What the Alonzo upgrade means for Cardano

As decentralized finance (DeFi) gains momentum, not only is Ethereum hitting the big leagues, but now alternative blockchain platform Cardano is also gearing up to make its own DeFi debut with the launch of smart contracts.

Cardano’s upcoming Alonzo upgrade is due in mid-September, and will usher in the long-awaited smart contract functionality. If all goes well, this moment “could mark a monumental achievement for the Cardano community” according to eToro’s Chief Blockchain Scientist Dr. Omri Ross.

Smart contracts are the foundational mechanism underpinning DeFi. They make it possible to create complex financial services on the blockchain, including lending protocols, exchanges, and other decentralized finance innovations.

On Cardano, smart contract development will take place on Plutus — a new purpose-built development platform that, as Professor Ross notes, lays the foundation for a new approach to smart contract creation using the functional programming language Haskell:

We are excited to familiarize ourselves with Plutus and Marlowe and to see how these new languages will lay the foundation for new applications in DeFi and beyond.” said Ross. “As the creators of the open-source Lira project, a domain-specific programming language for over-the-counter derivatives, we are long-term believers in the benefits of writing smart contracts in functional languages.

In addition to introducing smart contracts, Alonzo will also give Cardano the capability to support new cryptoassets — potentially putting the freshly upgraded platform at the center of the explosion of interest in non-fungible token (NFT) trading.

Once the hard fork occurs on the mainnet and smart contracts are introduced, we could begin to see a whole raft of applications being built on the network,” suggests eToro Crypto Market Analyst Simon Peters, “including NFT marketplaces, DEXs, and lending protocols, to name just a few.

Enthusiasm about the development of DeFi on Cardano has already sparked a rally, sending the price of native cryptoasset ADA to all-time highs above $3 in early September. Peters suggests this upswing could potentially continue, assuming that Cardano can catch up with the bigger players and begin to carve out its own share of the rapidly growing DeFi ecosystem:

Successful completion of this critical upgrade could lead Cardano to begin to take some market share away from ‘competing’ networks such as Ethereum,” Peters said. “And if we do see continued growth of the Cardano network going forward, we could also see a potential appreciation of the price of ADA.