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New Cardano Vasil Hard Fork - Here's what to expect

Jun 14, 2022
byNDAX Labs

As a crypto enthusiast, you might have come across news of the Vasil hard fork that’s set to take place soon on the Cardano blockchain. And while the jury is still out on the impact this will have on the ADA coin prices, it’s still going to be one of the most critical events in the crypto community in June 2022.

So, what exactly is the Vasil hard fork? How will it change the Cardano blockchain? And what kind of impact will it have on ADA prices and TVL? We’ll explore all of these questions in-depth right here.

Cardano 101

Cardano is the name of the blockchain, and ADA is its native token — though you’ll find people calling both “Cardano”.

The blockchain was created by Charles Hoskinson, the co-founder of Ethereum, in 2017. And as you’d expect from a blockchain whose founder worked on Ethereum, Cardano is also important in the world of DeFi (decentralized finance), helping people who don’t have easy access to traditional banking institutions and financial services.

Cardano’s coin was named after Ada Lovelace, a 19th-century mathematician and computing pioneer. Holders of ADA can actually vote on certain decisions related to the running of the Cardano blockchain, and even delegate voting rights to others.

Of course, ADA can be used for crypto payments, and you can trade and buy it on a number of mainstream exchanges. It’s mined via the proof-of-stake method, and its algorithm was named Ouroboros, symbolizing the ancient mythological snake that eats its own tail.

Hard Forks: The Basics

So, Cardano is gearing up to implement a new hard fork. If you’re not familiar with the term, or you’ve never had it properly explained, it’s essentially a significant change to the blockchain’s protocol, making blocks that were previously invalid valid, and vice versa. Once a hard fork is implemented, all users or nodes have to upgrade to the newest version.

In some cases, forks aren’t initiated by the developers themselves, but by disgruntled members within the crypto community, who believe they can improve on the initial code. However, in the case of the Vasil hard fork on Cardano, it’s very much a planned effort by the developers.

The new rules that are implemented mean old versions of the blockchain are no longer considered valid, creating a permanent divergence. It’s called a fork because it literally is — one “path” is the upgraded, new blockchain, while the other path means continuing with the old version.

Hard forks are routinely created to increase anti-hacking security, counteract bugs, or just implement new features that increase the efficiency of the network. That last part is an especially significant aspect of the upcoming Vasil hard fork.

What is the Cardano Vasil Hard Fork?

Cardano’s development has been planned out extensively, and there’s a detailed (and publicly available) that the devs follow. This Vasil hard fork is a part of the Basho era of Cardano — the scaling era that has network optimization and performance upgrades as its main goal, driving mass adoption before the upcoming Voltaire — or governance — era.

So, what will the Vasil upgrade do for Cardano in practice? Through diffusion pipelining technology, it aims to increase the speed of the main Cardano chain, increasing block propagation efficiency and block size in the process. If all goes according to plan, the end result will be much higher throughput, with relatively minor alterations to the underlying protocol.

Apart from these minimally invasive changes, the upgrade will also see a couple of CIPs (Cardano Improvement Proposals) implemented via the hard fork:

CIP-31 — improving data access and storage by introducing new reference inputs;

CIP-32 — simplifying the method of attaching datums;

CIP-33 — decreasing computational draw by reducing script size.

Improvements to Cardano from the Vasil Hard Fork

Considering all of the above, how will the changes brought by the Vasil hard fork affect the blockchain?

For starters, Hoskinson’s recent media outings have drawn attention to the scaling enhancements brought by the Vasil fork — Hydra, UTXO scaling, Plutus CIPs, pipelining, etc.

Along with boundary changes, these improvements should increase the throughput of Cardano’s blockchain — making the framework more feasible in a world of increased demand for DeFi applications, DEXs, and smart contracts.

Those changes aside, though, the IOG group behind Cardano is also trying to make the network more accessible to clients with features like another lightweight crypto wallet, a DApp store, and extensions that might allocate resources from the layer 1 chain to sidechains. In due time, these sidechains can empower the potential for decentralized trades even more.

Impacts of the Vasil Hard Fork on Cardano's TVL and Price

When it comes to the state of the ADA coin, things are a bit more complicated and uncertain. Even though the Cardano blockchain has been coming up with all kinds of exciting new updates in the recent past, the price of ADA is still dropping after the most recent sell-off. Still, Cardano ranks 6th among the top 10 cryptocurrencies by market cap, which places it firmly in the big leagues.

Right now, ADA is worth 0.48 USD, its market cap is 15.946B, and its total value locked is around $104 million. This is quite a fall from the March 2022 high of over $330 million TVL, but there’s still a chance the Vasil hard fork could influence the price and TVL of Cardano positively.

With this in mind, it would be a good idea to have a look at more detailed ADA price predictions in 2022. Of course, it’s also important to note that crypto price predictions are notoriously prone to sudden change and volatility — and most of the big players make their predictions via algorithms that aren’t always correct.

That being said, the short-term technical forecasts for ADA are somewhat gloomy. A month ago, most trade publications expected the ADA price to fall below $0.50 by July 1st despite the hard fork’s release — and we’ve already reached that level now.

However, certain forecasts indicate that things might start turning around for ADA in late August, even seeing it reemerge above the dollar barrier by the end of that month. Still, another bearish phase is expected by the end of September, and the year will likely close below $1.

The exact numbers differ from prediction to prediction, but all of them agree on the fact that ADA’s price will continue yo-yoing back and forth throughout the rest of 2022.

Ultimately, Cardano will probably profit from the Vasil hard fork and go up slightly in the long run — but no one’s saying the upcoming update will usher in a bull phase and any seismic shifts in ADA’s price and TVL.

Wrapping Up

While the previous hard fork, Alonzo, represented a huge change for Cardano in terms of smart contract functionality, Vasil is set to be a more modest, incremental update. It will definitely tweak the current protocol, but not radically.

And the fact that most other hard forks and sizable upgrades arrive when the crypto market is in a bullish, positive market, isn’t helping either — there’s no going around the fact that Vasil will arrive in a bear climate. It may push ADA’s price upwards, but extreme optimism should be tempered with the realities of the wider crypto market — sudden price hikes aren’t likely, and they’re definitely not likely to last.

As is the case with any other crypto investment, remaining cautious and vigilant is still the best recipe when it comes to advice on approaching the Vasil hard fork. If you’re expecting this update to significantly alter the price trajectory of Cardano, we wouldn’t hold our breath for such an outcome.

That being said, it’s a worthy update that continues a long history of excellent updates to one of the biggest DeFi blockchains — so there’s a lot to be happy about too.