Cardano has successfully implemented the Alonzo hard fork, meaning that the blockchain platform will now be able to run smart contracts. It is a milestone achievement for the blockchain, which has become one of the most popular in the world.
Interestingly, many crypto newbies might not necessarily understand what it means - and many industry insiders actually don’t know as well. Following the first week and the influx of smart contracts already on the chain, it is worth understanding what Alonzo is and what its implications for the Cardano blockchain will be.
Cardano: Missing that One Key Ingredient
Anyone who is well-read in the inner workings of blockchain technology will understand what smart contracts are. These are essentially self-executing contracts, with the terms of their execution written into lines of code.
The code - as well as the agreement - of a smart contract are clearly written into a blockchain platform. So, once a specific requirement has been met, a transaction will be implemented. Smart contracts are an integral part of what makes blockchains so effective at connecting people. They allow parties to enter into agreements and offer a basis for trust - even though these parties have never met face-to-face before.
Smart contracts were introduced by the Ethereum blockchain. Since then, many others have piled on and integrated the feature into their operations as well. But Cardano - being one of the earliest blockchains - missed this.
While the Cardano blockchain has always been a popular blockchain, the lack of smart contracts has left it unable to truly function optimally. Developers are unable to build on the blockchain, and they can’t make use of its full range of features. So the blockchain’s developers set out a roadmap that will make Cardano more useful.
Cardano’s developmental roadmap will see the blockchain cycle through five stages - Byron, Shelley, Goguen, Basho, and Voltaire. With the introduction of Alonzo, the blockchain has now entered the Goguen era. Alonzo itself is divided into three - Alonzo Blue, Alonzo White, and Alonzo Purple. Each of the levels included different tests for the smart contracts, with developers finding and eliminating bugs from the blockchain as it looks to move.
from the Cardano official website reads:
“With the integration of smart contracts, the Goguen era represents a big step forward in capability for the Cardano network.” It explains that while the Shelley era decentralises the core of the system, Goguen adds the ability to build decentralised applications (DApps).”
Interestingly, the Goguen era will offer more than just smart contracts. The Cardano developers are also looking to add a multi-currency ledger, which will make the blockchain even more useful and allow users to create tokens with the blockchain’s support standard.
How Alonzo Makes Cardano Better
Alonzo’s importance is quite clear. The hard fork is what particularly triggered smart contracts on the blockchain, ensuring that developers can build dApps on it.
The blockchain industry is currently going through a significant change, especially with Ethereum running into challenges. Still the world’s most popular blockchain, Etheruem is facing scalability issues - with rising gas fees and frequent periods of network congestions.
With Ethereum now standing on shaky ground, several blockchains have thrown their hats into the ring. Now, Cardano will be able to join in as well. Areas like decentralized finance (DeFi) and non-fungible tokens (NFTs) are heavily reliant on dApps, and they could now be built on Cardano as well. It is an exciting time, and while most people don’t believe that Cardano will overtake Etheruem as the biggest blockchain, adoption for it will increase nonetheless.
As expected, this will also grow the price of Cardano’s native token, ADA. The coin has been on a rally in recent weeks as Alonzo’s implementation kept getting closer. It edged Binance Coin (BNB) as the third most popular cryptocurrency, and its price even crossed $3 for the first time ever. The market is currently in a consolidation period, but there are significant hopes that ADA will eventually see even bigger gains over the immediate period.
Adoption is already on the rise. According to official data, over 200 smart contracts have already been listed. For now, the contracts are in a timelock and they can’t be used until their developers release them. But, there is every indication that the number will rise even more.
Charles Hoskinson, Cardano's founder, said recently that the DeFi space is currently “up for grabs” now that smart contracts have launched on the blockchain. The founder believes that the “second wave” of DeFi will have winners who combine interoperability and liquidity - with features like certification, governance, insurance, and even regulation. This is what Cardano is building, as he believes.