Cardano’s Alonzo upgrade brings smart contracts, DeFi and NFTs, competing with Ethereum

Upcoming Cardano’s upgrade aims to bring in the network new abilities like smart contracts and non-fungible tokens (NFTs), as well as “programmability,” as per founder Charles Hoskinson. However, it could take several months before DeFi protocols come to the mainnet due to a lack of concurrency and tools.

Cardano’s big “Alonzo” upgrade rolls out on Sunday and will usher in the network’s ability to run a range of decentralized crypto applications, from smart contracts to non-fungible tokens, and aims to bring what founder Charles Hoskinson calls “programmability” to the blockchain.

“One of the magical superpowers of Cardano is that we built it with upgradability in mind,” Hoskinson told Insider. “It means that Cardano now supports programmability. That’s like when JavaScript came to the web browser. So, you go from static, boring web pages to Facebook and Google and YouTube,” he said.

The upgrade sets the stage for decentralized applications, known as dApps, to go live on the network. Charles Hoskinson has previously stated that Cardano will become a hub for DeFi and NFTs, but it turns out that it will be some time after Alonzo launches before DeFi protocols go live on the network. Several Cardano projects say that they are developing scaling solutions that will allow them to run on the network.

According to Hoskinson and other sources connected to Cardano, functional dApps such as decentralized exchanges will be added at a later stage. Decentralized exchanges, also known as DEXs, are a critical component of DeFi. One of the key reasons for the delay is Cardano’s EUTXO-based protocol design, which presents scaling issues for dApps.

However, even Cardano’s founder noted in a Wednesday video stream that there were many “open questions” about how the network would look following the upgrade. “Templates, abstractions, and dApps have to be built like any other ecosystem,” he said.

Nevertheless, the Cardano community is optimistic about the months ahead. Positive sentiment has prevailed after Cardano invested in more than 160 projects through its Catalyst innovation fund.

The same goes for the investors. Since Cardano announced in a video on August 13 that it would release the final Alonzo “purple” update on September 12, the network’s native ADA cryptocurrency has gained around 33% and is now the third-largest digital coin by market value, with a capitalization of $82 billion, according to coinmarketcap.com. Although Bitcoin, the biggest crypto with a market value of about $884 billion, has gained just around 4% in that time.

Cardano’s energy-efficient consensus protocol could rightfully dispute Ethereum’s high-fees and low transaction output system. Ehteruem’s high gas fees play into Cardano’s favor as the network is less energy-dependent. Not relying on miners carries lower transaction fees while increasing transaction speed outputs. Thus, Cardano’s peer-reviewed methodological approach could pay dividends.