Despite Cardano's ‘smart contract' upgrade, ADA falls during the cryptocurrency selloff

 Despite the blockchain's long-awaited Alonzo upgrade, which enables "smart contract" functionality, Cardano's ADA token, the world's third-largest cryptocurrency by market capitalization has dropped 8% in the last 24 hours

 According to Coinmarkercap, the token is recently trading at $2.42.The drop in ADA coincides with a broader selloff in cryptocurrencies. Bitcoin was trading at $44,636, a 2.9 percent decrease over the previous 24 hours. Ether has lost 5.3 percent in the last 24 hours, and is currently trading at $3,238.

The drop in ADA may be due to a “buy the rumor, sell the news” dynamic, but analysts believe the upgrade will boost ADA's price in the long run.

Analysts believe that as decentralized finance, or DeFi, and nonfungible tokens, or NFT, grow rapidly, Cardano's ability to support smart contracts will allow it to compete more effectively with other blockchains such as Ethereum.

·         “We expect to see the first simple smart contract scripts deployed on Cardano within hours of the HFC (hard fork combinator) the event,” Tim Harrison, marketing and communications director at Cardano creator Input Output, wrote in a blog post on Saturday.

·         The Alonzo upgrade will “significantly increase Cardano’s functionality” and “lead to a material increase in its value,” Nick Spanos, co-founder of smart contracts marketplace ZAP Protocol wrote to MarketWatch through email.

·         Founded by Ethereum’s co-founder Charles Hoskinson and launched in 2017, Cardano is a “proof-of-stake,” or POS blockchain, which means a person can mine new tokens or validate block transactions based on the number of coins they hold. Different from bitcoin’s “proof-of-work” system, which requires a lot of computational efforts to add a new block, the POS system claims to be more environment-friendly. Ethereum is in the process of transitioning from “proof-of-work ” to “proof-of-stake.”

Cardano - Alonzo finally in action

With the arrival of Alonzo at 21:47 UTC at epoch 290, smart contracts – pieces of code that execute themselves when predefined conditions are met – can now be created and deployed on the Cardano mainnet.

                       

When it comes to meeting that challenge, smart contracts are the gold ring. Following months of development on the Alonzo testnet, today's hard fork to the Cardano mainnet allows smart contracts to be written in Plutus scripts, "a purpose-built smart contract development language and execution platform using the functional programming language Haskell."

The update is an important part of the Goguen era, which focuses on developing smart contract capabilities. Goguen was created in collaboration with Shelley, the previous era that introduced the proof-of-stake protocol Ouroboros to the network more than a year ago, as part of an effort to strengthen the network's security and decentralization.

The introduction of Cardano's Plutus scripts will also allow for the development of decentralized applications (dapps) in the ecosystem. However, because the protocol is still being developed and matured, it may be sometime before the Cardano ecosystem is completely ready for dapps to fully materialise on the mainnet.

According to Neil Davies, a systems performance analyst at Input Output, the Cardano team will continue to focus on various improvements such as synchronization efforts and compression of transaction script sizes to optimize network throughput. Indeed, he stated during the YouTube watch party preceding the hard fork that this is the first epoch in which the network has exceeded half a million transactions.

Cardano's native cryptocurrency, ADA, is currently trading at around $2.46, down 5.76 percent from today's high of $2.79 at 18:22 UTC. According to CoinDesk data, ADA reached an all-time high of $3.09 on September 2, 2021.

Nonetheless, Cardano observers can expect to see a number of simple smart contracts deployed in the hours following the Alonzo hard fork, with the possibility of additional projects currently in development being rolled out in the coming months.