Elon Musk's Next Big Bet: Cardano's Future?

Elon Musk's influence on the crypto market is well-known, with the billionaire CEO's tweets and comments often causing prices to surge or plummet. In 2021, Musk's attention turned to Cardano, a blockchain network running the cryptocurrency ADA, which is considered a greener alternative to Bitcoin. Cardano's founder, Charles Hoskinson, is convinced that Musk's Twitter profile picture change in February 2021 was a reference to the upcoming Mary hard fork scheduled for March 1. While Musk has not explicitly endorsed Cardano, his interest in more eco-friendly cryptocurrencies and his criticism of Bitcoin's energy consumption have put Cardano in the spotlight.

Cardano's energy efficiency

Cardano's blockchain is an estimated four million times more energy-efficient than Bitcoin. Cardano's proof-of-stake (PoS) consensus protocol is 1.6 million times more efficient than Bitcoin's blockchain protocol, which is known as proof-of-work (PoW).

PoS blockchains require significantly lower computing power and, therefore, lower energy requirements than PoW blockchains. PoW blockchains, such as Bitcoin, require an enormous amount of energy to achieve consensus for each new block. PoS blockchains, such as Cardano, do not have these same energy requirements.

Cardano's PoS protocol is called Ouroboros. Ouroboros uses cryptography, combinatorics, and mathematical game theory to guarantee the protocol's integrity, longevity, and performance. Ouroboros is the first provably secure proof-of-stake protocol and the first blockchain protocol to be based on peer-reviewed research.

> "There are probably millions of people out there that don't want to invest in cryptocurrencies because they don't want to invest in something that is bad for the environment. We should let the world know that energy-efficient cryptocurrencies exist."

Musk's preference for Dogecoin

Elon Musk, the CEO of SpaceX and Tesla, has shown a preference for Dogecoin over other cryptocurrencies like Cardano and Ethereum. Musk's support for Dogecoin is not new, with the billionaire first tweeting about it in 2019. In a tweet, Musk stated that he prefers Dogecoin over "more advanced alternatives" because "Doge has dog memes, whereas others do not".

Musk's interest in Dogecoin may be attributed to the fact that it is a meme-based cryptocurrency that began as a joke in 2013. He has also said that he decided to support Dogecoin because it felt like "the people's crypto", as many of his employees at Tesla and SpaceX own it. Additionally, Musk has a history of engaging with the crypto community through his tweets, which have seemingly impacted the prices of various cryptocurrencies.

Dogecoin's price has experienced explosive pumps following Musk's tweets about the cryptocurrency. For example, in July 2023, a tweet by Musk about his preference for dogs over cats caused a 3% increase in the price of Dogecoin in just one minute. However, these pumps are often short-lived, and the price can deflate or even plummet within a few hours. This has led some to believe that attempting to trade Dogecoin based on Musk's tweets is futile and that the patterns that emerge from such trades are predictable.

Despite his influence on the crypto market, Musk has warned against betting "the farm on crypto" and advised that "true value is building products and providing services to your fellow human beings, not money in any form". Experts also view cryptocurrency as a volatile, risky, and speculative investment and warn investors to only invest what they can afford to lose.

Cardano's founder, Charles Hoskinson

Charles Hoskinson is an American technology entrepreneur and mathematician. He is the co-founder of blockchain engineering company Input Output Global, Inc. (formerly IOHK), and the Cardano blockchain platform, as well as a co-founder of the Ethereum blockchain platform. He has founded three cryptocurrency-related start-ups: Invictus Innovations, Ethereum, and IOHK.

Hoskinson attended the Metropolitan State University of Denver and the University of Colorado Boulder, where he studied analytic number theory before moving into cryptography. He has also held a variety of posts in both the public and private sectors, including a position as the founding chairman of the Bitcoin Foundation's education committee. He established the Cryptocurrency Research Group in 2013.

In 2013, Hoskinson quit his consulting job to begin a project called the Bitcoin Education Project. He joined the Ethereum team as one of the five original founders in late 2013 and held the position of chief executive. However, in 2014, Hoskinson was removed from the Ethereum team due to a dispute over whether the project should be commercial (Hoskinson's view) or a nonprofit (Vitalik Buterin's view).

Following his departure from Ethereum, Hoskinson, along with former Ethereum colleague Jeremy Wood, formed IOHK (Input Output Hong Kong), an engineering and research company focused on building cryptocurrencies and blockchains. Their key project is Cardano, a public blockchain and smart contract platform that hosts the ADA cryptocurrency. Hoskinson did not pursue venture capital for Cardano, stating that it ran counter to the blockchain's principles. He also believed that venture capital involvement might lead to an outsized control of the project.

In addition to his work in the cryptocurrency space, Hoskinson has made several notable contributions outside of the industry. In September 2021, he donated $20 million to Carnegie Mellon University's philosophy department to establish the Hoskinson Center for Formal Mathematics, with the goal of studying formal logical systems. He has also been involved in backing independent US presidential candidate Robert F. Kennedy Jr. in May 2024.

Cardano's proof-of-stake system

Cardano is a decentralised, proof-of-stake (PoS) blockchain that is designed to be more efficient than blockchains that rely on proof-of-work (PoW). Cardano is built on the ground-breaking PoS consensus protocol, Ouroboros, which was the first blockchain consensus protocol to be developed through peer-reviewed research.

Proof of stake is a type of consensus mechanism that uses the amount of stake (or value) held in the system to determine consensus. In other words, it is a set of rules that each network participant adheres to. As blockchains are not controlled by a single, central authority, a consensus protocol is used to allow distributed network participants to agree on the history of the network captured on the blockchain.

Cardano's PoS consensus mechanism, Ouroboros, is an environmentally sustainable, verifiably secure protocol with rigorous security guarantees. It improves the security guarantees of PoW protocols at a fraction of the energy cost. Ouroboros applies cryptography, combinatorics, and mathematical game theory to guarantee the protocol's integrity, longevity, and performance, as well as that of the distributed networks that depend on it.

Ouroboros is the first provably secure PoS protocol. It combines unique technology and mathematically-verified mechanisms, which, in turn, combine behavioural psychology and economic philosophy, to ensure the security and sustainability of the blockchains that depend on it. The result is a protocol with proven security guarantees that can facilitate the propagation of global, permissionless networks with minimal energy requirements.

Cardano's PoS consensus mechanism relies on staking to validate transactions and reward cryptocurrency to validators, whereas Bitcoin's PoW relies on cryptocurrency mining. Cardano's PoS expends drastically less energy than Bitcoin's PoW by removing the need for computers to use large amounts of electricity to power complex mining calculations.

Cardano's PoS consensus mechanism also makes its validation process more accessible to the average user than Bitcoin's PoW. Cardano staking can be done simply by installing compatible wallet software on computers or devices.

Some of the primary advantages of PoS over PoW include rigorous security protocols, reduced centralisation, energy efficiency, and cost efficiencies.

Cardano's potential for growth

Cardano has a lot of potential for growth, which could be why Elon Musk might consider investing in it. Firstly, Cardano has been described as a cryptocurrency with incredible potential outside of being a tradable asset. It has strong technical foundations and a supportive community, which have made ADA one of the top cryptocurrencies in the world. Cardano's proof-of-stake mechanism for validating block transactions is also far more energy-efficient than Bitcoin, consuming 4 million times less energy. This is particularly appealing to environmentally conscious investors like Elon Musk, who has expressed concerns about Bitcoin's environmental impact.

Cardano's price has also been steadily increasing. In 2021, the price of ADA was $1.96, and as of July 2024, it is predicted to reach $2 by the end of the year. By 2025, the price of ADA is expected to oscillate between $1.81 and $2.42, with an average price of $2.115. This growth is expected to continue in the long term, with predictions of ADA's price soaring to between $9.12 and $10.32 by 2030.

Cardano's founder, Charles Hoskinson, who is also the creator of Ethereum, has offered advice to Elon Musk on improving Dogecoin, which Musk has been heavily promoting. Hoskinson's advice includes improving Dogecoin's transaction capacity and implementing quantum resistance. This shows that Cardano's founder is technically competent and willing to engage with other cryptocurrencies, which could be beneficial for Cardano's growth.

Overall, Cardano has strong fundamentals, a supportive community, and a positive price outlook, all of which contribute to its potential for growth in the coming years.

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