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  • Cardano is set to launch its solid company Alonzo on September 12, but there are questions about what the ecosystem will look like once the smart contracts are launched.
  • According to various sources, functional Plutus dApps such as decentralized exchanges will not be operational immediately after Alonzo launches.
  • Several projects at Cardano say they are still developing scaling solutions to address concurrency issues in the blockchain.

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Alonzo’s hardfork business, which provides network smart contract functionality, will begin operations on September 12th. However, it may take several months before DeFi comes to mainnet due to lack of tools and concurrency issues. Several Cardano projects say they are developing scaling solutions that allow them to operate on the network.

Cardano Not Ready for DeFi Despite Alonzo Upgrade

Cardano is set to launch smart contracts as part of the much-anticipated Alonzo update this weekend, but it could take months for DeFi protocols to be up and running on the network.

On Tuesday, Input Output successfully submitted a proposal to run the hard collector for the final release of Cardano’s Alonzo update.

The proposal was confirmation that Cardano’s core developers are ready to split the Alonzo Purple testnet and update it on September 12th. This event is highly anticipated among Cardano fans, mainly because it will bring smart contracts written in the Plutos programming language into the Cardano mainnet for the first time.

The upgrade paves the way for decentralized applications, known as dApps, to run directly on the network. Charles Hoskinson previously stated that Cardano would become a hub for DeFi and NFTs, but it turns out that it will take some time after the launch of Alonzo before DeFi protocols can be activated on the network.

According to Hoskinson and other sources linked to Cardano, functional Plutus dApps such as decentralized exchanges will be added at a later stage. Decentralized exchanges, also known as DEXs, are a crucial component of DeFi. One of the main reasons for the delay is the design of the EUTXO-based Cardano protocol, which exposes scaling issues for dApps. Minswap launched a decentralized platform on the testnet last week and immediately encountered problems. Users were unable to make swaps due to transaction throttling, and the project had to close its testnet. It is believed that other dApps may experience similar issues.

Three prominent dApps built on Cardano, Sundaeswap, Maladex and OccamFi said they have conceptual solutions that can overcome challenges created by Cardano’s EUTXO model. Several scaling solutions have been proposed, ranging from multi-transaction aggregation to Layer 2 protocols and side chains. However, there will be a delay between launching the Alonzo mainnet and launching such solutions.

SundaeSwap, another Cardano-based DEX, has revealed its plans to launch in mid-October. Other projects have also hinted at a similar timeline but these are tentative.

In an interview with Cardano’s stock pool operator bigpey, Pi Lanningham, lead developer at SundaeSwap, revealed that he believes the chances of getting functional dApps after the fork are very low. He said:

“I don’t think you’ll see any big dApps on the first day of Alonzo.”

Even the founder of Cardano said in a video broadcast on Wednesday that there are many “open questions” about what the network will look like after the hard crack. He told viewers, “The templates, abstractions, and decentralized apps should be built like any other ecosystem.”

Besides concurrency issues, Cardano does not yet offer a variety of wallets or tools for dApps to integrate with. They are expected to appear with the Plutus Application Backend updates, which will launch right after Alonzo.

In the same video stream, Hoskinson said that the only DApps that will be streamed live on day one will be “some gaming smart contracts” developed through Input Output.

Other than a few simple dApps, Cardano users will still be able to trade NFTs, which is currently one of the hottest crypto niches. NFTs are already on Cardano because they do not require smart contracts, although the ecosystem is much smaller than those on competing networks such as Solana and Ethereum.

However, the Cardano community is optimistic about the coming months. Positive sentiment prevailed after Cardano invested in more than 160 projects through the Catalyst Innovation Fund.

With Cardano currently having a market value of approximately $80 billion, the project treasury also has more than $1 billion in development funding. Cardano seems to have the resources to build a rich ecosystem of DeFi applications – it just needs more time to pay off.

Disclosure: At the time of writing, the author of this feature owns less than $100 worth of ETH.

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