Cardano’s scaling overhaul hit by a user confidence gap widened by ADA’s slump and wallet exploit – Crypto News

Cardano has opened public testing for a major throughput upgrade and advanced a mainnet hard fork, pushing forward the blockchain’s most consequential architectural changes in years.

These milestones are arriving alongside a sharp decline in ADA and a multimillion-dollar wallet exploit, widening the divide between Cardano’s engineering progress and the condition of the ecosystem built around it.

Data from CryptoSlate shows that ADA, the network’s native token, was trading near $0.14, its lowest price level since 2020. ADA has fallen more than 55% this year and risks falling out of the top 20 crypto assets by market capitalization if its poor price performance continues.

Still, CoinGlass data show that traders betting on ADA are leaning toward a rebound, though the size of their positions suggests limited conviction.

According to the crypto analytical firm, Binance had about 2.1 long ADA accounts for every short account, while the ratio among the exchange’s top traders stood near 2.49. OKX showed about 1.46 long accounts for every short account.

However, the aggregate positioning among Binance’s top traders was almost evenly divided. The position ratio stood at 0.9754, leaving the group marginally net short despite the much larger number of accounts betting on a recovery.

This imbalance suggests that many traders are attempting to catch a bottom with relatively small long positions while fewer participants maintain larger bearish bets.

Essentially, this resembles cautious bottom fishing after a severe sell-off rather than a decisive return of speculative demand.

SecondFi exploit deepens ecosystem strain

That pressure has already forced contractions in Cardano’s economy, with projects like TapTools and JPG Store scaling back or shutting down operations this year.

That fragility came into sharper focus when SecondFi, the successor to the Yoroi wallet, disclosed a failure involving software used to generate Cardano wallets.

In an X statement, SecondFi said its platform users lost roughly 16 million ADA across 374 addresses. At ADA’s recent price, the stolen assets were worth about $2.4 million.

Engineers initiated emergency rescue measures during the exploit and secured about 129 million ADA before attackers could drain it, the company said. Those assets were being transferred to an independent third-party custodian to be held on behalf of affected users.

Mitchell Amador, CEO and Founder of blockchain security firm Immunefi, told CryptoSlate that:

“SecondFi’s wallet software exposed the private keys it generated, and our research has been tracking exactly this move for two years. Key compromises inside DeFi protocols dropped to 8.1% of losses by 2025 because teams hardened their key management.

The attackers didn’t quit. They moved to where keys are held in bulk: exchanges like Bybit, custodians, and now wallet generation code itself.”

As of press time, the wallet provider said it had identified the source of the vulnerability and patched accounts that had not been affected. It also warned customers against restoring compromised recovery phrases in other Cardano wallets, as doing so would not eliminate the underlying risk.

SecondFi has hired an external accounting firm to conduct a special audit of the recovered funds and opened a process through which customers can submit claims.

Leios moves scaling design into public testing

Amid this external turbulence, Input Output, the research and engineering company behind Cardano, launched the Musashi Dojo public testnet to test Ouroboros Leios under realistic and adversarial conditions.

Leios is designed to address one of Cardano’s longest-running technical criticisms: that the network’s base layer cannot process enough transactions to support widespread activity.

The upgrade introduces a second block type alongside the existing Praos block. The two block types perform different roles, allowing Cardano to increase transaction throughput without replacing the consensus system that has secured the network since its Shelley era.

Cardano founder Charles Hoskinson described the Leios testnet as the culmination of about a decade of research into whether probabilistic proof-of-stake systems could provide mathematical security assurances comparable to those associated with Bitcoin.

Input Output estimates that the architecture could increase throughput by five to 20 times at the consensus layer.

The public testnet does not carry real ADA. Its purpose is to test, parameterize, and validate the design rather than produce headline performance figures.

Independent stake pool operators, developers, and other community participants will be asked to stress the network, identify weaknesses, and attempt to break the system under demanding conditions. The results will help developers refine the software before deciding whether it is ready for mainnet deployment.

The testnet will progress through five phases named Earth, Water, Fire, Wind, and Void after sections of Miyamoto Musashi’s “The Book of Five Rings.”

Developers aim to complete repeated rounds of testing by the end of the year, though Input Output has not announced a firm date for deploying Leios on the main network.

Van Rossem prepares Cardano for its next era

Cardano is also advancing the Van Rossem hard fork, formally known as Protocol Version 11.

The initiation proposal was submitted to Cardano’s mainnet governance system on June 16 during Epoch 637 after weeks of testing and infrastructure preparation across the Preview and Preprod networks.