If you regularly read about cryptocurrencies, you probably know something about the Cardano vs Ethereum debate.
The debate to decide which of the two blockchains is better started with the beginning of the Cardano project back in 2017 and since then, more and more fuel has been added to the fire.
Although both blockchains are very similar in terms of functionality, a growing group of crypto enthusiasts claim that Cardano is superior and that it’ll be the ultimate “Ethereum killer”.
But, is Cardano better than Ethereum?
In terms of technical infrastructure, yes. Cardano is better than Ethereum in matters of limited coin supply, scalability, PoS consensus, and a “no-code” smart contract language that makes it easy for non-coders to create smart contracts. But at present, Ethereum’s strength is due to its first-mover advantage, a huge user base, and a blockchain that has massive value.
But is this all to the story? Let’s dive in a little deeper to see if Cardano is really better than Ethereum.
What are the reasons behind these claims?
Cardano vs Ethereum: the battle of blockchains
The reality is that Cardano has managed to position itself in the crypto world as a strong competitor and alternative to Ethereum. These two platforms offer an entire ecosystem for the development and execution of smart contracts and DApps, as well as an alternative to traditional financial systems — something similar to Bitcoin.
On the one hand, Ethereum with its consensus mechanism Proof of Work (PoW), gives an economic value to its cryptocurrency Ether through a series of complex mathematical calculations, although paying the price of high energy consumption and suffering a series of problems related to scalability.
On the other hand, Cardano with its consensus mechanism Proof of Stake (PoS), manages to solve the problems inherent to PoW, requiring much less energy and resources to function, while allowing faster and cheaper transactions in comparison through its cryptocurrency ADA.
Scalability, interoperability, functionality, and economic performance are the key factors that will make the difference between one blockchain and the other at the time of truth.
Let’s now take a closer look at each of these factors to determine which project is most likely to win the next third-generation blockchain battle.
How Cardano compares to Ethereum
Although Cardano’s network is currently capable of processing a maximum of 250 transactions per second (tps), it’s expected that in future updates the network will be capable of processing up to 5,000 tps.
To achieve this, Cardano’s network will make use of a protocol called KMZ Sidechains, which will allow it to run several chains parallel to the main chain to alleviate the workload.
A good example of this is the recently implemented Hydra protocol, a Layer 2 solution that will run DApps in parallel with Cardano’s Layer 1 to provide extra scalability and cheaper fees per transaction. Cardano can add as many side chains – Hydra’s heads – as it requires to keep the desired overall performance on the network.
This, combined with the consensus mechanism Ouroboros – based on PoS – will allow the network to achieve high levels of scalability and grow without experiencing bottlenecks.
The current version of Ethereum can only handle a maximum of 30 tps using the PoW consensus mechanism. This has resulted in the network being congested quite frequently and transaction costs skyrocketing – not to mention a high consumption of energy and resources.
However, it’s expected that when the Ethereum network is updated to version 2.0 and thanks to the change of consensus mechanism from PoW to PoS, the number of tps will increase exponentially to a theoretical max of 100,000 while decreasing the cost of transactions significantly.
Cardano supports interoperability with other blockchains using communication protocols that will allow other blockchains to run parallel to the main chain – one of these is KMZ. This feature is already working and it’ll allow the Cardano network to expand its functionality by adding features from other networks.
The protocols implemented in Cardano to achieve interoperability will ensure the communication and exchange of data in a secure way between chains without compromising the stability of the main network, being able to connect and disconnect any external network as necessary.
For its part, although Ethereum doesn’t currently have this ability to communicate with other networks, there are already several external projects that will allow adding this feature once version 2.0 is fully functional.
When the time comes, Ethereum will be more open to communication and interaction with other networks, allowing the exchange of data and values in a secure and private way. Some of the top projects in this area are Chainlink, Wachain, and Aion, just to name a few.
3. Smart contracts and DApps
Currently, Cardano already allows the development and execution of smart contracts and DApps; however, this most recent update had presented concurrency issues when executing smart contracts on the blockchain. In addition to this, it’s still lacking a well-developed ecosystem in terms of DApps.
On the other hand, the mechanism used in Cardano for the development of both smart contracts and DApps will make the technical aspect more accessible – through the Marlowe programming language – so that any type of user is able to create smart contracts and applications, as well as make it easier for the interaction of these programs with others inside and outside the network.
And while Cardano may be lacking a well-developed DApp ecosystem, insha’Allah this will soon change as there are multiple DApps in the works for Cardano. Building on Cardano is an excellent website to see projects being developed for the Cardano blockchain.
Additionally, Cardano has recently added a new feature called ERC-20 converter, a software tool to help developers migrate ERC-20 tokens to Cardano to avoid paying high gas fees and the lack of speed in transactions. Actually, at least 100 projects are expected to migrate as soon as the tool goes mainnet.
Ethereum is currently the pioneer and world leader of blockchains in terms of smart contracts and DApps. Since its inception in 2015, Ethereum hasn’t stopped growing in this sense, and the use of smart contracts and DApps has become popular in other blockchains thanks to this.
Thanks to the use of standardized types of tokens (ERC-20 and ERC 721), Ethereum has managed to build a huge and robust ecosystem in which communication and interaction between the different projects developed within the network are possible.
Since its introduction to the market in 2017, ADA has been gaining more and more acceptance among investors. Even though Cardano is still in development, each new major update seems to positively influence the price of this cryptocurrency, returning more than 7,000% since its introduction to the market.
This is reflected in its market capitalization ($62B) and its current price ($1.95), factors that have maintained a relatively slow but constant increase over time.
We should also consider that this cryptocurrency has a maximum supply of 45B units. This abundance of coins is one of the factors that contribute to keeping the price of ADA low.
However, the inflationary mechanism of ADA, added to the progressive decrease in the supply of currencies to the market as well as other factors and new developments on the blockchain, will contribute to the price of this asset increasing over the years insha’Allah.
Being Ethereum, the leading blockchain in the sector of smart contracts and decentralized applications, it’s normal that, even with the high fees, this network remains with the second largest market capitalization ($510B), only below Bitcoin.
In a similar way to what has happened with ADA, the price of Ether has been increasingly influenced by the advances in future updates of the network and as the date of ETH 2.0 approaches, it seems that the price of Ether tends to go up, already passing $4,000.
At this point, it’s important to point out that Ethereum has an unlimited supply of coins, with an increased supply programmed to an annual inflation rate of 4.5%. This is countered by the new EIP-1559 “London” update that burns a portion of the transaction fees thus decreasing the coin supply. This could lead to an increase in price in the future; something investors are looking forward to.
Due to this fact, it’s not surprising that there is an increasing demand for Ether in the market, something that is also boosted by the current NFT fever, where Ethereum plays a predominant role.
Cardano vs Ethereum: a fierce and close battle
To determine which of the two blockchains is – or will be – the winner of this battle, there is a key factor to consider: which of the two blockchains will offer more value, Cardano or Ethereum?
One of the main problems that Ethereum faces today has to do with scalability and the high cost of transactions, a problem for which Cardano has presented a solution from the beginning. While it’s true that the issue of scalability in Ethereum should be solved in version 2.0 when sharding is implemented, we will still have to wait until 2022 or 2023 to see this.
Currently, ADA has extremely low fees (close to 0.17 ADA), something that gives it a lot of stability. The problem is that Cardano doesn’t have a user base like Ethereum to take advantage of this – although I do believe this will eventually happen insha’Allah.
In addition, there is another factor that works against both projects, and it is the fact that neither of the two blockchains is fully operational.
Now, speaking in technical terms, at this time Cardano would have the advantage since this project is being developed using a scientific methodology, it’s peer-reviewed, and also very easy to audit thanks to the use of Haskell. Meanwhile, due to the use of its Solidity programming language, audits on Ethereum are much more difficult to perform.
Cardano also has a double processing layer to work with two process flows separately; computations are made on layer 1, and settlements are made on layer 2. Ethereum only uses one layer to run all processes, which is inefficient.
In terms of power consumption, Cardano is much more efficient than Ethereum due to the use of PoS, but the latter network should solve that problem by moving to version 2.0.
In economic terms, at the moment Ether has more value than ADA, naturally due to the advantage of being out first and having the effects of a large network of users and a well-developed software ecosystem. However, keep in mind that the supply of ADA is limited and this could give a strong boost to price increase in the near future. Of course, this will also depend on the offer of functions.
My personal opinion is that there is space in the crypto ecosystem for both platforms to coexist, at least for a few years.
The reality is that it’s impossible to predict whether one blockchain will end up wiping the other off the map since both projects are moving in practically the same direction.
Once both blockchains are fully functional and PoS becomes the new norm, eliminating problems related to energy consumption, scalability, and high fees, the preference of users for one or the other network will depend on the creativity of developers – something similar to what happens with videogame platforms.
This means that healthy competition will motivate the creation of more and better DApps, as well as the constant implementation of improvements to each network. If we add to this the new projects that are preparing to also compete with Ethereum, we will have many more options to choose from very soon.
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