires its validation node KYC cost to increase by 3 million US dollars a year, which has compressed the staking return annually from 5.2% to 4.1%. The staking return of Polkadot is 14% with no additional compliance burden. Apart from this, in November 2023, Cardano’s blockchain partnership initiative on education with the government of Ethiopia was suspended due to data privacy controversies. The primary goal of depositing 5 million students’ digital identities into the blockchain was achieved by merely 8%, revealing its incapability of applying practical implementation power.
The matter of how and where to assign funds and resources has also hampered the timeframe of when will cardano explode. IOHK, the umbrella organization of Cardano, has a 2023 research and development budget of 40 million US dollars, a mere third of what Solana Labs budgets (120 million US dollars). Consequently, the size of its ecosystem incentive scheme is merely 80 million ADA (or about 36 million US dollars), compared to 500 million US dollars worth of developer rewards of the BNB Chain over the same duration. Node operator data shows that 50% of block generation on the Cardano network is controlled by 10 pools and that the centralization level jumped by 15 percentage points between 2022, which bred a crisis of community trust. And to add fuel to the fire, the collage ratio of algorithmic stablecoin Djed declined from 400% in early half of the year to 220% during the month of November, close to the red zone of liquidation of 150%. This must have caused selling by the project team 120 million ADA (worth 54 million US dollars), which resulted in a price drop in ADA of 19% per month. These structural vulnerabilities caused Cardano to drop to the 9th ranking in the 2023 Public Chain Innovation Index, as it was overtaken by new entrants such as Sui and Aptos.