Can Cardano Compete With Ethereum Following Its Hydra Update?

Cardano has deployed its Hydra upgrade on the mainnet to enable layer-2 (L2) scalability. Could it emerge as an L2 alternative to Ethereum?

By accelerating transaction speeds through high throughput, Hydra aims to lower transaction costs through scaling. Its first upgrade in this regard intends to make Cardano more affordable and quick.

What’s Changed After Cardano Hydra Release?

Total value locked in the Cardano DeFi ecosystem has been steadily rising over the past several months after slowing down after the wave of bankruptcies last year. The blockchain ranks 17th on DeFiLlama, with 19 protocols controlling a TVL of $139.67 million.

Additionally, the debut of the Hydra upgrade occurs at a time when Ethereum is struggling with expensive gas fees. A whale recently paid 64 ETH to complete one transfer.

With a working layer-2 network, Cardano could become cheaper and more efficient to use. According to the community, the skyrocketing gas fees are hindering artists from minting NFT projects on the Ethereum network.

However, Ethereum could regain control of its gas fees with the next network upgrade called Dencun. Until then, the estimated median gas price stands at 14.3 gwei according to ETH Gas Station.

Cardano Operating at 94% Capacity

Cardano is also nearing maximum capacity. In a recent tweet, DCSpark co-founder Sebastien Guillemot noted that Cardano is only six percent away from hitting full network capacity.

According to the executive, all transactions would be queued once Cardano reaches a 100% load. This implies that there would be a longer wait for each transaction to appear on the chain. Guillemot predicted that if Cardano reaches 100% capacity, stake pools would start offering priority access. In his words, “They may sell it to users, and they may sell it to dApps (ex: prioritize one DEX over another).”

He also believes 2023 will be a year of improvement because most of the roadmap in terms of scalability has been accomplished. In the meantime, Cardano is increasing network activity and beating Ethereum in transaction costs. According to recent data, Cardano’s daily active addresses have steadily grown. The buzz surrounding the layer 2 chain’s social dominance metric is another indicator of its potential this year.

Dan Gambardello, crypto influencer and the founder of Crypto Capital Venture believes that Cardano and Bitcoin are the market’s “ultimate crypto power play.”

But, in terms of price, it’s still lacking. It currently ranks seventh in terms of market cap, but the price of its native ADA has decreased by more than 40% in the past year.