The Soaring ADA: High Control, Heavy Marketing, and Past Scandals

This article is an original piece by Chain Catcher, authored by Wang Dashu.

1. Why is ADA rising so much?

As an early public chain project in the industry, Cardano's token ADA has recently seen an astonishing rise, with a total market value reaching a peak of $46 billion, briefly surpassing BNB and USDT to become the third-largest cryptocurrency by market capitalization. However, even in a bull market, the value support and logic behind ADA's rise have left most crypto enthusiasts puzzled and questioning.

Of course, most of ADA's community supporters are unfazed by these criticisms. As ADA holders and beneficiaries, they fervently promote ADA in various Twitter communities, even claiming that Cardano has the capability to surpass Ethereum, with their Twitter discussions often exceeding those of BTC. Moreover, financial bloggers who frequently promote ADA have stated that some of their fans have sold their homes to buy ADA, which is quite extreme.

Analyzing the reasons behind ADA's rise from a news perspective, the main positive factors are the upcoming launch of smart contract functionality and the continuous increase in ADA's staking rate. At the end of January this year, Cardano's founder tweeted that its smart contracts would be open-sourced starting in March. By the end of February, he announced that the mainnet staking pool, Charles Pool, had begun operation, and the new economic model under the codename Mary protocol had successfully been applied to the Cardano mainnet. A series of positive news was rhythmically released, undoubtedly boosting market confidence.

Additionally, Cardano officials also tweeted that in January, ADA broke past its previous highest record in growth data, with the number of on-chain ADA wallets increasing by 4,000 in a single day, while new staking exceeded 100 million ADA in a single day, both showing significant growth.

Chain Catcher verified on the data website Stakingrewards that the current staking yield for Cardano is around 6%. Although this is slightly lower compared to the over 10% staking yields of Solana, AVAX, and DOT, the staking rate for the ADA token has reached 73%, surpassing DOT and ranking first among tokens.

Considering that ADA does not have a technical advantage over other public chains, this data likely indicates that ADA holders are more concentrated and subject to high control.

Moreover, the project team has also put considerable effort into marketing. For instance, they have generated high search interest for Cardano on Google, attracting a lot of retail investor attention; they have also publicly expressed their focus on regions like Africa, where financial infrastructure is relatively underdeveloped, claiming they aim to help 5 million African users establish digital identities within the Cardano ecosystem in the future.

2. Disreputable team background

Chain Catcher has learned that Cardano's operational structure is quite complex, jointly operated by IOHK, the Cardano Foundation, and Emurgo. IOHK leads technical development, the Cardano Foundation is responsible for promotion, and Emurgo is the funding party and regional business, a Japanese company that primarily helps projects integrate their businesses into Cardano's distributed blockchain ecosystem.

Cardano's founder, Charles Hoskinson, is also the head of IOHK, a company that claims to provide financial services to billions of unbanked individuals. Not only is it responsible for the technical development of ADA, but it also manages partners for ETC. Moreover, Charles was one of the eight co-founders of Ethereum and co-created BitShares with EOS founder BM, making him a star entrepreneur alongside Vitalik Buterin and BM to some extent. Furthermore, according to official introductions, Cardano's development team consists of engineers and scientists, which is considered top-tier in the context of the blockchain industry in 2017. However, unfortunately, this halo did not last long, as founder Charles and team members were exposed in 2018 for a series of scandals, with keywords like young models, prostitution, and internal strife.

According to public reports, in July 2018, a former business developer for Emurgo in China, Li De, angrily accused the Emurgo team of using ICO funds for prostitution, completely neglecting their duties, and screenshots of the group chat spread throughout the crypto community. Founder Charles was criticized by Wan Hui, saying, "You play too much!" Moreover, the three operational parties behind Cardano had significant disputes over application attributes, as the Cardano Foundation wanted to develop gambling applications, while the other two parties aimed to create a public chain, leading Cardano into a severe internal conflict stage.

Shortly after these scandals, the market entered a bear market low, and this so-called Japanese Ethereum based on the PoS consensus mechanism began to stagnate. The nominal five development phases: Byron, Shelley, Goguen, Basho, and Voltaire only progressed to the second phase—Shelley, and then fell silent. The version originally scheduled to launch in April 2019 was delayed for a year before any news emerged.

In July 2020, the official announcement of the continuation of the Shelley upgrade was made, stating that it would soon launch a DPoS consensus mechanism based on the Ouroboros algorithm, facilitating subsequent user mining and staking operations. However, as of now, six months have passed, and the slogans have yet to materialize. Interestingly, the DPOS mechanism adopted by Cardano is almost identical to that of EOS.

3. Continuous questioning

Of course, the market is concerned about coin prices, so Cardano is most questioned about its price.

According to data from Feixiaohao, ADA's current circulating market value is 228.051 billion RMB, and while its ranking often fluctuates, it can remain in the top five for a long time. As a public chain project without smart contracts and with extremely slow development progress, Cardano is often perceived as having a hollow reputation, and the rapid price increase of its token ADA has led many to feel that something unusual is afoot, with some netizens even joking that Cardano has the shadow of a Ponzi scheme.

"ADA has a total issuance of 45 billion, of which 25 billion is for platform subscriptions, 5 billion is for supporting the operating funds of the development company, and another 15 billion is continuously distributed in the form of block rewards. Although the issuance is constant, the total amount is massive at 45 billion, with over 26 billion currently in circulation. In the past 90 days, the price has increased by 645%. Something unusual is definitely afoot; this coin has been rising like some Ponzi scheme's air coin, and when it falls, we won't even know how it died." A Weibo influencer complained while reminding investors to keep their eyes open and calm their restless hearts to discern the truth.

This influencer is not the first to suspect that Cardano has the shadow of a Ponzi scheme. As early as mid-last year, when the market was in a transitional phase and ADA's price surged, relevant personnel from the official community released photos of ADA entering rural areas for roadshows and holding large meetings with banners. They also posted the reward mechanism offered by a Ponzi scheme based on ADA, which, at first glance, closely resembled the gameplay of well-known Ponzi schemes previously exposed by Chain Catcher, divided into dynamic and static rewards. However, this model was named the Shelley Plan.

The recently announced Mary fork, which will make Cardano a more decentralized smart contract platform, was mentioned during ADA's rural outreach. According to reports at the time, the aforementioned Shelley Plan was derived from ADA's second phase, Sherry. Based on this, the project team packaged a project called Emurgo Wallet, with a specific mechanism for staking mining. According to related materials, investors can exit with three times their investment for 10,000 ADA, 3.5 times for 20,000 ADA, and four times for 40,000 ADA, which is a typical Ponzi scheme gameplay.

Although this is a revelation, it aligns closely with Cardano's current situation. Although the project team has released many positive news items, there has indeed been no actual innovation or upgrade in terms of technology or economic models, and the application ecosystem is significantly lagging behind other leading public chains.

Not long ago, BM, who had previously worked with Cardano's founder Charles, publicly accused him of having entered a technical dead end. "Like GameStop, they have a story that invites speculation. But its price is completely disconnected from the long-term viability of the technology that can help it achieve its original purpose." BM said.

While well-known crypto industry researcher Gu Yanjun has publicly expressed optimism about its development prospects, he also objectively analyzed the issue of ADA's market value. "The current market value is clearly too high. Considering the overall cycle of the cryptocurrency industry, I believe this bull market has mainly been driven by market purchases of Bitcoin, and there has been no fundamental change in the user base trading various cryptocurrencies outside of Bitcoin." Gu Yanjun said.

In summary, the price surge of ADA can be considered quite absurd, likely based on high control, a bull market, and heavy marketing leading to a short-term speculation, with the investment risks accumulating rapidly. Investors should approach it with caution.