On March 2, President Donald Trump highlighted Cardano’s ADA token as one of the cryptocurrencies set to be included in the United States’ strategic cryptocurrency reserve. An executive order issued on March 6 further detailed that altcoins would become part of the Digital Asset Stockpile (DAS), managed under the "responsible stewardship" of the Treasury.
ADA’s potential inclusion in this government-managed asset portfolio took the industry by surprise, sparking a mix of intrigue and significant criticism. While the token has a dedicated supporter base, many individuals within the crypto space questioned its selection for the digital asset stockpile.
Let’s delve into the underlying blockchain technology to evaluate whether ADA’s fundamentals and utility justify its inclusion in the US Digital Asset Stockpile.
The Argument for ADA in the US Digital Asset Stockpile
Debuting in 2017 through an ICO, Cardano stands as one of the earlier smart contract platforms. Its distinctiveness lies in a research-focused design methodology and the employment of a delegated proof-of-stake mechanism along with an extensive UTXO accounting model.
The aspirations of Cardano as a smart contract platform have been thoroughly articulated by a community member known as X ‘Cardano_whale,’ who pointed out key aspects such as "non-negligible fees, voting power, decentralized consensus, and all native token trading paired with it."
The discussion emphasizes ADA’s utility—a feature that many venture capital-backed coins seem to lack—with Cardano’s decentralized governance emerging as a pivotal advantage.
Cardano’s Project Catalyst stands out as one of the largest decentralized funding movements within the crypto landscape. It facilitates the democratic allocation of treasury funds derived from transaction fees and inflation to community-driven proposals. Additionally, unlike the Ethereum network, which has yet to fully transition to on-chain governance for major updates, Cardano aims to be entirely governed on-chain.
The Plomin hard fork, executed on January 29, was heralded by the Cardano Foundation as a move towards “full decentralized governance.” This development empowers ADA holders with genuine voting rights concerning parameter alterations, treasury withdrawals, hard forks, and the overall direction of the blockchain.
As for Cardano’s native token, ADA is integral to network fees, staking, and governance decisions. Its maximum supply is capped at 45 billion, with 31 billion distributed initially—26 billion sold during the public offering and 5 billion earmarked for IOHK, Emurgo, and the Cardano Foundation.
The remaining 14 billion ADA are reserved for gradual release through minting, with 0.3% of ADA reserves allocated as rewards every five days, resulting in diminishing inflation as reserves are used up. Currently, the inflation rate stands at approximately 4%, with a circulating supply of 35.95 billion ADA.
While a capped supply typically supports a cryptocurrency’s value and could validate its inclusion in the DAS, other metrics such as transaction fees and staking yields lag significantly behind industry competitors.
Are Cardano’s Activity Levels a Cause for Concern?
Even with its extensive tenure in the smart contract realm, Cardano has faced challenges in generating sufficient activity to assert its position among leading platforms. Consequently, the limited use of ADA raises questions about its long-term viability.
According to a recent report, Cardano averaged around 71,500 daily transactions in Q4 2024, with 42,900 active daily addresses. In contrast, quarterly fees amounted to $1.8 million, starkly contrasting Ethereum’s $552 million during the same timeframe.
Cardano’s annualized real staking yield, when adjusted for inflation, hovered around 0.7% in Q4, while Ethereum commanded a yield of 2.73%.
Other blockchain activity indicators further highlight concerns regarding ADA’s potential inclusion in a government portfolio:
- With 449 developers contributing to the blockchain, Cardano ranked 12th in developer presence among blockchain projects.
- The share of Cardano’s stablecoins accounts for a mere 0.01% of the $224 billion total stablecoin market capitalization.
- Cardano’s DeFi ecosystem lags at only 0.3% of the total $169 billion DeFi sector. However, if core staking— which doesn’t require locking and hence isn’t reflected in Total Value Locked (TVL)—is considered, that share could rise to 12%.
- DApp activity on Cardano remains minimal compared to other smart contract platforms. In Q4, it averaged just 14,300 daily DApp transactions, placing it far outside the top 25, with a sharp decline of 73% from Q4 2023 when it logged 52,700 daily transactions. This notable drop signals a troubling trend for a blockchain still seeking to expand its presence.
Can ADA’s Potential Justify Government Investment?
The rationale for including ADA in the strategic crypto reserve appears considerably weaker compared to Ethereum and Solana, which lead across various categories. Cardano’s low activity levels, limited adoption, and lackluster staking incentives cast doubt on ADA’s appropriateness for a government-controlled asset pool.
Conversely, ADA’s finite supply and Cardano’s emphasis on decentralization do afford it a distinct advantage, which could spur greater adoption and significance over time.
Innovative projects are part of the discussion, as some are examining Cardano’s compatibility with Bitcoin through the eUTXO system, which may pave the way for new opportunities in DeFi and enhance activity on Cardano.
Could this emerging potential be sufficient to warrant ADA’s inclusion in the digital asset stockpile? One observer suggests that the Cardano ecosystem must attract and nurture developers to create appealing products and applications. This, coupled with compelling narratives to rally broad support, would position ADA more favorably in the context of national reserve inclusion.
Disclaimer: This content serves informational purposes only and is not intended as legal or investment advice. The views expressed are those of the author and may not reflect those of any affiliated entity.