Ethereum Vs. Cardano: A Deep Dive

History and Introduction: Cardano and Ethereum

Usually, when we discuss digital currency, we hype up the coins with the larger market capitalization and higher price value.

However, the crypto market has few other coins with a comparatively lower market cap but unique features. Yes, there are a bunch of coins that are grey-zoned in our discussions but they too deliver unique advantages.

One such coin is the Cardano with a $1.18 price value and $37.77 Billion market cap. This is not just a digital currency, but a complete Blockchain network like Ethereum. It is often referred to as Japanese Ethereum, and sometimes as ‘Ethereum Killer’. Ethereum was launched by a team led by Vitalik Buterin in the year 2015. One of the members of the same team, Charles Hoskinson, developed and launched Cardano in the year 2017.

Ethereum was primarily created to serve developed countries, while the basic agenda of Cardano is to serve developing countries. Since Cardano is a complete blockchain network, it is used for both transactions and applications. Ethereum offers a similar interface, and being one of the oldest smart contract-based Blockchains, has garnered an expansive user base.

Cardano is still in its developing phase and hence has a limited user base. The Ethereum team, however, favors the working system where they launch updates and then experiment with its outcomes. This has resulted in a total of 17 updates to date. Out of these, 15 have already been launched, while two others are ripe enough to soon be launched. Cardano on the other hand, being relatively new, has gone through just 3 updates to date.

These contrasts between Ethereum and Cardano have led to several comparative debates. Let’s see a few key differences in detail.

Architecture: Ethereum is the top dog in providing a smart contract-enabled blockchain network, while Cardano with its unique two-layer architecture is much more efficient. A typical blockchain is composed of three layers i. Network Layer ii. Blockchain Layer iii. Application Layer.

Both Ethereum and Cardano have these three layers but with a difference. In Cardano, the blockchain layer is a sandwich of two layers-

1. Cardano Settlement Layer (CSL)

2. Cardano Computational Layer (CCL).

CSL is the layer where all the transactions are processed via the Proof of Stake (PoS) mechanism. In CCL, the smart contracts are processed. In Ethereum however, both these tasks are performed in the same layer. The most important part for both Ethereum and Cardano is that both are about to be revamped, to incorporate drastic improvements in their utilities and features.

Scalability: In terms of scalability, Cardano is head and shoulders above Ethereum.

Not only this, the current update of Cardano is expected to allow Cardano to support around 25 million transactions per second. This is an unusually high number when compared to the likes of Bitcoin and even Ethereum. Ethereum, being a very large and dense network, suffers severely from scalability issues.

Nevertheless, the forthcoming updates for Ethereum are without a doubt, focused on its scalability issues, and will look to fix them. With the upcoming update, it is estimated that Ethereum can scale up to 0.1 Million transactions per second. Ethereum and Cardano, both use Plasma Layer-2 scaling solutions in distinct ways.

Mining: Mining is the process used for verifying transactions on the blockchain. Mining does aid in the validation of transactions, however, the power and computing resources that are exhausted during the process are over the odds. This is a matter of serious concern.

Talking about Ethereum, it requires around 44.49 TWh per year just for mining. In this aspect, Cardano is very friendly and it requires a meager 6 GWh per year. That is why Cardano is also called a Green Coin, and as of now, very few coins fall in this category. The good news is that both Ethereum and Cardano are still working to cut down this power consumption and are almost ready with the solutions.

Financial Status: As previously mentioned, in terms of price value and market cap, Ethereum leads Cardano. There is a cap of 45 Billion on the supply of Cardano, while that of Ethereum is unlimited. Despite the exponential rise in blockchain use cases, Elon Musk announced with a tweet that Tesla won’t be using Bitcoin. This was also followed by a sudden drop of 15% in the value of Bitcoin, as well as a drop in the collective market cap of other cryptocurrencies as well. Surprisingly, at the same time, Cardano’s price value and market capitalization surged. This was all because of the low transaction fee that Cardano charges, and its relatively lower power consumption. Hence, while Cardano rests on a lower price than Ethereum, the relaxation in its transaction fee can attract way more users.

Conclusion: The third-generation coin Cardano stands at par with the popular second-generation Ethereum. Many unique features of Cardano can help make it stand out in the crypto market. However, Cardano is comparatively new and hence is not as popular as Ethereum. We cannot directly claim which is better, but both of these coins are awaiting updates with the potential to dominate the crypto market. As general users of cryptocurrency, we can look forward to lower transaction fees, quicker transactions, energy efficiency, and many more qualities in the new updates of both these Blockchains.

Table: Comparison of Ethereum and Cardano on various features. (Note: All the information is taken as of 19-July-2021)

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