Cardano vs. Ethereum is a HiTech debate that interests investors, dApp developers, the growing DeFi industry, and crypto enthusiasts. Ethereum and Cardano are two of the largest blockchain platforms in the world. However, while Ethereum is a household name thanks to the value of its associated cryptocurrency, Ether, you might be less familiar with Cardano and its capabilities.
If you are an interested crypto investor, this post will not be exploring these two blockchains from a cryptocurrency perspective. However, understanding the use cases for each blockchain might help you make future investment decisions. There are several ways Cardano and Ethereum are similar, and there are key differences that are important to understand. However, before we get into the comparison, let’s get a little background on Cardano and Ethereum.
Understanding the History of Cardano Vs. Ethereum
Crypto enthusiasts and journalists covering the sector have dubbed Cardano “The Ethereum Killer.” We’ll explore why people think Cardano could displace Ethereum in more detail when examining how these two blockchain platforms differ. However, for now, it is important to know that Cardano was founded by Ethereum co-founder Charles Hoskin and former Ethereum executive Jeremey Wood.
In many respects, you could make the argument that the Cardano blockchain was founded to improve the critical network issues that Hoskin and Wood saw first-hand while working on Ethereum. Still, there is a deep-rooted difference in philosophy between Ethereum and Cardano that should be discussed before getting into the technical differences.
Ethereum operates under a launch first and upgrade later philosophy. The Ethereum blockchain was quickly launched to capitalize on the weaknesses of Bitcoin. The haste to launch the Ethereum network has led to enhancement and scalability issues that we will explore in more detail later.
On the other hand, Cardano follows an academic approach. Instead of rushing out updates and releases, the Cardano network is backed by detailed research and academic documentation. In addition, the blockchain follows rigorous guidelines to ensure that the network protocols are well-researched, peer reviewed, and documented regardless of how long it takes to launch.
Ethereum was built to capitalize on the flaws in Bitcoin, but Cardano was built to innovate the entire crypto and blockchain ecosystem.
Comparing Cardano and Ethereum
While both Cardano and Ethereum are aimed at decentralized applications and the DeFi sector, there are significant differences between these blockchain platforms. The key areas that we will compare and contrast are:
- Smart contracts
- Consensus mechanisms
- Market cap
Ethereum’s most significant innovation is the smart contract. Smart contracts allow developers to create decentralized applications, they have revolutionized FinTech, and they have encouraged the growth of the decentralized finance trend. The Ethereum blockchain is the global leader in smart contracts. However, Ethereum is not the only platform that supports smart contracts.
Cardano also has smart contract capabilities. The big difference here is that there are plans for Cardano smart contracts to be more functional and accessible than Ethereum smart contracts. Cardano’s vision is that anyone will be able to create their own decentralized applications using Cardano smart contracts. Currently, if you want to create a smart contract, you need a developer who understands and can code with programming languages like Solidity (Ethereum) or Haskell (Cardano).
Ethereum currently uses a proof-of-work protocol (PoW) consensus mechanism to validate transactions on the network. Bitcoin pioneered the PoW consensus mechanism. While this mechanism is known for being secure, there are significant concerns about the amount of energy it consumes and the speed at which it can verify transactions.
Cardano innovated and pioneered the proof-of-stake (PoS) consensus algorithm. Cardano’s PoS system is more energy-efficient, scalable, and faster than the PoW mechanism currently being used by Ethereum. Ethereum recognizes this deficiency, and the network has plans to upgrade to a PoS system with the release of Ethereum blockchain 2.0.
The Cardano blockchain is split into two layers. There is a layer that processes ADA (Cardano’s cryptocurrency) transactions and a layer that supports smart contracts. Cardano’s dual-layer system gives it an advantage over Ethereum. Since Ethereum handles smart contracts and Ether transactions on the same layer, network congestion and high fees are often problems. Remember that the cost of Ethereum transactions is tied to the value of Ether. Not only is Ethereum the second most valuable cryptocurrency, but it is also traded in high volume, which causes network congestion.
Another advantage of Cardano’s dual-layer system is that each layer can be upgraded independently without slowing down the transactions on the other layer.
Cardano is more scalable than Ethereum. This fact remains true even if you account for the unreleased Ethereum 2.0. When Ethereum 2.0 is released, it will potentially have the capacity to handle 100,000 transactions per second. Cardano’s Ouroborus Hydra update will give the Cardano network the potential to process over 2 million transactions per second. Nevertheless, Cardano still dominates current transaction capacity figures for both networks. Presently, Cardano can process 250 transactions per second compared to Ethereum’s 100.
Scalability could be a significant issue for Ethereum in the future as more businesses and consumers utilize blockchain technology.
Cardano is more secure than Ethereum because of its emphasis on peer review. However, Ethereum’s philosophy of quick releases allows it to innovate faster. The Ethereum ecosystem is full of fast upgrades. In comparison, every upgrade made to Cardano is thoroughly peer-reviewed before production and deployment.
Additionally, Cardano uses the programming language Haskell. Haskell is more widely used than Ethereum’s Solidity, making auditing Cardano’s code easier and more accessible to a broad academic audience.
Despite Cardano’s advantages over Ethereum, Ethereum dominates the dApp development and DeFi sectors. Ethereum is also the central blockchain platform driving NFT development and sales. Ethereum’s market cap is 442 billion dollars compared to Cardano’s 45 billion dollars.
However, it should be noted that Cardano is heavily investing in the developing parts of the world, primarily Africa and South Asia. Cardano is focused on areas with low DeFi and dApp adoption to grow its network organically.
There is a lot of information to sift through when comparing Cardano and Ethereum. While Cardano has a lot of capabilities that make technologists excited, Ethereum is still likely the best option for smart contracts, DeFi, and dApp development. However, that doesn’t mean that Ethereum will always be the best choice.
Cardano’s academic approach has yielded some great early results, and it will be important to follow the progress the Cardano blockchain makes in the future. Hopefully, the Cardano vs. Ethereum debate makes more sense to you now, but if you have any questions, reach out to an app development partner for guidance and advice on everything blockchain-related.