Cardano ecosystem "anomaly": Market cap Top 9, TVL ranking 30, 70+ Dapps

Author: waynezhang.eth, Deep Tide TechFlow

While filtering through annual tokens, I discovered Cardano, a project that ranks in the top ten by market capitalization. During this bull market, its market cap was only surpassed by BTC and ETH, placing it third. However, looking back, even during the bull market, not many people were actively promoting Cardano. It was rarely mentioned in popular media, and there were few updates or articles about the Cardano ecosystem. Cardano felt like "the elephant in the room." To uncover the reasons behind this phenomenon, this article will explore several aspects of Cardano, including user numbers, project ecosystem, developer ecosystem, and community.

Introduction to Cardano

Cardano is a POS chain that began development in 2015 and was officially launched in September 2017 by Charles Hoskinson and his team.

It is worth mentioning that Charles Hoskinson is also a co-founder of Ethereum, having left the project due to disagreements with Vitalik Buterin over whether to establish Ethereum as a for-profit entity or a non-profit organization.

Currently, Cardano is primarily supported by three organizations: the Cardano Foundation, InputOutput Hong Kong (IOHK, now renamed IOG), and Emurgo. The first two are dedicated to developing the Cardano platform and related protocols. Emurgo is more of a third-party Japanese company that develops, supports, and incubates commercial projects on Cardano.

Cardano is often described as an "Ethereum killer" because it emphasizes cheaper transaction fees, higher scalability, and faster transaction speeds compared to the current Ethereum 1.0 blockchain.

The characteristic of Cardano is that it is divided into two independent layers: the Settlement Layer (CSL) and the Computation Layer (CCL). The CSL is used to validate and record ADA transfers. The CCL layer supports smart contract functionality, allowing developers to create and execute applications. The separate design of the two layers aims to reduce network congestion. We will elaborate on the technical details in a later section.

Cardano User Situation

According to data from ++Cexplorer.io++, the number of active accounts recently has been around 100K per epoch (Cardano has an epoch every 5 days), with the highest number of active accounts reaching 267.545K during epoch 316.

In tracking user situations, we also looked at the second data point, which is the number of Cardano wallet downloads. From ++Cardano Blockchain Insights++, we can see that the number of wallets has reached 3.79 million, with a total growth of 38% this year. Compared to last year (220K→2.64M), the growth rate has slowed down, significantly affected by the macro market. A reference number regarding wallet count is that the number of ADA token holders is ++357.7M++. The close proximity of wallet numbers and holder numbers suggests that a larger proportion of holders are likely participating in ecosystem development.

As the bull market fades and the bear market arrives, the daily number of new wallets has also fallen below 10,000. In mid-November, for some unknown reason, there was a surge of new wallets (possibly due to Cardano NFT releases, but this is uncertain), with the number of new wallets increasing from around 1K to 3K.

• Horizontally comparing, the number of ecosystem participants in Cardano is relatively low compared to other top ten market cap public chains like Bitcoin, Ethereum, BNB Chain, and Polygon.

• Vertically comparing with ++ecosystem projects++, the user numbers of the ++Top 5++ NFT and DeFi projects are comparable, with the Top 1 NFT project having 123.9K users and the Top 1 DeFi project having 89.5K users. There are 21 projects with user numbers around 1K. In addition to project users, the Cardano ecosystem currently has ++888K++ delegators who have delegated their ADA to ++3233++ pools for rewards.

Cardano Community Situation

In my view, the community issue of Cardano is one of the reasons for its low influence and brand awareness. Readers are invited to recall their own experiences with L1/L2 projects. Most projects provide their own communities for community interaction, but apart from meetups, the official community channels provided by Cardano, such as ++Cardano Community++ (with 1.3M followers), only offer a Telegram group for users to communicate with the project team and among community members. However, the process to join the group is quite complex, requiring bot verification without guidance.

I still haven't found a way to complete the bot verification. I hope readers can provide some guidance!

The official Meetup reports that there are currently 36K members from 53 countries across 88 groups. This data sharply contrasts with their Twitter following:

• Cardano Community: 1.3M followers.
• Cardano Foundation: 848.9K followers.
• InputOutputHK: 296.8K followers.
• EMURGO: 125.5K followers.

The Cardano Community's Telegram group only has 31K members. I pondered the possible reasons for this:

1. Poor user interaction in community operations.
2. Non-Web3 users commonly use Discord or Telegram.
3. The original number of community members was large, but many have since left, due to marketing and community maintenance issues.
4. The team lacks sufficient talent to manage a large community.
5. The community strategy is similar to Ethereum, predominantly forum-based.
6. Account follower counts may be inflated.

I personally believe that 1, 2, and 5 are the most likely reasons. As a decentralized community, having a strong sense of cohesion is crucial. More members may mean more builders and users, which would also promote the adoption of Cardano. Although the gap between 36K and 1.3M is significant, just looking at the Chinese groups in ++Cardano Meetup++, there are detailed classifications, and most basic questions can find relevant posts, fulfilling the basic functions of a community.

Overview of Cardano Projects

The projects mentioned in this section focus primarily on Dapps, excluding NFT project counts, which will be detailed in the next section. Before studying Cardano projects, let's first look at the number of Dapps on three other public chains that also rank in the top ten by market cap and can deploy smart contracts: Ethereum, BNB Chain, and Polygon. According to data from ++DappRadar++, these three public chains have 3607, 4414, and 1402 Dapps respectively, while Cardano has only 29 Dapps listed. The low number of Dapps directly affects the number of projects and gameplay that participants can engage in, leading to fewer on-chain activities and impacting ecosystem development, which may also be one reason for the low number of active accounts and project users in the Cardano ecosystem.

According to ++official displays++, the current number of projects on Cardano has reached 74 (excluding pure NFT projects). By category, the Top 5 are 25 NFT tool projects, 19 analytics projects, 16 token tools, 12 wallet projects, and 8 game projects. Currently, the focus of the Cardano ecosystem is still on the NFT field.

Why does it have a top ten market cap but such a low number of projects? Time is a factor worth considering. Although Cardano began development early, the proof-of-stake mechanism on Cardano was actually launched in 2020. It wasn't until the successful upgrade to Alonzo in September 2021 that Cardano officially entered the "smart contract" era. The first DeFi services only began to appear in early 2022. Therefore, considering the timeline, Cardano can be understood as having only started its ecosystem in September 2021.

2021 was the year of public chain explosion:

• Solana launched its mainnet in March 2020, and just in May, the Black Hat Marathon brought over 300 new projects to Solana.
• Terra (which later collapsed due to the Luna incident) started its project in January 2018 and launched its mainnet in April 2019.
• The Matic Network team decided to expand their project scope in February 2021 and rebranded as Polygon.
• Avalanche was co-founded in 2019 and officially launched on the mainnet on September 22, 2020.
• Fantom was founded in January 2018 and became compatible with the Ethereum Virtual Machine (EVM) by the end of 2019, allowing developers to quickly port Ethereum-based dApps to Fantom's Opera mainnet.

Other public chains like Near, Definity, Algorand, Flow, and WAX also saw rapid ecosystem development in 2021. From a timing perspective, being an early mover is an advantage, and this may also be one reason for Cardano's "low profile" in the ecosystem. Of course, a low-profile ecosystem does not mean a low-profile price; in September 2021, the price of ADA reached a peak of ++$3.01++, with an FDV exceeding $139 billion.

Of course, we must ask: why did it take until 2021 to enter the "smart contract" era? We will address this question in the concluding section.

Behind the projects are smart contracts. According to Cardano Blockchain Insights, there are currently over 4,000 smart contracts based on Plutus, and the TIMELOCKS SCRIPTS typically used to represent NFTs have exceeded 78K. I believe there are new opportunities within these contracts in the Cardano ecosystem.

Cardano DeFi Development Status

DeFi enhances the liquidity of a network and diversifies assets. The first DeFi service on Cardano appeared in early 2022, with the highest TVL reaching over ++$30 million++ in May 2022, but it has since dropped to ++$5.13 million++, ranking ++30th++ among public chains in terms of TVL.

Note: There may be discrepancies in Defilama's data, as projects like ++Sundaewap++ are not included.

Cardano's DeFi is still in its early stages. According to the Q3 report released by Cardano Daily, the main categories of current DeFi projects on Cardano include lending, staking, DEX, and DeFi services. However, the main TVL still resides in DEX, which is understandable. For instance, ++Minswap++ currently holds 45.21% of the TVL share, and besides the swap function, it also offers farming and 720 liquidity pools.

In terms of lending, the first DeFi lending protocol Aada Finance was only officially launched in September, and currently, both its utilization and product offerings are still in the early stages. Other lending projects in preparation include ADA Lend Finance, Liqwid Finance, and Parious.

Next is cross-chain bridges. Before August, WingRiders DEX held the top TVL ranking on Cardano, but a significant portion of its TVL came from the Nomad bridge. After the Nomad assets on WingRiders were zeroed out due to a hacker attack, the ecosystem's TVL decreased by 20%. The DEX that later rose to prominence is the aforementioned Minswap. Currently, the available bridge is Milkomeda, which will connect to the Cardano network and wrap native assets of the non-EVM compatible L1 chain, such as ADA's MikeADA. The gas fees incurred on the sidechain are paid in MikeADA. However, the operation interface is not user-friendly for newcomers. Besides Milkomeda, there are also projects in development, such as AdaSwap and Fourier Labs. At this stage, if you seek convenient and quick cross-chain operations, it is recommended to use the deposit/withdrawal services provided by CEX.

Finally, the key focus of the DeFi ecosystem—stablecoins. Firstly, Cardano currently does not have any officially issued stablecoins. However, there was a project called Ardana that was working on stablecoins, which announced in November that it would officially cease development and operations. The project team, which had been developing for over a year, cited reasons such as: "++Due to the extensive funding required for tools, infrastructure, and security, development on Cardano has been challenging, and given the uncertainty of completion, the best course of action is to halt the development of dUSD++." The funding shortfall was attributed to the collapse of its backer, Three Arrows Capital. However, its open-source code has provided some assistance to Djed, which is expected to officially launch in January next year with the help of IOG and Coti. Djed stablecoin is designed to be over-collateralized, requiring over 400% collateral value for each Djed minted. Coti's CEO Shahaf Bar-Geffen stated that upon launch, Djed will be integrated into 40 applications within the Cardano ecosystem. This release will also introduce DjedPay, a service that will enable merchants and other crypto players to accept Djed payments. Additionally, Emurgo plans to launch a USD stablecoin, USDA, next year.

In addition to the current lack of DeFi infrastructure, I believe another point worth noting is the staking situation on the Cardano network. Compared to Ethereum's staking ratio of over 10%, Cardano's staking amount has reached ₳25.30 billion, accounting for approximately ++74.05%++ of the current circulating total of ₳34.2 billion, with the number of staking addresses reaching ++1.238M++. This indicates that the current Cardano DeFi ecosystem is not sufficient to attract the majority of Cardano users who are stakers. The DEX with the highest TVL, Minswap, only has ₳86.58 million, which is merely 0.25% of the staking amount.

Cardano NFT Development Status

NFTs can be said to be the area where Cardano has shown the most vigorous development. According to real-time data from ++Cryptoslam++, the number of NFT transactions in the Cardano ecosystem has ranked in the Top 5. The Dapp with the highest number of users on Cardano is the NFT trading platform jpg.store, which has been used by ++124.5K++ accounts.

Due to the market downturn, the Cardano NFT ecosystem has also been affected, with the highest daily trading user count dropping below 5K, and recently hovering around 2K, while daily trading volume has been fluctuating between $200K and $500K.

The total market value of Cardano NFTs has now surpassed ₳468.16 million, with the total number of NFT projects exceeding ++8K++, of which the top ten NFT projects account for ++35%++ of the total market trading volume.

In the ranking of NFT trading volume, there are a total of 104 NFT projects with trading volumes exceeding ₳1 million, and some quality communities have already emerged, which you might call Cardano blue-chip NFTs, such as Claynation, a collection of 10,000 clay digital people, which has plans for 3D character development, metaverse development, and token launches.

The rise of NFTs has led to the emergence of many NFT markets. Currently, there are 15 NFT trading markets on Cardano. According to OpencNFT's 24-hour trading data, the leading NFT market remains jpg.store, accounting for 97.48% of trading volume.

Opening jpg.store gives a feeling similar to opening Opensea. In addition to NFT trading, it also has launchpad and NFT creation features. However, it shares similar shortcomings, lacking analytical tools.

Other Project Focus Areas

GameFi

Cardano's TPS, according to community data, is 250+, with a single transaction cost of 0.1 ADA. Technically, developing games is feasible, but currently, the games in the ecosystem are primarily NFT games, and I have not found any that are truly complete; they are mostly in the demo stage. As for P2E games, some studios are working on this, and EMURGO has invested early in a Nigerian P2E studio, Diagon Studios. In April, the NFT game developer Cardalonia also announced the completion of its pre-seed funding. But I want to ask a question: if I were a game development studio, why wouldn't I develop my game on Solana or Polygon, which are Ethereum L2s?

Sidechains

Cardano's EVM sidechain is a fully decentralized scalability solution deployed by IOG. It allows for the development and deployment of EVM-compatible smart contracts on Cardano without incurring the high gas fees typically seen on Ethereum, while projects can use Solidity to develop on the sidechain. For more information, you can click ++here++.

Privacy

IOG will launch a new blockchain focused on privacy called Midnight, along with a token named "dust." Midnight will operate as one of Cardano's sidechains and will provide zero-knowledge proof smart contracts, allowing transactions to be completed without disclosing identifiable data. The native token of the Midnight blockchain will be Dust. No other privacy-related projects have been discovered yet.

Governance

Project Catalyst is Cardano's project catalyst, where users holding a certain amount of ADA can propose projects or ideas, and community members can vote on them. According to data from ++Lido Nation++, there are currently a total of 4,300 proposals, of which 1,156 have received funding support, totaling $38.65 million.

Project Guidance

If you want to understand Cardano through some Dapps, I think you can start with these websites:

Wallets

Like common public chains, Cardano requires a dedicated wallet for use. After trying several wallets, I feel that the experience and services are quite similar, so you can directly click ++this link++ to choose your preferred wallet for download.

DeFi

I recommend ++Minswap++, which is currently the DeFi product with the highest TVL on Cardano. Its functions include Swap, Pool, Farm, and Launchpad, allowing you to gain a better understanding of the tokens of other projects in the Cardano ecosystem, and it has a user-friendly interaction.

NFTs

NFT projects are mainly divided into NFT projects, NFT trading platforms, and NFT tools. I will mainly introduce the hottest NFT trading platform, ++Jpg.store++. Its overall user interface is similar to Opensea, and those with NFT trading experience can use it directly. Its functions include trading, browsing NFTs, creating NFT collections, and launchpad features, but it lacks analytical tools. Recently, jpg.store announced that it can accept ETH or Sol for purchasing Cardano NFTs.

Technical Features & Roadmap of Cardano

Strong Academic Atmosphere

Cardano has a distinct academic flavor. Scientists propose innovative ideas through rigorous research and then carefully implement them. To ensure rigor, Cardano uses the Haskell functional programming language to avoid "bugs" affecting network operation. Haskell provides a theoretical framework for describing and evaluating functions, where each function is a mathematical function with a high degree of security.

Cardano is the first in the industry to propose a peer-review method for code, meaning that Cardano's code must undergo professional peer review to ensure the feasibility of the technology before it is officially launched. This is one reason why smart contracts were launched later; the process is time-consuming but rigorous.

Network Architecture

The network architecture of the Cardano blockchain is highly forward-looking, designed to support two main layers:

• Cardano Settlement Layer (CSL), used for tracking addresses and tokens; essentially the payment layer.
• Cardano Computation Layer (CCL), which executes logic and smart contracts.

Layer 2 (CCL) uses data from Layer 1 (CSL) and provides a low-cost, high-performance environment for DApp operation, while Layer 1 is responsible for verifying the computation results of Layer 2 and providing foundational support. The organic combination of the two layers ensures that value can flow securely and efficiently.

Cardano's execution layer uses the eUTXO model, inserting state into every UTXO on the chain, thus avoiding the high gas fees caused by concurrency issues seen in Ethereum (currently, gas fees are between 0.17-0.18 ADA). Moreover, since metadata and scripts are combined in transactions, throughput efficiency can be improved.

For more information about the eUTXO model, you can click ++here++.

Programming Language

The Cardano blockchain is built on the functional programming language "Haskell." "Plutus," Cardano's smart contract programming language, is based on Haskell, and Marlowe, a domain-specific language for financial smart contracts on Cardano, is also based on Haskell. Haskell was developed in the 1990s. This language is not particularly friendly for novice developers, and currently, only a small number of developers in the market are proficient in it.

Roadmap

Cardano's development is divided into five phases. Although the various periods of Cardano will be delivered sequentially, the work of each phase can proceed in parallel, with research, prototyping, and development often occurring simultaneously in different development processes. What is most admirable is that Cardano organizes the development methods, prototyping, technical specifications, etc., of each phase in ++some academic form++ for everyone to view.

• BYRON: After two years, thousands of GitHub submissions, and hundreds of hours of research, the first version of Cardano was released in September 2017, marking the beginning of the Byron era.
• SHELLEY: Unlike the Byron era, which began at a single point in time with the launch of the mainnet, the transition to Shelley aims for a smooth, low-risk transition without service interruptions. As the Shelley era progresses, more and more nodes will be run by the Cardano community.
• GOGUEN: Goguen will enhance the ability to build decentralized applications (DApps) on Cardano based on peer-reviewed research and high-reliability development.
• BASHO: The Basho era is an optimization period aimed at improving the scalability and interoperability of the network. Previous development periods focused on decentralization and new features, while Basho is dedicated to enhancing the foundational performance of the Cardano network to better support the growth and adoption of high-transaction-volume applications.
• VOLTAIRE: With the introduction of voting and financial systems, network participants will be able to use their stakes and voting rights to influence the future development of the network.

Tripartite Governance Structure

Cardano is primarily supported by three organizations: IOG (formerly known as IOHK), Emurgo, and the Cardano Foundation.

• IOG was founded in 2015 by Charles Hoskinson and Jeremy Woods. It is a blockchain infrastructure, research, and development company based in Hong Kong. It is a fully decentralized organization that provides evidence-based software development. For government clients, the company creates blockchain infrastructure solutions. It also collaborates with public and commercial sectors to provide services and has been promoting the development of decentralized platforms and smart contracts.

• EMURGO Global is the official trading and venture capital arm of the Cardano project, registered in Tokyo since June 2017. It has two subsidiaries: EMURGO Africa and EMURGO Ventures. In September of this year, its founder stated that they plan to invest over $200 million in the next three years to support the development of the Cardano ecosystem.

• The Cardano Foundation is a blockchain and cryptocurrency organization based in Zug, Switzerland. Essentially, the Cardano Foundation is an independent standards organization responsible for overseeing and monitoring the ongoing development of Cardano and its ecosystem.

From the above introduction, we can see that IOG leads technical development, the Cardano Foundation is responsible for promotion, and Emurgo acts as the funding party and regional business development. Theoretically, if each performs its duties, 1+1+1 > 3, but what is the reality?

From a media perspective, some activities and projects are carried out collaboratively by multiple parties. For example, in the investment in Africa, EMURGO is expected to contribute around $100 million, while the other two also provide their technology or other resources. However, there have been some scandals in 2020, so it is difficult to determine whether the tripartite governance structure brings more benefits or drawbacks. One thing is certain: the quality of the cooperative relationship among the three supporting parties will directly affect the development of Cardano.

Why has Cardano become "the elephant in the room"?

First, from the developer's perspective:

1. The project's smart contracts were only officially launched in September 2021. Compared to the hot L1 and L2 projects at the same time, many people have already made their platform choices.
2. The programming language Haskell is very niche, and its learning cost-effectiveness is far inferior to mainstream languages like Solidity, Rust, and Golang. Moreover, newcomers require a certain training period.
3. Cardano's academic atmosphere places a strong emphasis on stability and security, but developers need to attract more users to their programs, while the number of Cardano users is still less than that of certain main chains.
4. Most EVM public chain projects find it difficult to migrate over due to the complexity of code changes.

Secondly, from the user's perspective:

1. There are too few projects available for users to choose from, and the market cap is too high, making the investment cost-effectiveness less prioritized.
2. Community development is poor; most of the communities that can be found are primarily formed around staking pools, and the official community feels outdated.

Other reasons:

1. In the bear market context, the number of users and new users for the vast majority of public chains is decreasing.
2. Business development capabilities are lacking, and promotional abilities need improvement, especially in community maintenance and media outreach.
3. There are relatively few development incentives and related hackathon activities.
4. Currently, there are no applications that leverage Cardano's technical advantages.
5. Some groups may trade tokens listed on CEX, but even on ++Coingecko++, the number of Cardano-related tokens is pitifully low, while in reality, many tokens have been issued within the Cardano ecosystem. The numerous liquidity pools on Minswap ++illustrate this++.

Many public chains share some or all of the above issues. During the peak of public chain popularity, I have not found another project that can reach the level of "elephant" in the top ten besides Cardano. Price does not necessarily reflect value, but it can reflect certain strengths of a project. Regarding Cardano's price, I believe it prominently reflects its marketing capabilities: although development is slow, Cardano's projects are constantly progressing, and its GitHub submission numbers have rarely dropped out of the top 5, sometimes even dominating the top position for extended periods.

Additionally, Cardano's academic capabilities emphasize security and stability. At the same time, Cardano is deeply involved in the third world, supporting the development of financial infrastructure in underdeveloped African countries. "Honest, low-key, and full of responsibility" is my initial impression of the Cardano ecosystem. However, digging deeper into the data, the years of "effort" have resulted in surprisingly disappointing outcomes.

For Cardano, opinions vary. But from my perspective: a good product does not necessarily equal a good commodity. The market needs good products that can also serve as good commodities. However, human determination can overcome challenges. Web3 is still in its early adoption phase; even if a product is not good, it can still become a good commodity. As more entrants join Web3, will the fierce competition lead to motivation or allow the new waves to rise?

Conclusion

This report does not currently discuss Cardano's token economics, staking, block production mechanisms, or other details, focusing instead on exploring ecosystem development data.

In the NFT field, Cardano has achieved remarkable results, once ranking as the third-largest public chain by NFT trading volume, which is encouraging. However, we also see many NFT projects showing signs of imitation from other chains. Moreover, concepts like SBT and Dynamic NFTs are currently absent on Cardano.

In the DeFi field, we found that mainstream stablecoins like USDT, USDC, and BUSD have not yet crossed chains to Cardano. When Djed launches in January, many lending, farming, and even derivatives projects that are currently in preparation will also be officially launched, making Cardano's DeFi offerings more diverse. However, the lack of cross-chain bridges may become a stumbling block for Cardano in attracting other ecosystems. One possible outcome of DeFi development is a decrease in Cardano's staking rate, as DeFi projects in the market may offer more attractive yields.

For developers, the emergence of the Plutus smart contract programming platform is accelerating the development process. The rapid growth of projects in the recently popular Move ecosystem, such as Aptos, shows that new or difficult programming languages are not insurmountable challenges for developers. How to get everyone to accept new languages and how to incentivize more developers to build in the ecosystem are issues that a public chain should consider. At the same time, the EVM-compatible sidechain will also allow languages like Solidity to enter the Cardano ecosystem, making it increasingly friendly for developers.

IOG is developing a multi-blockchain wallet called Lace, which will allow users to create a decentralized identity (DID). Infrastructure projects like Charli3 Oracles, blockfrost, and txpipe are also paving the way for Cardano developers. The emergence of EVM sidechains will also provide higher security.

In terms of market capitalization, Cardano has surpassed the vast majority of public chains, but in terms of ecosystem, this public chain, launched in 2017, is still in its early stages. Cardano, developed with a rigorous academic attitude, can be considered a "fresh stream." However, when the real data is peeled back, the years of "effort" have yielded surprisingly disheartening results.

For Cardano, opinions will differ. But from my perspective: a good product does not necessarily equal a good commodity. The market needs good products that can also serve as good commodities. However, human determination can overcome challenges. Web3 is still in its early adoption phase; even if a product is not good, it can still become a good commodity. As more entrants join Web3, will the fierce competition lead to motivation or allow the new waves to rise?