How Cardano Could Help You Retire a Millionaire

Cardano (CRYPTO: ADA) was launched eight years ago with an earliest trading price of $0.02. By September 2021, its price had reached a record high of $3.10 per token. That rally would have turned a $10,000 investment into $1.55 million.

But as of this writing, Cardano trades at about $0.65 -- so that investment would only be worth about $325,000 today. A 3,150% gain in eight years is still impressive, but could it generate millionaire-making gains from a fresh $10,000 investment during the next decade?

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What sets Cardano apart from other cryptocurrencies?

Cardano was created by Charles Hoskinson, a co-founder of Ethereum (CRYPTO: ETH). Like Ethereum, Cardano uses the proof-of-stake (PoS) consensus mechanism for its transactions. It can't be mined in the same way as proof-of-work (PoW) coins like Bitcoin (CRYPTO: BTC).

Cardano runs on its own proprietary PoS blockchain called Ouroboros. That sets it apart from some other cryptocurrencies that were minted on Ethereum's blockchain. To keep pace with Ethereum, Ouroboros added staking features in 2020 (which lets its users lock up their coins to earn interest-like rewards) and smart contracts in 2021 (which allowed its developers to launch decentralized apps (dApps) and other crypto assets on its platform).

Cardano differentiates itself from Ethereum by approving its projects with formal peer reviews. Ethereum's projects are not formally peer-reviewed. Cardano's backers claim that key difference makes its blockchain more secure and more scalable than Ethereum's sprawling ecosystem.

Cardano's Layer-1 (L1) blockchain can achieve speeds of about 250 transactions per second (TPS), compared to Ethereum's average L1 speed of just 15 to 30 TPS. Cardano can achieve even higher speeds of of about 1,000 TPS through its Layer-2 (L2) Hydra heads -- which process more of its transactions off-chain so they don't congest its L1 blockchain. Ethereum's developers also bundle their transactions off-chain in a similar manner with its L2 rollups.

Cardano charges fixed transaction fees, which often makes it cheaper than Ethereum, which implements surge pricing in its gas (user) fees whenever its network gets congested.

Cardano has a fixed maximum supply of 45 billion tokens. Most of those tokens were pre-mined at its launch, and a large portion were distributed to its founders, developers, and early investors. That predictable supply further differentiates it from Ethereum, which has an infinite supply that fluctuates relative to its network activity.

How could Cardano generate millionaire-making gains?

For Cardano to turn a $10,000 investment into $1 million, its price would need to surge 100-fold to $65 per token, boosting its market cap from $23 billion to $2.3 trillion. That would put it in the same ballpark as Bitcoin.

But if we extend that time frame to a decade, it probably won't eclipse Bitcoin's market cap unless the world's top cryptocurrency stops appreciating. Instead, it could rise alongside Bitcoin, Ethereum, and other big blue chip tokens as more investors pay attention to cryptocurrencies.

To achieve that huge gain, a few catalysts need to kick in. Cardano's smart contracts would need to gain more developers to be considered a worthwhile alternative to Ethereum. That might happen if its new Hydra heads and planned network upgrades significantly boost its transaction speeds. But without achieving that mass developer adoption, Cardano could struggle to step out from Ethereum's shadow. Looking further ahead, Cardano has been trying to secure more real-world contracts for identity, finance, and supply chain solutions across emerging markets like Africa. Locking in more of those big enterprise customers could stabilize Cardano's price as it's more widely used for mainstream financial transactions. Its recent integration with Bitcoin via a new smart contract bridge could also improve its usefulness for decentralized finance (DeFi) apps.

Earlier this year, Grayscale and Tuttle Capital Management submitted their applications for the first Cardano exchange-traded funds (ETFs) to the Securities and Exchange Commission (SEC). The approvals of those ETFs could draw in more retail and institutional investors.

Lastly, declining interest rates should drive more investors toward cryptocurrencies again. That rising tide could drive Cardano's price to fresh highs over the next decade.

But will Cardano really make you a millionaire?

Cardano has proven a lot of skeptics wrong during the past eight years. It's impossible to tell where it will head over the next decade, but the expansion of its developer ecosystem, increased institutional interest, and a broader acceptance of cryptocurrencies could drive it higher. I'm not sure if it can turn a $10,000 investment into $1 million again -- but it might still have a bright future as the cryptocurrency market evolves and expands.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.