Cryptocurrency has made waves in the investing world this year, with big names such as Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) frequently making headings.

One of the more recent gamers in the crypto space is Cardano (CRYPTO: ADA), and it’s been steadily gaining traction amongst investors. Over the past month, the rate of Cardano has exploded by more than 55%– compared to Ethereum’s 4% gain and Bitcoin’s 1% drop.

While Cardano may be the new crypto on the block, it has some huge advantages. But is this the correct time to invest?

Image source: Getty Images. The benefits of Cardano

Cardano was developed by the co-founder of Ethereum, so the 2 cryptocurrencies share some functions. Both allow the development of clever agreements, for instance, which are digital arrangements that use blockchain technology to verify deals. Some investors think clever contracts have the possible to change society, particularly the legal industry.

Compared to Bitcoin, Cardano is more energy-efficient. Bitcoin uses a proof-of-work protocol throughout the cryptocurrency mining process. That indicates that to validate transactions and make tokens, Bitcoin miners need to utilize high-powered computers to solve increasingly tough puzzles. That’s incredibly energy-intensive, and Bitcoin has drawn criticism for its impact on the environment.

Cardano, on the other hand, utilizes a proof-of-stake protocol, through which miners need to put their own crypto holdings at stake to confirm deals. This results in faster transaction times and significantly less energy usage.

Where it fails

While Cardano has lots of advantages, it has its disadvantages as well– primarily that it’s not as well called its competitors. Bitcoin is the most popular cryptocurrency and has the most name acknowledgment, offering it the first-mover advantage in the crypto space.

Ethereum is the 2nd most popular cryptocurrency, and it shares many of the exact same advantages as Cardano. Not just does it also host smart contracts, however it’s preparing to transfer to a proof-of-stake network also. Ethereum is likewise home to non-fungible tokens and the decentralized financing motion, providing it more real-world utility than Cardano.

Obviously, this does not always suggest Cardano won’t find ways to exceed its rivals down the roadway. It is still a fairly brand-new cryptocurrency with room for growth. Likewise, cryptocurrency isn’t a zero-sum video game, so it’s possible for numerous currencies to exist side-by-side with their own advantages.

Is Cardano right for you?

Before you invest anywhere– whether you’re buying cryptocurrency or stocks– make certain you’re taking a long-lasting outlook.

You must just purchase Cardano if you think it will perform well over the next a number of years or decades. Investing isn’t a get-rich-quick technique, so attempt not to get captured up in fashionable investments that could make a great deal of cash in the short-term.

No one understands for certain whether cryptocurrency will succeed, however if you think in its long-term capacity, be prepared to hold your financial investments through the waves of volatility. Bitcoin has actually lost more than 80% of its value in the past, and Ethereum’s value has actually dropped by almost 95% on occasion. If you’re not comfy with short-term volatility, cryptocurrency may not be the best investment for you.

Will Cardano ultimately become a traditional kind of currency? Nobody knows for sure. It does have its advantages, however it’s still highly speculative at this moment. If you think in its potential, it could make for a strong long-lasting investment. Otherwise, there are a lot of other financial investment options out there.

This post represents the viewpoint of the writer, who might disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis– even one of our own– assists all of us believe seriously about investing and make choices that help us become smarter, better, and richer.