Smart contracts went live on Cardano during the Alonzo upgrade on Sept. 12, 2021. Here's how smart contracts work on Cardano, and a list of the most promising DApps in the ecosystem.
Smart Contracts go Live on the Cardano Network
2021 has been an eventful year for the Cardano community, culminating in the Cardano summit at the end of September. Several important development milestones were reached, and the ADA token has surged in value throughout the year, reaching an all-time high (ATH) of $3.09 on Sept. 2, 2021.
— Input Output (@InputOutputHK) September 25, 2021#CardanoSummit2021 goes live in c.90 min!
Join us to hear CEO @IOHK_Charles LIVE opening keynote.
Register here and get the magic link to join the virtual world https://t.co/q6riGO7VfJ pic.twitter.com/VU9IblKEMr
But Sept. 12 was the day Cardano fans had really been waiting for. Just before 11pm, IOHK tweeted:
— Input Output (@InputOutputHK) September 12, 20211/2 Upgrade successful.
Moments ago, we deployed the #Alonzo upgrade at the epoch rollover.
Welcome to the start of a new era for #Cardano $ADA pic.twitter.com/r6QNvTv4pt
The Alonzo upgrade was named for mathematical logician Alonzo Church, who is widely held as one of the founding fathers of computer science. The moment Alonzo went live, smart contracts were finally available on Cardano. In the first 24 hours, more than 100 smart contracts were running on the network.
Six weeks have passed since the Alonzo upgrade was completed. There’s been a lot of hype and debate about whether Cardano’s smart contracts could drastically alter the DeFi and crypto landscape.
The 4000 developers who had been working in Cardano’s private Testnet before Alonzo went live are now trying to get their decentralized applications (DApps) up and running as fast as possible.
Nevertheless, if you’re expecting ready-made DApps to be released on the network right away, you’ll have to manage your expectations a bit.
Cardano is a few years late to the smart contract party, and developers moving from Ethereum to Cardano aren’t facing a straightforward adjustment. A recent IOHK blog post reiterated this point, saying “a developer can’t just use an adapted Ethereum contract.”
Clearly, it’s going to take a while for most Ethereum DApp developers to adjust to Cardano, so it might be another year or two until the bulk of the Cardano DApps are fully developed.
Still, to celebrate the dawn of a new era for Cardano, we’re looking at five new and exciting projects using its new smart contract functionality.
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But First, What’s Cardano all About?
Before we get into new projects on the Cardano network, here’s a quick overview of the Cardano platform. For an in-depth description of Cardano, check out CoinMarketCap’s Cardano Deep Dive.
Charles Hoskinson, pictured below, founded Cardano in 2015. The Cardano Mainnet went live in 2017, and Cardano is currently the fifth largest cryptocurrency by market cap, behind BTC, ETH, USDT and BNB.
Cardano’s mission is to build a network which overcomes the scalability and interoperability shortcomings facing Bitcoin, Ethereum and other first and second generation cryptos.
Hoskinson and the Cardano team have set themselves some lofty real-world goals, such as “to provide economic identity to the billions who lack it by providing decentralized applications to manage identity, value and governance"
While most other cryptos were focusing on getting up and running as fast as possible, Cardano took a slower, more cautious approach.
Cardano submits every new feature for academic peer review, which Hoskinson maintains will help the platform develop a strong foundation on which to build a more secure network for the future.
Cardano is often compared to Ethereum, which Hoskinson helped to set up alongside Vitalik Buterin and Gavin Wood. Yet the two platforms aren’t perfectly alike in their aims or their methods.
In an interview with Lex Fridman, Buterin described the difference between Ethereum and Cardano as “They [Cardano] really emphasise having these big academic proofs for everything, whereas Ethereum tends to be more ok with heuristic arguments, in part because it’s just trying to do more faster.”
What Separates Cardano From the Crowd?
Cardano’s focus is on crafting secure, long-term blockchain applications designed for real-world use cases.
In April this year, Cardano announced the world’s largest real-world blockchain development to date. IOHK partnered up with the Ethiopian Ministry of Education to provide 5 million teachers and students with blockchain-based digital identity. The project will one day become a national record of academic attainment for student grades and overall school performance.
To encourage entrepreneurs and developers to build DApps on the Cardano network, IOHK launched Catalyst. Catalyst is an innovation fund for the community to propose and vote on ideas for platform alterations and features. The most recent funding round, Catalyst Fund6, offered the community funding worth $4 million for new projects.
The Cardano community is known for being one of the most active, and as such its blockchain receives considerable amount of attention than any other blockchain, according to Outlier Ventures.
Staking tokens on Cardano is far easier than on other networks as there’s no staking lock and unlock time. You can even stake ADA directly from exchanges like Binance and Kraken. A recent blog post revealed that 71.4% of the total ADA supply has been delegated to stake pools at a value just shy of $60 billion, and annual staking rewards are currently between 4-6%.
Transactions on the Cardano network rely on a novel PoS protocol called Ouroboros, which has already allowed the network to process 250 transactions per second. Once the final Hydra update goes live, each Cardano staking pool will be able to process thousands of transactions per second.
Ouroboros PoS has made Cardano among the most energy efficient networks, using just 6GWh of energy, compared to Bitcoin’s whopping 111TWh, making it roughly 1000 times more energy efficient than the world’s first cryptocurrency.
Why Was Cardano so Late in Releasing Smart Contracts?
As previously stated, Cardano has taken its time building a strong and stable foundation. While this approach will help to attract partnerships with governments, businesses and regulators in the future, it has meant Cardano is lagging behind its competitors.
Supporters and maximalists of rival networks like Ethereum and CIP have doled out substantial criticism on this point.
The founder of Internet Computer, Dominic Williams, has criticised Cardano for its slow development of smart contracts on several occasions. He also questioned the Cardano community’s unshakeable support for the platform despite its slow progress.
Williams said, “It amazes me that this chain had been in the market for 2 years, and is only just adding support for smart contracts, and people are happy with this progress.”
Frederik Gregaard, the CEO of the Cardano Foundation pictured below, responded that Cardano doesn’t launch functions using a trial-and-error approach.
Cardano’s strong foundations, Gregaard argues, will ensure long lasting security and easier scalability. He added that for Cardano to ever be considered for real world use cases, it must be verifiably secure, hence why the platform’s features undergo rigorous testing and peer review.
How Does Cardano’s Smart Contracts Differ From Ethereum’s?
Cardano’s spokespeople point out that its network isn’t identical to Ethereum and “thus requires a learning curve and a different approach.” Also, as previously mentioned, “a developer can’t just use an adapted Ethereum contract."
Cardano uses a UTXO-based blockchain, more specifically an eUTXO model (extended unspent transaction output). This makes predicting the smart contract execution cost much easier than on Ethereum. UTXO is the transaction model originally used by Bitcoin and is designed to mimic cash purchases but in a digital way.
Smart contracts on the Cardano network are written using Plutus scripts, unlike smart contracts on Ethereum which use Solidity. The Plutus programming language is based on Haskell, but adjusted specifically for developing smart contracts.
The Cardano Foundation’s reason for the change was, “Haskell, particularly in conjunction with formal methods, is well-suited to write code that is robust and correct.” New developers can learn how to use Plutus to develop on the Cardano ecosystem through the Plutus Pioneers Program.
The program’s completion certificates are stored on the blockchain as NFTs, which graduates can only access by “constructing an appropriate transaction to unlock their individual token."
Shortly after the Alonzo update went live, rumours spread on Twitter that Cardano DApps would be limited to one transaction per block. Had this rumour been true, Cardano would have faced a PR nightmare.
However, IOHK quickly responded to the rumours stating, “the block budget (or, the maximum number of transactions it can hold) allows the execution of hundreds of simple transactions and several complex scripts.”
Charles Hoskinson added, “With this launch, commercialisation is as much in the hands of the community as it is the system architects, and they are already delivering – in less than 24 hours, over 100 smart contracts have already been run on the network.”
Now that you’re caught up on the Cardano network and its smart contract functionality, it’s time to look at some of the most exciting projects in the Cardano ecosystem.
List of Top Cardano Decentralized Applications
Despite Cardano’s slow start, its ecosystem is undergoing rapid development. The Cardians Twitter account recently shared the image below showing some of the projects already integrated on the Cardano ecosystem.
Source: @Cardians_
1. ERGO DEX
ERGO is a smart contracts platform built for DeFi DApps. The platform was built by a team involved in the development of Cardano, WAVES and Chainlink, and as such enjoys great popularity in the Cardano community.
Both ERGO and Cardano are research-driven companies and have partnerships with Emurgo. Charles Hoskinson has been vocally impressed with the project, saying “it’s one of the most revolutionary cryptocurrencies ever built.”
ERGO’s smart contracts are built using the eUTXO model, the same model used by Cardano, which has led to some exciting collaboration between both companies in the form of ERGO DEX.
ERGO decentralised exchange (DEX) is a non-custodial exchange that shares liquidity from numerous exchanges on top of the ERGO and Cardano blockchains. This allows users to trade interchangeably on exchanges sitting on either the ERGO or the Cardano network.
ERGO DEX uses atomic swaps to avoid token wrapping and gateways, which does away with any need centralized intermediaries. Additionally, the platform offers features usually only available through centralized exchanges like limit orders.
ICOs on ERGODEX offer much more security than most other DEXs. Features like partial filling and buyback support during ICOs will help to protect users from scams, rug pulls and malicious actors. There are also timed-release payments, which will give ICO investors the opportunity to abandon ship if the project doesn’t live up to its promises.
These safety features protect users and will, over time, build trust in the crypto community and eventually lead to scammers focusing on platforms without these security features.
ERGO also offers a noteworthy and novel solution to the problem of lost coins. Bitcoin and several other early cryptocurrencies have a significant number of lost, unrecoverable coins. ERGO suggests that charging users rent fees for long-term coin storage will solve this problem.
By charging rent for coins stored for more than four years, ERGO can recover the lost coins over time, albeit quite slowly. To avoid paying fees for long-term coin storage, you just have to move your coins once every four years.
It’s early days, but ERGO DEX could one day provide greater access to liquidity than any other DEX by sharing liquidity across multiple blockchains.
For more details of the ERGO DEX beta program, click here, and to learn about ERGO’s other projects, click here.
2. Empowa
Empowa is one of a growing number of projects in the Cardano ecosystem hoping to use blockchain technology to address real world problems.
Specifically, Empowa wants to address the severe shortage of affordable housing in Africa, and the brutal cycle of poverty this problem creates. The platform’s long-term goal is to deliver 50 million affordable, sustainably built homes to poor and middle-income people in Africa.
Affordable housing is a critical first step toward to improving any individual’s safety, health, wellbeing and overall wealth. And yet, just 16% of African urban households have a permanent roof over their heads, and many households in Africa build their properties by hand.
Mortgages for houses in Africa come with interest rates of around 25% and are even as high as 32% in Zambia. Evidently, this makes buying a property simply impossible for many Africans.
To make matters even worse, Africa has the fastest growing population of any continent, which will compound Africa’s housing difficulties. The problem of affordable housing in Africa will only worsen should it be left unaddressed.
Hundreds of charities and NGOs have tried numerous strategies and technologies to help alleviate Africa’s housing woes, yet the problem persists.
Empowa contends that by using blockchain technology and DeFi funding, the platform will succeed where all other altruistic efforts have failed.
Empowa was founded in April 2021 by Glen Johnson and Phil Lewis using funding from Cardano’s project Catalyst.
Johnson is an entrepreneur with experience in business development in Africa, and Lewis has more than two decades of experience designing and implementing large scale IT solutions. Lewis is held in high regard by the Cardano community, having been active in the Cardano Testnet community since 2018.
Empowa aims to use blockchain and DeFi to become a leading property developer in Africa, but without developing any property directly. Instead, the platform provides decentralized financing for new, affordable property and uses its partnerships with property developers in Africa to organise the building work.
Empowa is going to take advantage of modern building technology and techniques to build homes sustainably. Every construction project will prioritise building sustainability, and all the building materials will be reusable.
You can find details of the Empowa’s development roadmap below.
The native token for Empowa is EMP. The token’s ISPO started on 7th October and will continue until 4 million EMP tokens have been distributed. In exchange for buying EMP tokens, you receive a cut of future rental income once the properties are built.
If you’re interested in reading about some use cases and real world examples, check out the Empowa whitepaper.
3. MELD
MELD is building DeFi applications on the Cardano blockchain to help level the global financial playing field.
The MELD whitepaper describes its platform as “the first decentralised protocol that incorporates fiat loan capabilities into the crypto ecosystem.” Its developers aim to “build DeFi products that level the playing field and create opportunities for the bottom 97% of the world’s population."
Like numerous other DeFi protocols, MELD facilitates lending and borrowing both crypto and fiat currency without needing to go through credit checks.
When you deposit crypto as collateral, you create a collateralized debt position (CDP). The terms of your specific CDP are in a smart contract on the blockchain. After the MELD app has performed an anti-money laundering check, your loan is wired directly to your bank account.
Every MELD loan must have a loan to value (LTV) of 50%, meaning you have to put up assets with twice as much value as the amount you want to borrow. If the collateral drops to 65% LTV, you’ll get a margin call and have to post collateral to bring down the loan’s LTV.
If your loan reaches 85% LTV, your collateral will be liquidated and converted back to a stable currency and transferred back to you, minus a 5% fee.
The diagram below shows how the MELD lending process works.
MELD will particularly benefit individuals who have most of their wealth stored in crypto but lack cash liquidity by allowing users to tap into their crypto wealth without selling their crypto.
The MELD roadmap describes a mobile app – called MELDapp – which will be as crypto beginner-friendly as possible. The app will link in with MetaMask to make depositing crypto as easy as possible for new users, and will be available on iOS, Android and as a Chrome extension some time in 2022.
There’s also a MELD debit card planned, which will convert crypto to fiat anywhere that accepts VISA or MasterCard, but a release date isn’t available.
The MELD token is currently in the middle of its ISPO, which will continue until December 8th, 2021. The token will be used for:
- Governance
- Voting on community projects
- Staking to provide insurance against collateral liquidation in exchange for
- Paying fees
The image below includes details of the MELD ISPO.
For recent updates on the MELD ISPO click here, and to learn more about MELD, check out the MELD whitepaper.
4. SundaeSwap
SundaeSwap is an automated market maker (AMM) DEX. Sundae is essentially the Uniswap of the Cardano network – or at least it hopes to be.
The protocol allows for peer-to-peer token trading, as well as staking, borrowing and lending. Like other DEXs, users will receive a cut of the fees in exchange for lending their assets to the platform.
SundaeSwap planned to launch on the BSC in May 2021 and bridge to the Cardano network at a later date, but then decided to launch on Cardano directly and not launch on the BSC at all.
SundaeSwap’s ISO was planned for May 2021, before the change of direction, but this has been delayed until later in Q4 2021.
The SundaeSwap website gives the reason for the change as “Cardano is faster and cheaper than the alternative smart contract platforms…all in all it is more advanced and a better option for future projects to be built on.”
While the precise launch date isn’t known, the team have shared some details about how the token launch will work.
To take part in the SundaeSwap ISO, you’ll need to stake ADA tokens in the Sundae stake pools. Instead of receiving ADA as a staking reward, you’ll receive SUNDAE tokens.
5% of the total SUNDAE token supply will be distributed over 25 days. To prevent whale control, there will be a diminishing rate of returns, and there is no minimum staking amount.
For the full breakdown of the SundaeSwap ISO, check out this article on the website.
If you want to learn more about SundaeSwap, check out the whitepaper or the official website.
5. Ardana
Ardana is a comprehensive stablecoin ecosystem built to integrate with the Cardano network. Ardana has several interesting and distinctive features which set it apart from the crowd.
First, there’s dUSD, which is Ardana’s stablecoin which is pegged to the US dollar and backed with collateral. dUSD will initially let you get leverage on your ADA, with other cryptos planned to be made compatible further down the line.
Then, there’s Danaswap, which is Ardana’s AMM DEX specifically designed for multi-asset pools. Swaps between stablecoins and stable assets will enjoy ultra-low slippage, and you can deposit stablecoins to receive interest payments as passive income.
Just like how MakerDAO users can receive DAI in exchange for staked crypto, Ardana users will generate dUSD, the platform’s stablecoin, by putting up ADA as collateral. By allowing users to mint new dUSD by staking ADA, Ardana will generate a lot of liquidity, from which a number of interesting new use cases for the platform could develop.
Danaswap will also feature a foreign exchange service where you can swap stablecoins. So far, Ardana only offers dUSD, but there are plans for dEUR and dGBP as well.
Ardana is governed by the Ardana token ($DANA). By staking DANA tokens on the Ardana Rewards Enhancement Module (AREM), you can receive a share of the network fees as well as vote on changes to the platform.
The first token sale has now finished. For information about upcoming DANA token drops, use this link. The next sale is planned for Nov. 4, 2021.
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