Is ADA a currency? Will it ever be? Does it really matter?

I start this thread in hope of lining up our stands in this question. I think if we communicate things in similar fashion our message has a better chance to go through. On the other hand if half the community says ADA is a currency while the other half says it isn’t that can cause confusion and damage our credibility. Of course I don’t want to damage anyone’s right to a free opinion, I just think some clarification and dialog may help in this regard or at least couldn’t hurt.

My personal opinion is that ADA is a currency by utility or design - because it’s not a stock and not a commodity -, despite the fact it’s not a particularly effective one yet. Price instability makes it inconvenient and disadvantageous to use it as a currency right now, but if volatility would lower this situation could change dramatically.

I think adoption is the key of understanding price behavior, but it effects volatility in a rather strange if not illogical way. A wave of new adopters increases volatility for a while, but then, after the ripple effect decays volatility falls to a lower level than before the tide. In my opinion this is because volatility is the result of low liquidity and high speculation rate. I don’t think that fixed supply is the primary cause of high volatility, but it certainly adds to it through low liquidity. As adoption level raises liquidity of the markets will raise while the proportion of speculative actors will lower. Yet a new level of adoption triggers this low liquidity speculative market. I hope it makes sense.

So, long story sort I expect ADA to be more and more effective as a currency, and consequently more and more people will use it as such.

My speculations aside my opinion is that at the end of the day currency is something that people use as such.

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This is a really good and interesting question but i think that we, as a community, can’t find common ground.

To me $ADA is clearly not a currency, as you already said, its way to volatil and it makes no sense to price normal daily groceries in ADA as you may would pay today 1 ADA for 1 apple and tomorrow you would have to pay 3 ADA for 1 apple.

However i do think that we will be able to have a kind of currency on Cardano. Im not sure if this will be DJED in the future, but i think DJED is a good start to test the waters.


Here it comes (just announced yesterday) :nerd_face:

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Observe that Milkomeda said that they will only do this on their testnet and it has nothing to do with the “official” Djed stablecoin that will be started by Coti.

Why do you think we can’t? Does that mean that it’s not a particularly important question? Is it a speculative question, that only time will tell?

With USD the same can happen only with smaller amplitude. The price of an apple can be $1.1 tomorrow which was $1 yesterday. I think “stable” in stable coins is a misleading overstatement. Of course there is an unbearable difference between the two at the moment, I’m just saying that in my understanding there is no theoretical difference: it’s only a metric which is much worse in ADA’s case.

For me the situation is similar to the early internet and the telephone network. The early internet was too slow for VoIP, even the endpoints was running through telephone lines, but a couple of decades was enough to reach a point where all telephone communication is running on the Internet. Similarly now we need USD for the endpoints but in 20 years from now ADA (of course, what else!? kidding) might prove to be a better infrastructure and take over.

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For the OP and other readers, sure you can disqualify what Milkomeda is doing if:

  • you have no interest in observing interactively & experimentally how DJED stablecoin backing & liquidity work as the testnet coins capitalise on an observable testnet;
  • the prospect of cross-chain compatibility for a Cardano based stablecoin is not of primary appeal to you (for those who don’t know, Milkomeda is building infrastructure for cross-chain bridging & smart contract code compatibility)
  • the questions raised by high profile crashed stablecoins of this quarter are matters you’d be happy to leave in someone else’s hands: so you’re OK just to wait for a DJED implementation that’s commercially branded. :stuck_out_tongue_closed_eyes:
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I didn’t mean to disqualify Milkomeda’s efforts. In fact, I’m not really happy with the little information we get from Coti.

But that does not change the fact that Milkomeda themselves said that they don’t want to go into production with it. And that that, therefore, is not the Djed everybody and especially @Zyroxa above your post is talking about.


Ada will not be a currency for the foreseeable future because:

  1. It is too volatile (as others have said)
  2. Govt’s won’t tax you in it (so you still need to convert to the Govt currency to pay your taxes)
  3. Govt’s won’t recognise it as a currency

This last point in particular makes it totally unworkable as a currency. Every time you pay for something in Ada you need to calculate your capital gains tax implications.

Maybe my question wasn’t clear enough. I am interested in the theoretical side of things. That’s obvious that at the moment ADA is not very practical as a currency. I can see that. What I am interested in is that if this will change on the long run as volatility comes down, or is there a deeper theoretical reason why this will never happen.

But I found this: ADA: Currency or Commodity? | EP02 | Deep Dive in the suggestion list of similar topics and it gave me some answers.

Since ADA is a platform for smart contracts and there is a large number of financial constructs that need deposits it means that ADA has a commodity value. Now that contradicts the requirements of a pure currency in my view.

Probably it was already obvious for most of you.

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That doesn’t mean it’s not coming along there imminently… i.e. Milkomeda just announced funding this Djed project today:

As it says in this blog posting, Milkomeda will “work directly with the teams building on Milkomeda C1” whose projects are profiled here… including this implementation of Djed :sunglasses:

At this point I’d suggest to make a separate topic - it is off topic for this one.

It most certainly isn’t off topic. The last part of the question was “does it matter” and the presence of (and support for) stablecoins on Cardano is a huge part of that question.

I agree. But when the discussion becomes focused on Djed, perhaps it merits a topic of its own. It’s an important topic, that’s for sure.

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I don’t quite get, what they are doing there. In a thread of tweets they emphasise that their Djed is only testnet

and just there, so that we can play a bit, before “Djed by COTI” starts:

But their Milkomeda Djed seems to be down, right now, anyway (or is it just me getting all zeroes there?):

Now, in this accelerator announcement, they neither mention their own testnet prototype nor the Djed implementation by COTI? WTF?

Also: On their testnet page, they say “Milkomeda Djed is the very first publicly accessible implementation of Djed”, which is so wrong that it hurts. The Ergo mainnet implementation cited in the Djed paper itself was earlier. The implementations by on several EVM testnets were earlier. Even the testnet implementation by COTI was earlier.

We are not doing topic splits very often. Don’t know if we should do it here.

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For me ADA is a currency, but I don’t think it matters what other ADA users think it is. As for gold, any one is free to use it as a currency, a jewel, a store of value, or to pay debts.

Why do we need to agree on something more than “it works for me” ?
How does that cause confusion or damage the credibility of ADA users ?

Isn’t the message, “Take it, use it as you want. It just work better and better!” a good point for ADA

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It may be a bit uninviting if the community seems to be divided in such a seemingly simple question. I don’t want to over-dramatize this, I’m just looking for the right wording. For me “commodity money” works just fine.

Cardano’s chance of being used as a currency is similar to BTC or ETH in the sense that volatility is inherent, which can decrease over time, but no one knows the final outcome (Satoshi apparently believed it is possible).

I believe that before thinking of use as currency, we can think of utility as a store of value. In this sense, platforms that offer practical utility like Ethereum and Cardano are more functional as a store of value than Bitcoin, as the value of the token is associated with a broader demand.

In the future, my bet is that some algorithmic stablecoin like RAI (not USD pegged!) will be used globally as a currency. If the future globally accepted stablecoin is on Cardano, ADA is likely to be the best possible store of value.

Is Ada a currency

I’d lean towards “not a currency” or at least “not a very good one”

The key defining feature of a currency is price stability: if the unit you are measuring in is changing as fast as the thing you are measuring - that’s no good for anyone. You really, really want your unit of measure to be changing much slower than the stuff being measured.

Imagine helping your 11 year old son with geometry homework where the teacher had decided to replace centimeters with “the distance from the top of the naval observatory in Greenwich to the peak of Mons Olympus on Mars broken into 1e-12 equal chunks.”

This idea of Ada being a “store of value” is fundamentally opposed to the concept of “Ada growing in value as the economic activity on chain grows”

Will it ever be?

One of the features is that digital assets can and will evolve and adapt.

If Ada reaches a steady state, and the value of the asset is the average value of the economic activity on chain, then Ada could indeed become an on-chain currency. The mechanism that would drive that doesn’t exist right now though - transaction fees are based on byte size and complexity rather than economic activity. That fee structure could certainly change though - with the consent of the community.

There are no economic mechanisms that tie the value of Ada to the average of any off-chain economic activity. If this was to ever happen, you might need to change the economics to tease Ada apart into 2 or more coins: one to “store of value” (neither increasing nor decreasing) and another to “accumulate value”. The “store of value” coin might need to be referenced to external markets (and be a currency in the off-chain economy), while the “accumulate value” tied to activity on chain (and be a good point to measure on chain activity from.)

The third option of moving all economic activity on-chain is probably not scalable in the global sense; shared ledgers have hard physical limits about how fast data can be written to them, how fast they can be passed around.

Without some major technical innovation, you probably have lots of subledgers around that each have their own “currency”. Those could be exchanged in a market place, and the aggregate economic activity there could be a currency (or it could end up just being measured in terms of one of the larger sub-ledgers.)

That “market of markets” would (hopefully) be based on a competitive model involving mutual consent and choosing your sub-ledger, where there is a natural mechanism for badly run currencies to be replaced with better ones - rather than bad policies backed up by tanks and warships.

Does it Matter?

Yeah, absolutely - there are some very specific economic reasons why currencies need to behave in certain ways that don’t apply to other assets.

Let’s say Satoshi arbitrarily defined the maximum supply of (houses, gym memberships or rolls of toilet paper) to be 21 million. There may be some good reasons for having a fixed supply of currency (if demand is constant) or other accounting-type assets, but that’s not true for every asset in the ecosystem: there is a lot more things you want to measure than there are good units for measurement.


There is a bit of subtlety there → “what is the use of currency?”

A bearer asset (“this is a coupon redeemable for $20 worth of beer”) is going to be of very similar value to the unit of measure ("$20") rather than underlying commodity (“beer”)

In the same way, I might accept “$20 of beer” directly for “$20 of labor” - but neither beer nor labor is serving as a currency. Barter exchanges tend to be “spot-only” transactions.

I tend to think of the actual utility of currency is more along the lines of “deciding what is a fair rate for exchange” rather than “the good or service that I am physically exchanging” → the currency just intermediates the exchange (and may only be conceptual: I am simultaneously swapping “labour for money” and “money for beer”, but the amount of currency nets to zero.)

My personal opinion is that ADA is a currency by utility or design - because it’s not a stock and not a commodity

I tend to consider Ada a lot more like a gym membership - which is also not a stock or a commodity. As the gym gets more popular, which brings more people, which brings more instructors, who offer more diverse classes, which brings more people → that membership is going to get valuable.

(In the future, it’s possible that things could move in the direction of a commodity; right now, chains are strongly differentiated, but I could imagine a future where things like EVMs compete primarily on price and conform to an common set of standards.)


Hey guys, did ya hear, the Euro dipped under 1 USD, plus we got somewhere like 11.6% inflation in our neck of the woods.

Finances aren’t stable, and the aim to stabilize crypto is moot, I at least will expect global markets to behave more and more like crypto rather than crypto becoming more and more stable. This thing we called stability flew out of the window — was it ever here in the first place? — and so did my optimism about traditional markets.

Sorry for the tangent, carry on.

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