Have you heard about Cardano and Ethereum but you’re not sure which one is better? Or maybe you’re trying to find out how it works and which protocol has the better technology? Either way, we got your back in this Cardano vs Ethereum guide.
We’re going to start by introducing the background and the difference between Cardano smart contract vs Ethereum smart contract. After that, let’s talk about their performance including how each of the blockchains verifies transactions without the need of a third-party intermediary.
Also, we’ll discuss how much Cardano is rallying nowadays and the anticipated update of Ethereum 2.0.
Lastly, we’ll tackle which coin is more profitable. So, by the end of this reading, you will have the information you need to decide which of these cryptocurrencies you think is the best!
Let’s start with understanding Smart Contracts!
Table of contents
Smart Contract Platform
Smart contracts sound like something only lawyers might be interested in but the truth is they are the backbone for multiple technologies.
- Decentralized applications (Dapps);
- Decentralized exchanges;
- Digital art marketplaces;
- Tokens; and
- Non-fungible tokens
As originally intended, it aims to avoid dealing with any third parties such as banks, by executing contracts through a trusted network totally controlled by computers. All sorts of exciting protocols are only possible because of smart contracts. Both Cardano and Ethereum are smart contract platforms but they have distinct differences.
Cardano is a blockchain protocol that aims to be a smart contract platform, launch decentralized applications, tokens, and all the other features we expect from these types of projects. It seems like we have heard the same pitch a thousand times before but Cardano has one distinction. This is the first major protocol built as a Proof of Stake (PoS) from the ground up.
Input Output Hong Kong (IOHK) created Cardano in 2015. The well-known cryptocurrency expert called Charles Hoskinson built this. While Ethereum is called a second-generation blockchain, Cardano claims to be a third-generation blockchain.
“Did you know that ADA is often referred to as Ethereum killer?”
Charles Hoskinson was the co-founder of Ethereum but he believes he can create a blockchain better than Ethereum, hence the birth of Cardano. He believes their project is more advanced than Ethereum. As a result, they call it the “Ethereum Killer”.
Moreover, Cardano has its cryptocurrency called the ADA coin. You can send or receive it through crypto wallets. People like the Cardano coin because it is supported by a team of researchers, academic leaders, and scientists, who help develop the blockchain.
The purpose of Cardano is basically to find the perfect balance between servicing the needs of their users and regulators. The team thinks that this is important because eventually, they believe that cryptocurrency is going to be regulated in the same way as the financial services industry. The long-term objective is that it will be able to provide cheap, fast, and highly scalable transactions from, a global standpoint. When that happens, it could one day provide a bridge between the real-world finance sector and cryptocurrency.
Computer programmer Vitalik Buterin envisioned and created Ethereum. He actually previously worked for Bitcoin. It became the first-ever blockchain project to allow people to create smart contracts. As a result, unlike Bitcoin, Ethereum can do much more than just process financial transactions. Removing the need for a third party, the contract agreements are faster, cheaper and more efficient.
Ethereum has its blockchain that allows people to send and receive coins. Ethereum has its cryptocurrency called Ether (ETH). Officially, there is no maximum supply to the total amount of ETH that can be issued.
According to the Ethereum whitepaper,
What Ethereum intends to provide is a blockchain with a built-in fully fledged Turing-complete programming language that can be used to create “contracts” that can be used to encode arbitrary state transition functions, allowing users to create any of the systems described above, as well as many others that we have not yet imagined, simply by writing up the logic in a few lines of code.
The Ethereum network is decentralized, meaning no single person or authority controls it, nor it is backed by any central bank or nation-state. Instead, each transaction (including smart contracts) is verified by the community. Anyone can connect a device to the Ethereum system to help confirm transactions. In return, they can receive additional ETH as a reward. Don’t worry, we’re going to talk about this in detail later on!
So, now that you know what is Cardano smart contract and Ethereum smart contract, the next part of my ‘Cardano vs Ethereum’ guide is going to cover how they perform in the market nowadays.
Firstly, Cardano is still in its very early days of development. The team claims that they are building one of the cheapest, fastest, and most scalable blockchains in the world. They still have a long way to go but recently, Charles Hoskinson highlights Cardano’s upcoming upgrades.
Now that I have got that out of the way, let’s take a look at what the team claims the blockchain will be able to do.
The ultimate goal of the Cardano smart contract is to be able to offer almost-instant and free transactions, allowing users to send and receive funds, create smart contracts and build decentralized applications (dApps). Once the product is fully upgraded, it will be able to scale to unlimited transactions. This way, ADA will have more people that use the network.
When using the Cardano blockchain to send funds to another user, each transaction normally takes about 5 to 7 minutes. In terms of how many transactions it can process, it looks like there has been a great improvement. The team did a test in late 2017 that resulted in the blockchain achieving 257 transactions per second. However, on February 10, 2021, it already reached 452,700 transactions per second.
When using the Ethereum blockchain to send funds to another user, each transaction normally takes about 16 seconds. This is quite fast, especially when you compare it to traditional payment systems. It doesn’t matter if you are sending funds to someone located in the same city or to someone in a different country, the transaction time is always the same. As it stands, Ethereum can process much faster transactions than Cardano.
As for Ether transaction fees, this all depends on how busy the network is. For example, during its first few years, transactions would only cost a few cents. However, as it has become more popular, this has increased. The average Ethereum transaction fee has passed $20 for the first time. High transaction fees are indicative of high demand on the network, which is good news for miners and long-term holders (if not for those wanting to use it on a daily basis.)
A further issue with Ethereum is that it is also very limited to the number of transactions it can process at one time. In the cryptocurrency industry, this is called scalability, and it is based on how well a network handles large amounts of activity. As noted by researchers at Coinbase, these scaling issues also increase “the cost of interacting with other applications on the network, creating a ‘traffic jam’ on the network for all the other applications on Ethereum.”
To give you an idea of why this is a problem, Visa can process a maximum of 50,000 per second! Furthermore, popular cryptocurrency exchange Binance can process more than 1.4 million transactions per second, so Ethereum has a long way to go. Fortunately, Vitalik Buterin and his team of developers are aware of this and are working on a few solutions, which we’ll discuss more in detail later.
Now that you know how the two projects perform, the next part of this ‘Cardano vs Ethereum’ guide is about how transactions are verified!
How Transactions are Verified
In this Cardano vs Ethereum guide, we mentioned that blockchains are decentralized. Meaning, transactions are verified without the need for a centralized third party. To do this, both blockchains use a ‘consensus mechanism’.
This mechanism determines how the blockchain reaches consensus and how we can trust if the transaction is valid. Every blockchain achieves this in a different way. They are all based on an advanced study of mathematics called “Cryptography”.
Moving on, Ethereum uses a consensus mechanism called “Proof of Work”, which is the same model that Bitcoin uses. To verify a transaction, the system generates a random sum that is so complex, no human could solve it. Instead, it requires computational power.
Anybody can become an Ethereum ‘miner’ by connecting a device to the Ethereum network which helps verify Ether transactions. The ‘miner’ that solves the sum receives a reward with additional ETH. Thousands of miners compete with each other to become the first device to solve the sum. Whoever solves it first actually wins the ETH reward!
Cardano is using a variation of ‘Proof of Stake’, which it calls “Ouroboros”. The protocol reaches consensus in a different way to Ethereum’s Proof of Work mode. Ouroboros shows that using Cardano is really good because unlike other Proof of Stake blockchains, there is no minimum amount that you have to stake.
Instead of getting miners to solve complex mathematical sums, Proof of Stake uses ‘forgers’. The difference here is that instead of machines solving complex mathematical sums, the cryptographic algorithm will randomly select successful forger.
The more Cardano coins that you stake, the greater chance you have of winning the reward. Simple!
The idea is that the more coins you stake, the more motivated you will be to ensure the system remains secure. If a forger did attempt to hack the network or process a malicious transaction, the forger would lose all of their stakes as a punishment.
So, now we know the difference between Cardano smart contract and Ethereum smart contract, how these blockchains verify its transactions, let’s check how Cardano is doing nowadays as ADA vs ETH gets interesting with both their anticipated upgrades and market situation.
Why is Cardano Rallying?
Cardano has seen continuous growth since 2017. For this reason, it is one of the top five cryptos in the market cap. ADA price went from $0.34 on February 1 to $1.05 on February 24, 2021, as seen on the below chart. Moreover, a crypto analyst has predicted that ADA will hit $5.
- The IOHK team of developers is now developing the Cardano mainnet upgrade called Goguen. The IOHK forecasts the hard fork upgrade completion before the year ends.
- Strong price resistance. Those who are ‘in the money’ won’t sell, waiting for the price to grow even further as it creates formidable price resistance.
- Development partnerships. It allows Cardano to explore stablecoins and even offer decentralised financial services. It’s cooperation with PwC and the partnership between the State of Georgia.
With that ADA vs ETH updates, let us also talk about the update the many people are anticipating Ethereum 2.0.
Ethereum 2.0: The Update’s Impact
No reason to celebrate just yet!
The Ethereum 2.0 update had been released last 2020 but it won’t be enough to cure Ethereum’s overall problems. Each phase has certain dependencies that determine when they will be deployed.
Even if the update had been released last 2020, it won’t be a miracle cure to Ethereum’s overall problems. It’s just the first step on the way to Ethereum 2.0 and a way to try out the new staking system, for now without any critical applications depending on it.
Nobody knows how long we’ll have to wait to see a full transfer to PoS on Ethereum’s mainnet. If things go on as they have until now, considering the endless debates and delays, we are looking at another two years at least.
The Verdict: Which Coin Will be More Profitable?
On this Cardano vs Ethereum guide, technical analysis looks very bullish on Cardano right now. Judging from the frequent updates published by the team, Cardano will stick to its roadmap and release upgrades on schedule, so there should be no bad news surprises on the fundamental side of things. This will be a major factor in the Cardano vs Ethereum battle in 2021.
As for the price of Ethereum, the dominant mood should still be of cautious optimism. At the time of writing, the price stood at $1652, and further growth higher than its $1960 record is completely possible. This would mean an 18% (or more) chance of increase. However, the delays of the Ethereum 2.0 upgrade are adding to the uncertainty.
Should you buy Cardano or Ethereum? Overall, ADA seems a more promising buy at the moment, at least for short-term and mid-term investors. Cardano’s price could surge by as much as $2, while for ETH an increase of 18%-20% looks possible. Although, the real battle will have to wait until Ethereum finally releases its upgrade and we’ll see how its PoS system competes against Cardano.
The Cardano vs Ethereum discussion is a hard one to have but if you read this from start to finish, you can possibly have a better understanding of how the two blockchains compare. One cryptocurrency is established and the other is an underdog. It is also difficult to know Cardano’s impact if there’s a success in Ethereum’s planned upgrades. If Ethereum can be able to process thousands of transactions per second, as well as if they increase its speed, then other smart contract platforms like Cardano might quickly become irrelevant.
Disclaimer: The views and opinions expressed in this article are solely the author’s and do not necessarily reflect the views of CoinQuora. No information in this article should be interpreted as investment advice. CoinQuora encourages all users to do their own research before investing in cryptocurrencies.