Ethereum vs Cardano: Strong Competition or Good Alternative?

Ethereum and Cardano are two of the largest competing cryptocurrency projects based on smart contract technology. Both projects demonstrate positive dynamics and great investment prospects. At the moment, ETH with a capitalization of under half a trillion dollars occupies second position in the coinmarketcap ratings. Although the capitalization of seventh-ranked Cardano is only a tenth of this, many experts call the Cardano blockchain an Ethereum killer.

Seriously considered an alternative to Vitalik Buterin’s brainchild, Cardano was launched in 2017 and today positions itself as an updated Ethereum. It was developed by Charles Hoskinson, one of the co-founders of Ethereum. Both blockchains pursue the goal of creating a single decentralized system for financial transactions and digital contracts for decentralized applications and other developments.

Can the Cardano project, which is more than 10 times weaker in capitalization than its main competitor, become an Ethereum killer? Let’s consider that in the article below.

A closer look at Ethereum

Ethereum is an open-source blockchain platform that acts as a base for the creation and deployment of decentralized applications (dApp). Ethereum first launched the concept of a smart contract into the public arena – a program that performs the functions of a legal document and defines the rules of interaction between the parties to the contract.

Smart contracts simultaneously solve several problems traditionally associated with legal contracts (censorship, fraud, downtime, third-party interference). Smart contracts have become the feature that has fundamentally singled Ethereum out among hundreds of other projects. This specialism has determined the popularity of the second-largest cryptocurrency in the world.

Ethereum is characterized by the key innovative advantages of blockchain, including the immutability of recorded data, the complete absence of censorship due to the implemented consensus principle, security, and immunity to hacking.

What is Cardano?

Cardano is a multi-level blockchain platform operating on the basis of Proof-of-Stake, the method of achieving consensus. Just like Ethereum, Cardano is a safe and reliable ecosystem for creating dApps. The key feature of the platform is the Ouroboros algorithm which boasts a high level of security that does not require additional protection measures.

Today, the Cardano platform is recognized by the expert community as one of the most successful and effective dApp platforms. The key advantages of the platform that distinguish it from its analogs include:

• The presence of regulatory supervision;
• 100% confidentiality of any activity on the platform;
• High level of client security due to innovative algorithms;
• Multilevel system and democratic principles of governance;
• High speed of transaction confirmation.

The platform has two levels: basic (responsible for the distribution of coins) and built-in (manages smart contracts).

The Cardano mining process resembles not so much coin mining as participation in a lottery. In Cardano, we don’t deal with the classic PoW, but with the PoS algorithm, which eliminates the need to use a powerful computer.

Ethereum vs Cardano: key differences

Both Cardano and Ethereum supply similar blockchain products. Smart contracts can be programmed on both platforms and decentralized applications can be deployed. However, there are some key differences between networks.

Development approach

The key difference between Ethereum and Cardano is their approach to implementation and development. Ethereum is characterized by practicality and rapid implementation of changes, while with Cardano, each component of the architecture is carefully checked and tested by a group of experts, and only then is it implemented. Because the creators of Ethereum spent less time on theory and moved more quickly, the product became a pioneer in the niche of smart contracts and the second-largest blockchain project in the world by capitalization.

Ethereum today is a fully-fledged ecosystem with a large number of dApps built on top of it. Cardano was launched a couple of years later in 2017, and the passage of the roadmap stages is quite slow. Significantly fewer projects operate on Cardano, and they are less well-known. However, the dominance of Ethereum is gradually decreasing.

As for target audiences, Vitalik Buterin’s brainchild first conquered developed countries, while Cardano initially focused on developing countries and on interaction with the governments of these countries. The creators of Cardano have chosen a strategy of demonstrating the usefulness of their product in niches where blockchain technologies are currently most in demand.

Consensus protocols

The main Ethereum network is still running on the basis of the PoW consensus model. All transactions must be mined to get into the blockchain. This technology is severely criticized by the expert community for excessive energy consumption and its negative impact on the environment. All this makes the PoW consensus very unpopular in the expert community and unacceptable as a dApps platform. Ethereum is, however, in the process of transitioning to ETH 2.0 based on PoS, which is scheduled to be completed in 2022.

In contrast, Cardano implements the PoS consensus model, in which miners are replaced by stakeholders who check operations on the network with much lower power consumption. At the moment, experts agree that PoS is the best alternative to blockchains designed for smart contracts.

Scalability

As for scalability, Cardano is superior to Ethereum. After the implementation of the Hydra scaling solution, the system will be able to process more than 2 million transactions per second with an up-to-date pool of validators.

Ethereum’s transaction processing speed reaches 16.5 transactions per second, and in this regard, Ethereum is still far behind many of its younger competitors. Ethereum 2.0 will provide users with transaction processing speeds of up to 100,000 transactions per second, which is several times higher than, for example, the processing speed of systems such as VISA.

Monetary policy

The monetary policy of the Ethereum project implies the payment of rewards to miners for each extracted block. The payment can be made at any time. The annual emission of ether is about 4.5% with 2 ethers per block and an additional 1.75 ether per block as a reward for miners. The monetary policy of the system can be characterized as minimum issue for maximum network security.

Ethereum has never increased the issue of coins, but at the same time has experience in reducing amounts issued in the background. Transferring to PoS is an important step for those committed to reducing emissions. The monetary policy of the project is implemented by participants including:

• Developers;
• Community members;
• Ecosystem project members and spokespeople;
• Miners;
• Other network members.

Being a decentralized platform, Ethereum cannot change monetary policy without a strong consensus amongst the above participants. Ethereum practices the off-network management process, ensuring that all decisions about changing the network outside the protocol are carried out.

Emissions of ether are unlikely to increase, but a significant reduction in emissions after the transition to Ethereum 2.0 with confirmation of ownership is certainly possible.

Cardano monetary policy is designed to solve two problems:

• provide network members with rewards;
• organize receipts to the treasury.

Remuneration is a basic incentive tool for the Cardano community. The stacking rewards for operators and delegates come from two main sources. The first is the commission charged for a transaction from all blocks. This money goes into a pot as a fixed percentage of ADA balances. The second source is monetary expansion, which essentially consists of sending a certain percentage to the treasury while using the remnants as rewards in each of the so-called epochs.

The system is built so that the rewards from reserves at the beginning, when the number of transactions is small, are high. This approach contributes to the rapid development of the ecosystem because early adopters are highly motivated by the number of rewards. When the number of transactions increases, the additional commissions compensate for smaller reserves. This monetary policy guarantees the predictability of rewards. A fixed commission charged on the remaining reserves ensures a slow exponential decrease in emissions.

The purpose of the Cardano Treasury is to accumulate resources for the development of the project. Funds are continually put aside for the development and improvement of the project.

Market capitalization

At the time of writing, Ethereum and Cardano are among the top 10 cryptocurrencies in terms of market capitalization, with $478 million and $44 million respectively. If we were talking about joint-stock companies, not cryptocurrency platforms, then the project’s developers could safely be described as companies with large capitalization.

The high market capitalization of Ethereum is due to the fact that large and institutional investors have put a lot of money into this coin. Today, many investors believe in the prospects of Ethereum, and the capitalization of Vitalik Buterin’s development is steadily growing against a background of ever-optimistic sentiment. The cost of ETH has increased almost 8 times over the year.

The considerable capitalization of the Cardano project, measured in tens of billions of dollars, is a reflection of the stability of the system and its social significance. Many investors are interested in ADA, as the coin has serious growth potential. The value of this coin has also increased 8 times over the year.

Smart contract features

The Cardano system uses the Extended Unspent Transaction Output (eUTXO) accounting model, which is an updated UTXO model of Bitcoin with the option of smart contracts. It is characterized by the support of several digital assets and functions, similar to regular cash. In turn, Ethereum uses the Account/Balance model by which coins are stored in users’ financial accounts, as with commercial banks.

The eUTXO Cardano model simplifies smart contracts and enables developers to create and run decentralized applications with less effort when compared with Ethereum. However, the functionality of Cardano smart contracts was activated not so long ago, and did not gain enough popularity for the system to be tested in the same “combat” conditions as Ethereum. At the moment, no decentralized exchange is deployed on the platform, which makes it very difficult to give it an objective assessment in terms of reliability, security, and functionality. So, in terms of the running-in of smart contract technology, Ethereum is clearly ahead in this regard.

Transaction speed and fees

This comparative table shows transaction speed & fees for the two projects:

Choosing the right platform for your project

Cardano and Ethereum are in many ways similar, but each has its own characteristics that should be taken into account when choosing where to deploy your dApp. The success of the project will largely depend on this choice.

Who is Cardano for? The platform relies on scalability and flexibility, so if these parameters play a fundamental role in the implementation of your dApp, then this ecosystem should be preferred. This applies to fast-growing mass-use projects such as social networks, hosting projects, and many more. In addition, Cardano’s strong point is its high energy efficiency, so if your project is concerned with the environment, it would be logical to give preference to a greener platform. And given that the “green” trend has now captured almost all areas of business, choosing Cardano gives a great reputational bonus to any project.

Who is Ethereum for? This platform is distinguished by its longevity and reliability. In addition, Ethereum currently boasts the largest number of dApp deployments, making it the most popular platform among developers. A whole industry of developers has formed around its ecosystem, so the choice in favor of Ethereum should be made by those interested in a developed professional community and the stability of the ecosystem in which the dApp is deployed. Ethereum also has a higher transaction confirmation speed, which makes the platform convenient for applications where this function is fundamentally important.

One more important point is the cost of transactions. At the moment, in terms of the availability of transactions within the system, Cardano is unambiguously in the lead. So the platform could become a worthy alternative to Ethereum, from where developers often transfer their projects to other sites with less workload and lower commission.

Can Cardano surpass Ethereum?

Is the Cardano platform a real ”killer” of Ethereum? To date, the answer is negative. Ethereum has been and remains a powerful blockchain project, characterized by reliability and security. Cardano also has a negative experience already with smart contracts, since problems arose during the launch, which caused many developers to postpone the idea of launching on Cardano. Moreover, the coin has a competitor breathing down its neck in the shape of Solana, a coin that has recently been developing comprehensively.

Can Cardano manage to surpass Buterin’s brainchild in terms of capitalization? It’s too early to talk about this at the moment, and it’s far too early to talk about a complete “murder” of Ethereum. Although some really talented and experienced enthusiasts are working on the project, developers will still have to prove the functionality of Cardano-based smart contracts. And if we take into account that the team takes a lot of time over each update due to the thoroughness of their approach, it is difficult to predict in which direction the project will move and whether it will be able to knock Ethereum out of the market.

It’s worth remembering also that Ethereum is not in the best position these days. Its high transaction price and slow network operation are motivating users to switch to alternative platforms, including Cardano.

Top 5 Ethereum projects

As of today, several thousand decentralized applications, characterized by a high level of data security, have been launched on the Ethereum blockchain. The top startups on Ethereum include projects such as Uniswap, Chainlink, MakerDAO, Axie Infinity, and Aave.

Uniswap

Uniswap is the world’s most popular decentralized exchange where you can trade coins for coins. The peculiarity of this development is that the system uses an automated market maker system. With this, the basic liquidity pools are managed by smart contracts as opposed to the traditional order book, as happens on traditional centralized exchanges. A unique pricing algorithm determines the market price of each coin presented on the exchange.

Chainlink

Chainlink is an Oracle platform linking smart contracts with third-party data. The system can receive data such as weather reports or currency exchange rates, process them using an established algorithm, and, based on the data received, follow the instructions set. For example, according to the terms of a smart contract, insurance payments can be credited automatically when a hurricane is recorded in the area where the insured person lives. Chainlink is supported by the ERC-20 crypto token and runs on the Ethereum network.

MakerDAO

MakerDAO, a lending and borrowing service without intermediaries, operates on the Ethereum platform. Loans to participants are paid in cryptocurrency. The problem of the instability of crypto values has been solved by linking loans to the Dai stablecoin, which in the future will become fully decentralized, according to the company’s plans.

Axie Infinity

An Ethereum-based role-playing game based on NFT tokens owned fully by the players. In addition to the entertainment process that this gaming product provides, Axie Infinity allows you to make money on the resale of NFT assets that have collectible value.

Aave

A decentralized lending and borrowing platform that generally repeats the functionality of similar dApps. After attracting multimillion-dollar investments from top venture players, the Aave platform has an impetus for development in this niche.

Top 5 Cardano projects

The list of the top Cardano projects was formed by our expert analysts based on market capitalization, technical analysis, and news agenda. There are fewer applications created on the basis of Cardano than on competitive Ethereum, but there are many noteworthy ones among them, including Ardana, Empower, SundaeSwap, RaySwap, and World Mobile.

Ardana

Ardana is a crypto coin designed specifically for fast and inexpensive transactions. You can use this coin for payment, as well as for trading, stacking, or mining. Ardana members are free to vote on upcoming changes and updates. According to the logic of the platform, token holders receive a reward from each operation.

Empower

Empower is a long-term project based on Cardano. Its mission is to provide affordable housing to the people of Africa through decentralized financing. The project was launched in 2021 and at the time of its official opening had already attracted a serious amount of funding long before its full deployment. The Empower cryptocurrency (EMP) functions as a service token.

SundaeSwap

This fairly popular application also has an integrated offline market maker mechanism. The creators of the project want to transform SundaeSwap into the most decentralized exchange on Cardano, which offers an unprecedented level of DEX security.

SundaeSwap is based on fully decentralized hosting on IPFS (Interplanetary File System). The Sundae coin acts as its own token, which was provided with the initial pool of bets. Today, users can receive Sundae tokens by placing ADA bets and through a betting pool. Tokens are distributed among users transparently and securely. 55% of all coins are in the hands of users, while the rest are in the hands of the original investors and team members.

RaySwap

RaySwap is a decentralized Cardano-based application that performs the functions of a savings wallet. It allows users to earn 5% per year and exchange tokens in a variety of paired combinations. In addition, an autonomous market maker and various yield farming technologies are integrated into the platform. Experts currently rate RaySwap as one of the most ambitious, effective, and functional Cardano-based dApps.

World Mobile

World Mobile focuses on secure mobile communications integrated into the Cardano blockchain. The mission of the project is to solve the difficulties associated with connecting to cellular communications by replacing them with Wi-Fi. The application is distinguished by a special digital identifier that makes it possible for the user to access online banking systems. The World Mobile Token allows people from third-world countries to enjoy economic benefits that have been available to Western consumers for a long time. This project has already allowed the creation of smart villages in various parts of Africa, providing residents of the continent with access to advanced technologies and unlimited use of information.

Closing thoughts

As can be seen from the information above, smart chains are more relevant today than ever. They create an ecosystem for the deployment of fast and secure applications based on smart contracts, and generally provide all the necessary infrastructure for the implementation of projects. Despite external similarities, Ethereum and Cardano are radically different from each other. Cardano focuses on security, achieved through systematic testing of innovations by a group of scientists and developers. Ethereum, as an ecosystem, is less controlled, but it allows you to make changes faster and improve it by testing innovations in practice.

The key difference between the platforms is that Ethereum successfully works with smart contract technology, while Cardano postponed the integration of this technology into its environment after an unsuccessful launch. Despite this, Cardano has its advantages. In particular, it is characterized by lower power consumption, better scalability and higher throughput thanks to the Ouroboros consensus.

Which platform should you choose? The decision should be based on the goals of the developers or investors. In any case, both tokens have huge potential and represent highly reliable and efficient systems for dApp development.

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