1 Reason to Buy Cardano (ADA)

Key Points

• Cardano's peer-reviewed approach sets it apart from other cryptocurrencies.

• The risk is that Cardano will develop too slowly, costing it market share.

• 10 stocks we like better than Cardano ›

Cardano (CRYPTO: ADA) is a cryptocurrency that sometimes goes against the grain. Its ADA token is a proof-of-stake cryptocurrency, which means the tokens can be staked to earn rewards. The man behind it, Charles Hoskinson, was also a co-founder of Ethereum (CRYPTO: ETH).

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Cardano's biggest selling point

In an industry that's often focused on short-term gains, Cardano is built to last. Each step of its development has been peer-reviewed and carefully thought through. It is designed to scale easily and work with other blockchains.

The Cardano team is also more outward-looking than other cryptocurrencies and focused on real-world use cases. For example, it has been working in Africa and Asia for years to promote financial inclusion -- spreading financial tools to more people.

It spent several years creating a blockchain-based way to track education records in Ethiopia. The project didn't succeed, but the technology played a key part in Cardano's decentralized identity work. That could be increasingly important in the real world as we grapple with ongoing data breaches.

Cardano's biggest risk

However, Cardano's slow-and-steady approach could be too slow, costing it market share. Once developers start using a particular coding language or platform, it takes a lot to make them switch. And blockchains like Cardano need users and developers if they are to grow and stay relevant.

Cardano didn't launch its smart contract capabilities until 2021. That's later than other cryptocurrencies like Solana (CRYPTO: SOL) and Tezos (CRYPTO: XTZ). Smart contracts are crucial for layer 1 blockchains as they make them programmable. Its late start is one reason the Cardano ecosystem currently has a fraction of the applications of other top cryptocurrencies.

Cardano has long-term potential

It's still early days in the smart contract crypto race, and there's a lot to play for. That relative infancy makes it important that crypto investments are part of a wider, balanced portfolio.

For Cardano, crypto's next chapter could present an opportunity. As crypto becomes more mainstream, its dependability may appeal to non-crypto businesses. And if security and scalability become more important than speed and transaction costs, developers may well switch to Cardano.

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Emma Newbery has positions in Cardano, Ethereum, and Solana. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.