Cardano’s Ethereum-сompatible sidechain project opens entry into the DeFi space

Cardano plans to make its blockchain interoperable and compete with the DeFi ecosystem based on Ethereum. Using its native altcoin (ADA), Cardano is getting closer to its decentralized finance objectives in partnership with dcSpark.

dcSpark, a product-based DLT company, announced on Wednesday plans to develop a new sidechain project titled “Milkomeda” to aid cryptocurrencies not related to EVM (Ethereum Virtual Machine) in achieving mass adoption.

According to the statement, the novel protocol will be launched on the Cardano blockchain, along with other non-EVM chains like Solana and Polkadot, which will allow the use of wrapped assets to pay for transaction fees.

For this implementation, dcSpark claims to have developed a novel technology called “wrapped smart contracts.” This feature allows teams to deploy EVM-compatible smart contracts on the sidechain without having to move native Cardano smart contracts over to the sidechain themselves.

“In other words, as an example for Cardano, Milkomeda will allow sidechains to be deployed that connect directly to the mainchain and use wADA (wrapped ADA) as the asset to pay for transaction fees,” the release stated.

This new protocol’s goal is to allow developers and users to interact and develop their apps on the Cardano blockchain. The blockchain itself is also in the deployment process of smart contract abilities on the mainnet till September. That has already added the value of the ADA token in the market.

In addition, Milkomeda will bring EVM compatibility into the Cardano ecosystem, which is also a part of the roadmap.

“The EVM-based sidechain which will connect directly to Cardano will be named M1 and will be both the very first Milkomeda sidechain as well as the very first Cardano sidechain. It will use wADA as its base assets, and the Milkomeda validators who run the sidechain will be selected from existing stake pool operators and other trusted entities within the ecosystem,” the release added.

The reason for launching a sidechain on Cardano is not for scaling the network but purely to enable Ethereum compatible contracts, the dcSpark team said in its announcement.

The Cardano network is not natively compatible with the Ethereum Virtual Machine, a software environment for executing transactions on the Ethereum blockchain. Unlike Ethereum’s account-based model, Cardano has adopted an extended UTXO for settling transactions.

The dcSpark team also revealed that its roadmap has plans for more sidechains that connect Cardano with other Layer 1 networks such as Solana and establish interoperability between the various sidechain implementations.

On that path, Cardano is following the steps of Ethereum, the largest smart contract platform, which has become the base layer for the DeFi and NFT spaces. For this reason, many competing Layer 1s have made efforts to offer certain interoperability with Ethereum, with the help of sidechains or standalone networks.

However, its high gas fees and congestion have often deterred many users, following which some jumped off Ethereum’s ship. If Cardano can provide users with low fees and secure alternatives, it can fill the void left by Ethereum during periods of high activity, which could lead to a noticeable shift in DeFi development.

dcSpark was co-founded in April by Nicolas Arqueros, Sebastien Guillemot, and Robert Kornacki. CEO Nicolas Arqueros is the ex-CTO of EMURGO (which does for Cardano the equivalent of what ConsenSys does for Ethereum) and presently “serves as a Board Member at the Cardano Foundation.” CTO Sebastien Guillemot is the former VP of Engineering & Cardano Product Manager at EMURGO. CSO Robert Kornacki was formerly Head of Research at EMURGO. It is noteworthy that the last Ethereum rally happened in late 2020 on the back of the DeFi boom, although it was a slow process. Even if Cardano manages to deploy smart contracts on its network, it may take some time to function smoothly.