Cardano Chang Hard Fork: What Does It Mean For ADA?

On 1 September 2024, Cardano finally launched its long-awaited Chang Hard Fork upgrade – which is the network’s first major upgrade in two years. This upgrade will transform the blockchain into a community-governed network, much like its major competitors, Ethereum and Solana. ADA will become a governance token, and its holders will be able to vote on all the major decisions of the network.

Just a few years ago, Cardano was one of the largest altcoin networks in the industry, with ADA firmly positioned as one of the top five largest cryptocurrencies in the market. It reached an all-time high of $3.16 in 2021. Yet, the token failed to maintain momentum in the rapidly growing altcoin market. It’s been over two years since ADA reached the $1 mark, and its price has been subjected to significant volatility even during bullish cycles. 

A large part of this was because of Cardano’s stalled progress. While other blockchains like Ethereum, Solana, and Ripple scaled with new integrations and community-governed features, Cardano remained largely centralized, with a community of ADA holders that had little to no role in the network’s governance process.

The network is finally addressing these issues and driving a new community-driven phase for Cardano with the Chang Hard Fork upgrade. So, what is the Chang upgrade? And how will it impact ADA going forward?

Key takeaways 

• What is the Chang Hard Fork?: A major Cardano upgrade that shifts the network to decentralized governance, allowing ADA holders to vote on key decisions.
• Key features: Introduction of community-driven governance, Cardano Constitution, and voting via delegate representatives (DReps).
• Will ADA go up?: The price impact is uncertain; while the upgrade has potential benefits, market reaction has been mixed so far. Cardano’s previous upgrades were generally followed by a bullish cycle for ADA. 

What is Cardano’s Chang Hard Fork upgrade? 

The Chang Hard Fork represents a crucial step in Cardano's roadmap, transitioning the network into what is known as the Voltaire era – the final stage of its development plan, which focuses on establishing decentralized governance.
 

A hard fork in blockchain technology is like a software update for the entire network. It introduces new rules or changes to the blockchain's protocol, and all participants (nodes) must upgrade to the new version to continue participating in the network. Hard forks can introduce new features, fix security issues, or, in some cases, radically change how the blockchain operates. 

Here are the key changes that the Chang upgrade will introduce:

The key features of the Chang Hard Fork

1. Decentralized governance: Before this update, decisions about the future of the Cardano network were primarily managed by Input Output Global (IOG), the company behind Cardano's development. The Chang Hard Fork changes this by allowing the community of ADA holders to have a direct say in how the network evolves.
2. Introduction of voting and delegate representatives (DReps): ADA holders will now have the ability to vote on important decisions directly or delegate their voting power to representatives known as DReps. These representatives will play a crucial role in the decision-making process, acting on behalf of those who delegate their voting rights to them.
3. The Cardano Constitution: A major part of the governance shift includes the creation of a 'Cardano Constitution'. This is essentially a foundational document that will outline the rules and principles guiding the governance of the Cardano network. The constitution will be drafted through a community process and then put to a vote by all ADA holders. If approved, it will serve as the bedrock for how future decisions are made within the network.
4. Two-phase implementation: The transition to this new governance model will happen in two phases:

• Phase one: This initial phase involves setting up the governance structure, allowing DReps to register and start campaigning for votes from the community. This phase also focuses on ensuring the security and stability of the network as it moves toward full decentralization.
• Phase two: Once the governance structure is fully established, the community will take full control over the network's governance. This includes voting on proposals, making decisions about the network's future, and enforcing the rules established in the Cardano Constitution.

What are the benefits of the Chang Hard Fork?

The Chang upgrade addresses some of Cardano's most frequent criticisms over the years. The project, which began in 2015, took several years to launch its mainnet (in 2017) and only introduced smart contract functionality in September 2021 with the Alonzo upgrade. For comparison, Ethereum introduced smart contracts in 2015, while Solana added the functionality in early 2020. So, Cardano has been historically slower than its competitors in integrating the latest technology and features. 

With the Chang Hard Fork, the community will now have the power to decide on its roadmap and future upgrades, which will potentially help the network keep up with the dynamic landscape of crypto. 

The project has been heavily influenced by IOHK (Input Output Hong Kong) over the last nine years, a company founded by Charles Hoskinson, who is also one of the co-founders of Ethereum. The community often saw this centralization as a potential risk factor, as it concentrates too much power and decision-making in the hands of a few. It was also a major drawback for attracting more new investments in the network.

𝗖𝗮𝗿𝗱𝗮𝗻𝗼'𝘀 𝗘𝗿𝗮 𝗼𝗳 𝗢𝗻-𝗖𝗵𝗮𝗶𝗻 𝗚𝗼𝘃𝗲𝗿𝗻𝗮𝗻𝗰𝗲 𝗶𝘀 𝗛𝗲𝗿𝗲!

In mere moments, the Chang Hard Fork will lay the groundwork for a self-sustaining, truly decentralized Cardano.

It's a milestone years in the making, and it's finally happening. We're saying…

— Cardano Community (@Cardano) September 1, 2024

With the Chang upgrade now live, ADA holders will now participate in the governance of the network through voting and delegation, thereby advancing Cardano's vision of becoming a fully decentralized and self-governing blockchain.

Chang challenges 

While the Chang Hard Fork is a major milestone, it also presents challenges. For example, ensuring active participation from the community in governance decisions can be difficult, and there is a risk of 'voter apathy', where not enough people participate in important votes. Additionally, the technical implementation of such a major change always carries some risk, and the transition must be carefully managed to avoid disruptions.

How has ADA’s price changed following the Chang upgrade? 

The potential impact of the Chang Hard Fork on ADA's price is uncertain and depends on several factors. Historically, major upgrades like the Alonzo and Vasil hard forks have had varying effects on ADA's price.

Historical context

• Alonzo Hard Fork (September 2021): This upgrade, which introduced smart contracts, led to a significant price surge for ADA, with its price reaching an all-time high of around $3.10. The anticipation of new features drove optimism in the market.
• Vasil Hard Fork (September 2022): While this upgrade improved scalability and efficiency, its impact on ADA's price was more subdued due to broader market conditions at the time.

Market expectations for the Chang Hard Fork

Some analysts and market participants believe that the Chang Hard Fork could lead to an increase in ADA's price. The move toward decentralized governance could attract more users and investors who are interested in a community-driven blockchain, potentially driving demand for ADA.

However, despite the importance of this upgrade, the immediate price action for ADA has been less positive. Following the upgrade, ADA's price actually saw a decline, down by nearly 2% in a day – which could be attributed to broader market trends or short-term selling pressure. Moreover, the effectiveness of the new governance model and active community participation will be crucial for sustaining any long-term price increase​.

Next Steps Post-Chang https://t.co/p0Hdgshbte

— Charles Hoskinson (@IOHK_Charles) September 2, 2024

Will there be any changes to transaction fees?

The Chang Hard Fork primarily focuses on governance and decentralization, and it does not directly introduce changes to Cardano's transaction fees. However, the upgrade could indirectly influence the network's economics, including transaction fees, depending on how the decentralized governance model evolves.

Current transaction fees on Cardano

Cardano's transaction fees are determined by a formula that includes a fixed fee (0.155381 ADA per transaction) and a variable fee based on the transaction size (0.000043946 ADA per byte). These fees are intended to be predictable and stable, helping to avoid issues like fluctuating fees seen on other blockchains like Ethereum during periods of high demand.

Potential future changes

• Governance impact: With the introduction of decentralized governance, the Cardano community will have the ability to propose and vote on changes to the network, including adjustments to transaction fees. If the community decides that changes are necessary to improve the network's efficiency, reduce costs, or adapt to different economic conditions, they could propose and implement such changes through the new governance process enabled by the Chang Hard Fork.
• Long-term considerations: Any changes to transaction fees would likely be made with careful consideration of their impact on network security, decentralization, and user experience. As of now, no immediate changes to transaction fees have been announced as part of the Chang Hard Fork.​

Final thoughts

While the Chang Hard Fork is a significant development for Cardano, its direct impact on ADA's price remains uncertain. The market's response has been mixed, and the long-term price performance will likely depend on how well the decentralized governance model is adopted and how the broader cryptocurrency market evolves.