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Cardano vs Ethereum: Key Differences for Crypto Investors

Knowledge Crunch | Thursday, October 14, 2021 4:24 PM GMT

If you are investing in cryptocurrencies, then you will most certainly have heard of the Cardano vs Ethereum debate. Cardano and Ethereum are often compared to each other because both their networks provide similar offerings. However, they both offer different philosophies to how they approach their design, so in this edition of the ZuluTrade knowledge crunch blog we will be covering exactly that, what is the difference between ADA and ETH?



Table of Contents

 

What is Ethereum?

What is Cardano?

Ethereum: Pros & Cons

Cardano: Pros & Cons

Difference #1: Vision

Difference #2: Architectures

Difference #3: Development

Difference #4: Speed

Difference #5: Scalability

Difference #6: Future Dominance




What is Ethereum?

As we already covered this subject in our last knowledge crunch post, which you can find here. We’ll give you a quick rundown. 

Ethereum is a blockchain platform created in 2015. Ether is the cryptocurrency of the platform. Ethereum has its own programming language, called Solidity. Ethereum is a much faster blockchain than Bitcoin, making blocks very easy to mine. It is also not a capped cryptocurrency. But like Bitcoin, its blockchain relies on a Proof-of-Work (PoW) protocol to mine blocks and verify transactions.

The Ether token acts as the medium for contracts and applications built on the platform. Users can create smart contracts on the Ethereum blockchain. Smart contracts are the main feature of Ethereum and what sets it apart from other players in the crypto space… But that brings us to our next contender… Cardano.




What is Cardano?

Cardano was created in 2017 by Input Output Hong Kong and led by founder Charles Hoskinson who was one of the many co-founders of Ethereum, so it shares many similarities to its crypto competitor. It also serves as a platform for smart contracts, which is one of the biggest advantages of its competitor Ethereum.

Cardano is the new kid on the blockchain (Get it?). The heart of any blockchain platform is the algorithm it uses to create blocks and validate transactions. Cardano uses Ouroboros, an algorithm that uses Proof-of-Stake (PoS) protocol to mine blocks.  

While Ethereum is currently transitioning from a PoW network to a PoS network, Cardano already uses a PoS system. That makes it more environmentally friendly and faster than its competitors.  

Like Bitcoin, Cardano also has a limit on how many tokens can be produced, which creates a sense of scarcity and can help drive up its value over time. 

Now that we’ve been introduced to our cryptos, here's a quick look at the pros and cons.




Ethereum: Pros & Cons

Ethereum, is the second-largest cryptocurrency by market capitalization, a position it has maintained for some years. Ethereum is a high-risk, high-reward investment. If the value of Ethereum falls, users may lose a portion of their investment, just like any other investment. 

Ethereum’s outstanding performance has attracted both traditional and institutional investors. Unlike Cardano, Ethereum does not have a limited supply, and its supply is programmed to increase by 4.5% every year. However, developers can propose changes to the existing monetary policy, while nodes and miners that run the software can vote on new rules.

Source: Accubits

 

Here’s a quick look at the pros and cons of Ethereum.

 

Ethereum Pros

Ethereum main pros are:

  • Ethereum Is Decentralised - Ethereum allows people to execute deals and transactions without third parties, helping users deal with restrictive regulations, unfair fees, and censorship worldwide.
  • Always improving - Ethereum has a large community of active developers that actively try to improve the network Ethereum 2.0.
  • Reduced carbon footprint - Ethereum mining uses a lot less energy consumption than Bitcoin.
  • The Hub Of The Crypto Market - Some of the biggest cryptos are still based on Ethereum, such as Uniswap.

Since Ethereum started, it has grown to become one of the most well-established blockchains. As a consequence of its success, the price of Ether has grown exponentially since 2016.

Ethereum allows developers to code smart contracts that execute preset actions with no need for a middle-man to manage them. Smart contracts are self-executing contracts that will only run when a set of predetermined conditions apply.

 

Ethereum Cons

Ethereum main cons are:

  • Ethereum Struggles With Scaling - Ethereum has scaling and network congestion issues to attract more cryptocurrency investors.
  • High Transaction Fees - Congestion on the Eth network can cause absurdly high transaction fees
  • No cap supply - In comparison to Bitcoin (capped at 21 million coins), an unlimited amount of Ethereum can exist.
  • Extremely volatile - as with all cryptos they can be highly volatile, which can increase profits but also land you with multiple losses.

Even with its massive success, Ethereum still faces some issues. Like all blockchains, one of Ethereum’s main problems is scalability. As the ecosystem evolves, several solutions are already in place to guarantee the scalability of performances with low transaction fees. 2021 was the year of layer-2 protocols, such as Polygon.

Layer 2 solutions allow scalability by handling transactions outside the Ethereum main net while still leveraging the robust security of the main network.

Let’s take a look at Cardano.




Cardano: Pros & Cons

Cardano is a decentralised public blockchain-based platform that is also one of the first open-source and peer-reviewed networks in existence. It aims to deliver advanced features based on a rigorous scientific and research-based process.

Cardano offers similar functions on its platform to Ethereum. However, it differentiates itself through a research-driven approach to its design. Cardano sees itself as a third-generation crypto that can improve smart contract deployment and resolve the scaling issues of Bitcoin, and Ethereum.

No wonder why many experts believe that if Cardano fulfils its promises, it may replace Ethereum, a second-generation coin...

 

Cardano Pros

Cardano’s main pros are:

  • Third-generation blockchain - Overcomes challenges that other platforms have encountered. More scalable than Ethereum (second generation) and more decentralised than Bitcoin (first generation).
  • Academic backing - Cardano benefits from being one of the few coins that have been reviewed by academics who largely praise it.
  • Can provide digital identity - Cardano can provide digital identity to unbanked citizens throughout the globe, especially in developing countries across the globe.
  • Uses multiple layers - By implementing a settlement layer and a computational layer, Cardano ensures unlimited scalability and quick transactions. 

The primary advantage of Cardano rests on the fact that it is a scalable blockchain platform developed and introduced for multiple applications. It is similar to Ethereum but is more scalable. The technology is more promising because of the research-oriented focus and philosophy of its developers and the participating open-source community.

 

Cardano Cons

Cardano’s main cons are:

  • Still in development - Though Cardano is known as the ‘academic blockchain’ that has undergone essential review and testing, the truth is that Cardano is still developing, and is developing slowly.
  • High level of risk - Just like all other cryptocurrencies, there is a high level of risk involved in investing. Cardano is no exception.
  • The voting system - Token holders are not always tech-savvy and may vote for an unreasonable decision.
  • Better tech doesn’t speed up adoption - In Cardano’s case, it has a tough time beating Ethereum and Binance which are already very popular. Why leave a very active community for a quieter one?

Undeniably, one of the biggest disadvantages of Cardano is it does not have the first-mover advantage, unlike Bitcoin. Furthermore, with Ethereum being the second-largest blockchain network in the world, this platform and its native cryptocurrency need to overcome the challenges of a highly competitive market with existing dominant players.

Now that we’ve discussed the pros and cons, let's jump into the key differences of what makes Cardano and Ethereum what they are.



Difference #1: Vision

Cardano has positioned itself as an alternative to Ethereum. Both platforms are used for similar applications, such as smart contracts and have goals of building a connected and decentralized system.

The heart of any blockchain platform is the algorithm it uses to create blocks and validate transactions. Cardano and Ethereum use different blockchains. Let’s dig in at the different visions these cryptos have.

 

Cardano

Cardano differs from other blockchain projects by emphasizing a research-driven approach to design, aiming to achieve an academic rigour it believes will propel the adoption of its technology.

While Cardano may not promise new ground-breaking features, users and developers may find its cryptocurrency offers appealing optimizations based on scientific research and formal verification, a process by which its code is verified mathematically.

Furthermore, Cardano is released in phases and has seen 5 major platform upgrades since 2017

Ethereum

Ethereum was created with the intention of becoming a global, open-source platform for custom assets and new kinds of economic applications.

A new phase of Ethereum, called decentralized finance (Defi), has started garnering attention in 2020. This movement saw the creation of decentralized applications (dapps) intended to automate financial services like lending or borrowing without the need for a traditional bank or intermediary. That covers the vision, but what about the road to get there?

 

Difference #2: Architectures

Probably the most significant way the two smart contract platforms differ is in their layer designs. Scalability is one of the biggest problems the crypto industry is facing today. The unprecedented growth the industry has seen has made using DeFi a slow, expensive, and risky endeavour that has been pushing users towards more centralized platforms.

Let’s take a look at some of those differences.

Cardano

Cardano is split into two layers. The layers separate the account value ledger from the reasons why value transfers from one account to the other. This separation gives you, as the end-user, more control over the privacy and execution of your smart contracts.

The Cardano Settlement Layer (CSL) takes care of the value ledger while the Cardano Computation Layer (CCL) handles the “why” of transactions.

Ethereum

Ethereum only has one layer. But, second-layer scaling solutions are in the works. Plasma is one of those solutions. Plasma contains child blockchains similar to Bitcoin’s Lightning Network.

These child chains facilitate transactions without having to take up bandwidth on the main Ethereum chain. Ethereum will soon implement sharding as well to help with the blockchain’s scalability issues.

So both differ in architecture but what about development?

 

Difference #3: Development

This year is crucial for the Cardano-Ethereum race and how they approach the adoption and development of their ecosystems. Cardano has already launched smart contracts and Ethereum wants to move to a proof of stake model. A lot depends on whether they do so without any technical issues.

Ethereum's first-mover advantage cannot be overstated. Even if Cardano's technology eventually turns out to be superior, it won't mean much if people don't use it. Cardano may be comfortable playing the long game, but it won't reach the end of its technical roadmap until at least 2025. And four years is a long time in the quickly developing cryptocurrency industry. Let's see both roadmaps for development.

Cardano

Cardano prides its own development where every component of its architecture is peer-reviewed and rigorously tested by academics before implementation.  This is a long process but assures that any implementation works well before release.

Cardano’s approach has been to target the developing world, specifically their governments and public institutions. Rather than push for the direct adoption of Cardano, IOHK and Emurgo have been providing various African nations with permission infrastructure to prove the utility of Cardano’s core technology.

Ethereum

In terms of development, Ethereum has more of a hands-on approach by putting practice before theory and has historically been more focused on private sector use cases in developed regions like Europe and North America. Over the last few years, Ethereum has started to gain traction in Asia where Vitalik (ETH’s founder) is referred to as the “V God”. 

Development is important for both cryptos but what about their speed in dealing with transactions?

 

Difference #4: Speed

Both Cardano and Ethereum's speed were designed to leave Bitcoin in the dust in terms of transaction speed. Cardano is setting itself to be eco-friendly crypto that uses a fraction of the energy of Ethereum and Bitcoin. But on the other hand, Ethereum 2.0 will be able to process an estimated 100,000 transactions per second and will use 99.95% less energy than it currently does…

It will be interesting to see how both turn out when both reach their full potential. Let’s take a look at both where they’re at currently.

Cardano

Cardano is capable of processing over 1 thousand transactions every second, proving faster than Ethereum. There is an opening that shows that the network could in the future support 1 million TPS. This platform, which is continuously updating its network, is working towards providing the best services. 

However, the transactions in Cardano take an average of 5-10 minutes to fully complete. Primarily, it takes about 20 seconds to complete one block. To ensure there is no reversibility, Cardano instils a process that involves putting around 15-30 blocks. 

Ethereum

The Ethereum platform can process 20 transactions every second, actually faster than the crypto giant bitcoin. Moreover, according to various analysts, this platform can complete the whole transaction process in a short period of 5 minutes. 

Generally, the speed of transactions depends on the amount of gas you give out. For instance, if you pay slightly lower gas fees, your transaction could take days to complete. 

 

Now let's explore the scalability of both and see how different they are.

 

Difference #5: Scalability

Scalability is a big problem for all cryptocurrencies. Now it is very popular to search for ways to eliminate this shortcoming. The problem of scalability very much slows down the development of cryptocurrency technology but Cardano and Ethereum say they have answers for this problem.

Cardano

Cardano is capable of transacting at a super-fast rate and hosts many transactions simultaneously. Therefore, investors with all values can transact in Cardano and enjoy the platform’s capabilities. Compared to Ethereum, Cardano provides more scalable transactions, larger than many blockchain protocols in the cryptocurrency space.

Ethereum

Scalability is a huge problem in the Ethereum network, with the platform facing tons of difficulties. In late 2018, the Ethereum network hit over 1 Terabyte, and the size is growing at a super-fast rate. Although with ETH 2.0 around the corner, the Ethereum layer two solution will bring scalability to the network, which will help deal with the major issue of scalability and high gas fees that plague and affect network users.

 

All of these differences lead up to the same question again and again… Who’s going to be the winner of this fight!?

 

Difference #6: Future Dominance

The Cardano vs Ethereum debate is widespread in the cryptocurrency space as both networks offer similar characteristics, and investors believe that their favoured coin is the best to buy. Predicting Cardano and Ethereum’s pricing movement requires a lot of guesswork, but there are some interesting key catalysts for both of them on the horizon… So let's take a look at what they will be.

Cardano

Cardano has long been hailed as the potential "Ethereum-killer." as it seeks to top both Ethereum and even Bitcoin, as it offers the best of both worlds. It solves Bitcoin's excessive energy usage problem while also challenging Ethereum's captivating smart contracts.

Cardano seeks to offer many of Ethereum's most compelling capabilities, such as robust smart contracts. Cardano is energy-efficient, supports fast transactions with minimal transaction fees and has a strict cap of 45 billion coins outstanding, as compared to Ethereum, which has no absolute limit to its total eventual supply.

Ethereum

Ethereum's simplicity has allowed it to gain true mass-market adoption. Cardano may possess some technological advantages, but Ethereum is the only blockchain that is truly “enterprise-ready”, boasting supporters that include Accenture, FedEx, JP Morgan Chase and Microsoft – all members of the Enterprise Ethereum Alliance.

The imminent arrival of ETH2 has gotten people talking about the Flippening, the hypothetical moment when Ethereum’s market capitalization surpasses Bitcoin’s. When that will happen… no one knows but what is for sure Ethereum is still a powerhouse of potential growth.

 

Now Over to You

At the end of the day, it’s impossible to say who will come out as the winner in the Cardano vs Ethereum duel, both digital assets can be an excellent addition to any portfolio and are extremely ambitious projects with grand plans for the future.

That being said,  you should remember that all crypto investments do carry risks and we can’t stress enough that you should always carry out your own research before investing in any asset, digital or not.

We hope you enjoyed this edition of the knowledge crunch blog just as much as we enjoy writing them! Stay tuned for more and be sure to check out our other helpful blogs with advice and tips to reach your investment goals with ZuluTrade. 

 

Why not start trading Cardano or Ethereum on ZuluTrade today?

 

Disclaimer: The views expressed do not constitute investment or any other advice/recommendation/suggestion and are subject to change. Reliance upon information in this material is at the sole discretion of the reader. Opinions expressed in this article do not represent the opinion of ZuluTrade Social Trading Platform and do not constitute an offer or invitation to anyone to invest or trade. Every metric and the statistical number is a result of a past performance which does not constitute a promise or a certainty for a future one.

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