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ADA of Cardano has entered the digital asset reserve of the United States — Is it worthy?
The fact that ADA could be included in the government's investment portfolio has surprised the entire industry and sometimes led to harsh criticism. Although there are loyal investors who have supported the project for many years, many in the crypto community have questioned why this token was included in the digital asset treasury.
Let’s analyze this blockchain to see if the fundamental factors and utility of ADA support its position in the United States digital asset vault.
Reasons ADA is present in the Digital Asset Vault of the United States
Launched in 2017 through an ICO, Cardano is one of the oldest smart contract platforms. The project differentiates itself from other platforms by its research-based design approach and the use of the DeleGate.iod Proof-of-Stake mechanism combined with an extended UTXO accounting model.
The ambition of Cardano as a smart contract platform is clearly demonstrated through a post on X by the user "whale", pointing out "the fees that cannot be ignored, voting rights, decentralized consensus, and all native token transactions that come with it."
The post on X emphasizes the utility of ADA (, a factor that "most VC coins lack" ), along with the decentralized governance of Cardano as the main advantages.
In fact, Cardano's Project Catalyst is one of the largest decentralized funding initiatives in the crypto industry. Through it, funds from transaction fees and inflation are democratically allocated to community proposals. Unlike the Ethereum network, which still relies on off-chain governance for major upgrades, Cardano aims to fully transition to on-chain governance.
The Plomin hard fork that took place on January 29 has transitioned the network to "completely decentralized governance" according to information from the Cardano Foundation. This provides ADA holders with "real voting rights – regarding changes to parameters, withdrawing funds from the treasury, hard forks, and the future of the blockchain."
The native coin of Cardano, ADA, is used for network fees, staking, and governance. The total supply is capped at 45 billion, with an initial distribution of 31 billion ADA, consisting of 26 billion ADA sold in the public offering and 5 billion ADA allocated to IOHK, Emurgo, and the Cardano Foundation. The remaining 14 billion ADA is reserved for gradual release through the minting process. With 0.3% of the ADA reserve fund distributed as rewards each year, ADA inflation decreases as the reserve fund depletes. The current inflation rate is approximately 4%, with a circulating supply of 35.95 billion ADA.
Although the limited supply may support the value of the coin and rationalize its inclusion in DAS, other metrics of ADA, such as fees and staking yields, are lagging far behind its competitors.
Is the delay in Cardano's activities a cause for concern?
Despite having many years of activity in the smart contract ecosystem, Cardano still struggles to generate enough activity to assert its position among the leaders. Therefore, the limited use of ADA in the crypto ecosystem raises concerns about its long-term value.
According to Messari's "Cardano Status Q4/2024" report, this blockchain processes an average of 71,500 transactions per day, with 42,900 active addresses daily. Transaction fees for the quarter totaled $1.8 million, a very small figure compared to Ethereum's $552 million fees during the same period, according to CoinGecko.
The actual annual staking yield of Cardano ( adjusted for inflation) is only about 0.7% in Q4, while Ethereum reached 2.73%.
– With 449 developers working on the blockchain, Cardano ranks 12th among blockchains in terms of the number of developers, according to a report by Electric Capital.
– The stablecoin market share of Cardano accounts for only 0.01% of the total stablecoin market capitalization of 224 billion dollars, according to data from DefiLlama.
The DeFi ecosystem of Cardano has not yet developed, only accounting for 0.3% of the total value of the DeFi sector worth 169 billion dollars. However, if we include core staking, which does not require asset locking and therefore is not counted in TVL (total value locked), Cardano's market share would increase to 12%.
The DApp activity of Cardano is still low compared to other smart contract platforms. In Q4, Cardano recorded an average of only 14,300 DApp transactions per day – far from the top 25 and just a small fraction compared to Solana's 22 million transactions. Even more concerning is the 73% drop compared to Q4/2023, when Cardano recorded 52,700 transactions per day. This significant decline indicates a worrying trend for a blockchain that is still in the development phase.
The reasons for ADA's presence in the strategic cryptocurrency reserves are much less clear than those of Ethereum and Solana, the leading blockchains in various fields. Low activity, limited adoption, and weak staking incentives of Cardano have raised serious doubts about the suitability of ADA for a government-managed asset fund.
On the other hand, ADA's limited supply and Cardano's focus on decentralization provide a unique advantage over competitors. This could lead to broader adoption and long-term relevance.
Furthermore, projects like Atrium Lab are exploring the native compatibility of Cardano with Bitcoin through the eUTXO system, which could open up a new framework for DeFi on Bitcoin and drive activity on Cardano.
Does this capability justify ADA's position in the digital asset portfolio?
As David Nage, the portfolio manager of the venture capital firm Arca, stated:
"Like the rest of the cryptocurrency, the Cardano ecosystem needs to seek out and support developers to create products and applications that millions of people love and rely on. Then, they need skilled storytellers to reinforce the narrative behind it to build a sustainable and large user base. After all this, introducing ADA into the national reserves of the United States will start to make more sense. That could be achievable."
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct thorough research before making a decision. We are not responsible for your investment decisions
Dinh Dinh
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