ADA plunges amid cryptocurrency selloff despite Cardano’s ‘smart contract’ upgrade

Cardano’s ADA token, the world’s third largest cryptocurrency by market capitalization, plunged 8% over the past 24 hours, despite that the blockchain on Sunday launching its long-awaited alonzo upgrade, which enables “smart contract” functionality and allows developers to build decentralized applications, or DApps. 

The token was recently trading at $2.42, according to CoinDesk data.  

ADA’s tumble comes amid a broader selloff of cryptocurrencies. Bitcoin was trading at $44,636, down 2.9% over the past 24 hours. Ether recorded a 5.3% loss over the past 24 hours, recently trading at $3,238. 

The fall for ADA may partly reflect a “buy the rumor, sell the news” dynamic, but the upgrade could boost ADA’s price in the long term, analysts said. 

The alonzo upgrade will “significantly increase Cardano’s functionality” and “lead to a material increase in its value,” Nick Spanos, co-founder of smart contracts marketplace ZAP Protocol wrote to MarketWatch through email. 

As decentralized finance, or DeFi, and nonfungible tokens, or NFT, record explosive growth, Cardano’s capacity to support smart contracts would allow it to better compete with other blockchains such as Ethereum, analysts said.

“We expect to see the first simple smart contract scripts deployed on Cardano within hours of the HFC (hard fork combinator) event,” Tim Harrison, marketing and communications director of Cardano’s creator Input Output wrote in a Saturday blog post. 

“It will take a while longer for more sophisticated DApps to start rolling out via the public testnet,” Harrison wrote. 

Founded by Ethereum’s co-founder Charles Hoskinson and launched in 2017, Cardano is a “proof-of-stake,” or POS blockchain, which means a person can mine new tokens or validate block transactions based on the amount of coins they hold. Different from bitcoin’s “proof-of-work” system, which requires a lot of computational efforts to add a new block, the POS system claims to be more environment-friendly. 

Ethereum is in the process of transitioning from “proof-of-work ” to “proof-of-stake.” 

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