In the current cryptocurrency landscape, a new paradigm suggests that Cardano (ADA) might be a more attractive investment than Solana (SOL). This paradigm does not focus heavily on the technological foundations of either chain but highlights a factor investors should consider today before it potentially impacts prices in the coming years.
The Importance of Ecosystem Development
A key element in supporting an investment thesis for a cryptocurrency is the activity level on its blockchain. When users find projects on a chain appealing—particularly those offering significant decentralized finance (DeFi) services—it attracts capital, positively affecting the native token’s price. Conversely, if a chain lacks compelling reasons to attract capital, it tends to flow elsewhere to seek investment returns or utility.
Investors must not only understand current activity levels on a chain but also future potential. Increased future usage typically drives prices up for early investors. While predicting whether a chain will see increased future use is challenging, a robust pipeline of intriguing or valuable projects suggests future demand.
Currently, Cardano has a market cap of $23.6 billion, considerably smaller than Solana’s $74.3 billion. Normally, the scale of software development within each chain’s ecosystem would correlate with its size, indicating Solana should have about three times more development activity than Cardano.
Despite challenges in measuring software development activity, certain composite metrics can track developers’ substantive contributions to a chain’s projects. According to Santiment, a crypto data provider, Solana experienced approximately 464,000 ecosystem development events over the last year, while Cardano saw 389,900 events. Cardano’s level of developer activity is noteworthy given its size, and it is not merely temporary.
Factors Beyond Developer Activity
While Cardano’s relative increase in developer activity is promising, it does not automatically make it a preferable investment.
Cardano faces significant disadvantages. Transactions on Cardano are slower and more expensive than on Solana. A swap on Solana takes about a second and costs a fraction of a penny, whereas on Cardano, it takes several seconds and costs roughly $0.20 on average. This cost difference incentivizes more developers to create applications on Solana.
Additionally, Cardano’s ecosystem lacks Solana’s diversity and vibrancy. It is missing critical growth areas such as artificial intelligence and capital-attractive segments like meme coins. Important categories, such as stablecoins, are relatively small on Cardano compared to Solana. Consequently, Cardano has fewer opportunities for capital flow and a less robust toolkit for handling large transactions.
While Cardano’s increase in development activity is encouraging, suggesting a moderate reason for investment, it is overshadowed by the current weaknesses in its ecosystem. At present, there is insufficient justification to prefer Cardano over Solana.
This scenario might evolve over time, particularly if Cardano’s activity level continues to rise. Nevertheless, investors should recognize that development activity is only beneficial if it leads to valuable projects. Currently, Cardano is not a primary destination for projects that hold significant value for cryptocurrency investors.
