Author: Adaverse

2022 passed in a flash, and after witnessing several "black swan" events such as Terra/Three Arrows Capital/FTX, the entire crypto market underwent extreme stress tests one after another.

All that has happened is but a prologue. As a long-established public chain project, Cardano also withstood another round of bull and bear tests in the crypto industry while being affected by the collapse of major players in the crypto world in 2022.

The hidden threads are long and intricate. We will review the key milestones and potential trends in Cardano's development in 2022, as well as the anticipated changes in 2023, to explore this critical year for the development of the Cardano ecosystem.

Catalyst of the Vasil Hard Fork Upgrade

The biggest milestone event in Cardano's development in 2022 was undoubtedly the Vasil hard fork on September 23.

This hard fork upgrade involved significant improvements to Cardano's custom smart contract language, Plutus, marking Cardano's complete transition from a traditional public chain to a smart contract public chain, laying the foundation for a new wave of DApps, new users, and ultimately the growth of Cardano's ecosystem TVL.

The main upgrade features include:

• CIP 31 introduced a new reference input to access information stored on the Cardano blockchain, allowing anyone to look up outputs without processing them;
• CIP-32 proposed a solution that allows data to be attached directly to outputs instead of data hashes, enabling simpler communication of data values between users;
• CIP-33 introduced the ability to reference scripts without including them in every transaction, significantly reducing the impact of scripts on transaction size;

In short, the Vasil hard fork upgrade aims to enable the Cardano blockchain to do more and do it better, significantly improving the network's speed and scalability, allowing it to support more complex DApps with a better user experience, thereby truly building a smart contract platform and exploring the narrative space of Cardano's "smart contract platform" in the second half, while laying the groundwork for a new wave of DApps, new users, and ultimately the growth of Cardano's ecosystem TVL.

Emergence of the DApp Ecosystem Matrix

With Cardano entering the smart contract era last September, the infrastructure of the Cardano ecosystem has gradually improved over the past few months, attracting market capital's attention and influx, and the vision of building a smart contract platform is slowly unfolding.

As of now, nearly half a year has passed, and Cardano has gradually formed an ecological pattern centered around DEX and NFT projects, with various types of applications such as DEX, Launchpad, and stablecoins emerging in the DeFi field, marking the initial emergence of Cardano's DApp ecosystem matrix.

Synthetic Asset Protocol Indigo Protocol

As early as 2021, with the rapid advancement of the Ethereum DeFi concept, the derivatives track (futures, options, synthetic assets, etc.) was once seen as the most promising future sector. However, two years later, the performance of the derivatives track has been lackluster.

Nevertheless, in 2021, Mirror's rise alongside the Terra ecosystem indicated to some extent the relative advantages of high-performance public chains in the synthetic asset track, which is a natural advantage for Cardano:

• On one hand, leveraging Cardano's performance and cost advantages, many unique functionalities that were limited by the Ethereum main chain can gradually be realized;
• On the other hand, Cardano's total market capitalization still stands at $13.7 billion (CoinGecko data from February 22), ranking just behind Bitcoin, Ethereum, BNB, and XRP among non-stablecoins, which means ADA, as an underlying asset, can provide sufficient support for the synthetic asset ecosystem;

Among them, Cardano's synthetic asset protocol Indigo Protocol launched the stablecoin iUSD in November 2021, allowing users to mint stablecoins by collateralizing ADA.

In the past month, Indigo Protocol's growth has reached as high as 50%, and in terms of TVL, it is currently the third-largest DeFi protocol on Cardano (nearly $20 million). The synthetic asset track in the Cardano ecosystem is gradually gaining momentum, and whether the market can spark another "DeFi summer" for Cardano is indeed worth looking forward to.

Collateralized Stablecoin Djed

After experiencing rampant issuance in 2020 and 2021 and the stability test in 2022, stablecoins have clearly entered a new stage of development. Moving forward, they will play a more important role in both the deep binding use in the crypto world and in cross-border payments.

As the "elephant in the room," Cardano must strengthen its stablecoin matrix to further advance in the competitive landscape of public chain ecosystems.

Djed, as Cardano's dollar-pegged over-collateralized algorithmic stablecoin, plays this crucial role --- it has been developed over more than a year in collaboration between blockchain company Coti and Cardano's chief developer Input Output.

Djed officially launched on the mainnet in January, receiving support from MinSwap, Wingriders, and MuesliSwap, and is gradually integrating more Cardano ecosystem projects.

From this perspective, Djed has built a series of scenarios around the demand for stablecoin usage from the very beginning, creating a breakthrough path for the entire Cardano ecosystem with "stablecoin + scenarios."

If it can gradually build its composable ecosystem based on ADA in various tracks such as DEX and derivatives, and ultimately converge the core scenarios of the ecosystem around the demand for stablecoins, it will deepen the robustness of the ecosystem step by step, allowing Cardano to move towards a relatively healthy positive cycle of stablecoin ecology.

Anchor Stablecoin USDA

In addition, recent events surrounding BUSD suggest that the stablecoin sector may face a "strong regulatory" norm in 2023, where compliance outweighs everything.

Cardano's commercialization incubation company EMURGO has also made preparations for this --- planning to launch a fully fiat-backed, regulatory-compliant anchor stablecoin USDA in early 2023.

Overall, according to the future ecosystem map previously released by the Cardano community, there are currently project teams deploying in various sectors such as lending, wallets, and NFTs, and the multi-line layout in the stablecoin sector is particularly noteworthy in 2023.

NFT Track Overtaking

Another trend worth noting in the Cardano ecosystem in 2022 is the overtaking trend in the NFT track.

In the month following the Vasil upgrade last September, Cardano's NFT trading volume reached $19 million, ranking third among NFT networks, only behind Ethereum and Solana.

This trend has been further solidified, and overall, Cardano's activity has indeed increased significantly since the major Vasil upgrade in September --- CryptoSlam's latest data shows that the average daily trading volume of NFTs on the Cardano network has been around $250,000 recently.

From a micro perspective, there is a clear upward trend in specific NFT projects on the Cardano network, with the Clay Nation series of NFT artworks being the most typical example:

As a clay animation art and culture project built on Cardano and acquired by Snoop Dogg, the Clay Nation series of NFTs has garnered increasing attention following the release of related music videos produced by Snoop Dogg and his son Champ Medici.

Meanwhile, looking at the total volume, the top three NFT series on Cardano have accumulated over $20 million in trading volume, providing a solid foundation for nurturing quality IP and hits.

For NFT projects, the most important factors are their brand awareness and the community consensus they build. Based on the community awareness initially constructed in 2022, whether Cardano's NFT track can gradually form a strong community and open culture in 2023, and through long-term meticulous cultivation establish IPs with enormous commercial value like BAYC, is a question worth long-term attention.

Contributing Public Product Standards to the Industry

In addition to the ecosystem, Cardano's development company Input Output Global (IOG) has also collaborated with the University of Edinburgh to develop the blockchain industry's first "Edinburgh Decentralization Index" (EDI) to measure the effectiveness of decentralization in blockchain, aiming to increase transparency and inclusiveness in the entire decentralized technology field.

The index will evaluate the degree of decentralization of blockchains based on several aspects, including APIs, consensus methods, hardware, software, networks, token economics, governance, and the geographical location of validators, contributing public product standards to the industry.

Conclusion

Looking back at 2022, the collapse of Terra in May brought a huge shock to the stablecoin sector, especially algorithmic stablecoins, profoundly affecting the evolution of its internal and external landscape; subsequently, the FTX crisis in November further intensified users' distrust of centralized exchanges, leading to a new trend of market capital flowing onto the chain, with the importance and attention on-chain becoming increasingly significant.

Throughout these waves of crises, Cardano has always focused on self-construction and has continuously advanced towards the vision of "Making the world work better for all."

The road is long and arduous, but we will surely reach our destination.