Cardano vs. Ethereum: Comparing the Two Cryptocurrencies

If you are investing in cryptocurrencies, 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.

Developers can use both the Ethereum (ETH) and Cardano (ADA) blockchains for similar features, including running custom programming logic (smart contracts) and building programs (decentralized applications).

The heart of any blockchain platform is the algorithm it uses to create blocks and validate transactions. Cardano and Ethereum use different blockchains.

The major difference at the moment is that Ethereum’s  Proof-of-Work blockchain is proving less flexible than Cardano’s Proof-of-Stake Ouroboros consensus protocol.

For more detail on Cardano vs Ethereum, take a look below. 

Difference Between Ethereum and Cardano

Ethereum and Cardano are blockchain platforms that were both created to function as decentralized application platforms. This distinguishes them from cryptocurrencies like Bitcoin which functions as a medium of exchange and a store of value.

Where Bitcoin is seen as a first-generation cryptocurrency, and Etherum is generally considered a second-generation cryptocurrency, Cardano is setting itself up as a third-generation cryptocurrency. The reason for this is the safety and scalability of its Proof-of-Stake (PoS) protocol.

What is Ethereum?

Ethereum is a blockchain platform created in 2015. Ether is the cryptocurrency of the platform. Ethereum has its own programming language, called Solidity.

Ethereums 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.

Although Ethereum can function as a medium of exchange similar to Bitcoin, its main purpose is to act as a decentralized application platform. As a blockchain network, Ethereum is a decentralized public ledger for verifying and recording transactions. The network’s users can create, publish, monetize, and use applications on the platform, and use its Ether cryptocurrency as payment. Insiders call the decentralized applications on the network “DApps.” 

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. 

What is Cardano?

Cardano is a blockchain platform created in 2017. Ada is the cryptocurrency of the platform. Cardano runs on the Proof-of-Stake Ouroboros consensus protocol.

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. The protocol is designed to reduce energy expenditure during the block production process to a minimum. 

Cardano aims to be a decentralized application (DApp) development platform with a multi-asset ledger and verifiable smart contracts. 

What’s the Difference?

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.

Ethereum’s Proof-of-Work blockchain has a well-established record. A network of miners computes complex calculations to keep the blockchain running. Proof-of-Work allows Ethereum to attach a physical value to its transactional system. An Ether is worth a certain amount of computing power.

A Proof-of-Stake consensus, like Cardano’s Ouroboros, replaces miners with validators. Proof-Of-Stake mining requires a lot less energy and fewer resources than Proof-Of-Work systems since Proof-Of-Work miners have to do much more ‘work’ to mine blocks. Ouroboros requires a small number of Ada holders to be online and maintain good network connectivity. This means that transactions can be validated quickly and cheaply.

Scalability, interoperability, and sustainability on PoW networks like Ethereum are limited by the infrastructure burden of growing costs, energy use, and slow transaction times.

Seeing the advantages of a Proof-of-Stake mechanism, Ethereum 2.0 intends to move from a PoW to a PoS model. Cardano does have the advantage of being the first-mover in this field and Ethereum will have some catching up to do.

If you are investing in cryptocurrencies, which should you choose? To see which side of the Cardano vs Ethereum debate you fall on, read the considerations for each blockchain platform below.

Cardano Considerations

Considerations that weigh in favor of Cardano are:

• Ouroboros consensus protocol. The Cardano platform runs on the Ouroboros consensus protocol. Ouroboros, created by Cardano in its foundation phase, is the first PoS protocol that was proved to be secure. When choosing to invest in Cardano, the success of the Ouroboros protocol is a huge plus.
• Scholarly academic research – Cardano’s development has been unique in that it has been informed by scholarly academic research. Each of Cardano’s development phases is supported by a research-based framework, incorporating peer-reviewed insights with evidence-based methods. This creates a strong foundation from which to make progress toward the future of both the blockchain network and the Ada token.
• Current price – In the short to medium term, Cardano appears to be a better purchase. Its price is more affordable than Ethereum’s price right now. As the DApp market grows, both Etherum and Cardano are likely to see an increase in value. 

Ethereum Considerations

Considerations that weigh in favor of Ethereum are:

• Longevity – Ethereum is the third-largest cryptocurrency worldwide. It also offers smart contracts and other decentralized applications on its network. This makes it a very appealing asset for clever investors.
• Ethereum 2.0 – The Ethereum 2.0 update will address some of the concerns with its PoW protocol. Long-term, this should increase Ethereum’s value.
• Current price – As the DApp market grows, both Etherum and Cardano are likely to see an increase in value (don’t forget cryptocurrencies are also subject to tax! Read more here.). Ethereum has shown that it is a major market player and is likely to continue to increase in value.

Frequently Asked Questions (FAQ)

What is the main difference between Cardano and Ethereum?

The main difference lies in their underlying blockchain technology and purpose. Ethereum, as a first-generation smart contract platform, focuses on decentralized applications (dApps) and smart contracts. Cardano, often considered a third-generation blockchain, aims to improve scalability, interoperability, and sustainability issues found in earlier blockchains like Ethereum.

What is the consensus mechanism used by Cardano and Ethereum?

• Cardano: Uses the Ouroboros proof-of-stake (PoS) consensus mechanism, which is more energy-efficient than proof-of-work (PoW).
• Ethereum: Originally used PoW, similar to Bitcoin, but is in the process of transitioning to PoS with Ethereum 2.0, aiming to improve scalability and energy efficiency.

How do Cardano and Ethereum differ in terms of scalability?

Cardano was designed with scalability in mind, using a layered architecture that separates the computation and accounting layers. Ethereum has faced scalability challenges but is addressing these through its upgrade to Ethereum 2.0, which includes sharding to increase transaction throughput.

What are the smart contract capabilities of Cardano compared to Ethereum?

Ethereum currently has more extensive smart contract capabilities and a larger ecosystem of dApps due to its earlier launch. Cardano has been developing its smart contract platform with a focus on security and formal verification, but it’s newer to the market.

How do the transaction speeds of Cardano and Ethereum compare?

Cardano generally offers faster transaction speeds due to its PoS mechanism and layered architecture. Ethereum has faced congestion and high fees, but its transition to Ethereum 2.0 aims to significantly improve transaction speeds and reduce costs.

What are the environmental impacts of Cardano vs. Ethereum?

Cardano’s PoS mechanism is inherently more energy-efficient and environmentally friendly than Ethereum’s original PoW. However, Ethereum’s move to PoS with Ethereum 2.0 is expected to drastically reduce its environmental impact.

Which cryptocurrency is better for developers, Cardano or Ethereum?

Ethereum is currently more established with a larger developer community and more tools and resources available. Cardano is growing but still needs to catch up in terms of developer adoption and ecosystem maturity.

How do the governance models of Cardano and Ethereum differ?

Cardano has a more formalized governance model, allowing token holders to vote on protocol upgrades and changes. Ethereum’s governance is less formalized, relying more on community consensus and the Ethereum Foundation’s guidance.

What is the market capitalization comparison between Cardano and Ethereum?

Ethereum typically has a higher market capitalization than Cardano, reflecting its larger user base, more developed ecosystem, and first-mover advantage in smart contracts.

Can Cardano and Ethereum coexist, or are they direct competitors?

Cardano and Ethereum can coexist as they target slightly different issues and audiences within the blockchain space. While they are competitors in some aspects, particularly around smart contracts and dApps, their coexistence contributes to the broader development and adoption of blockchain technology.

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• How to Read Crypto Charts

Final Thoughts

Cardano and Ethereum are often compared to each other because both their networks provide similar offerings.

Developers can use both the Ethereum (ETH) and Cardano (ADA) blockchains for similar features, including running custom programming logic (smart contracts) and building programs (decentralized applications).

The major difference at the moment is that Ethereum’s Proof-of-Work blockchain is proving less flexible than Cardano’s Proof-of-Stake Ouroboros consensus protocol.

Ultimately, as an investor, the Cardano vs Etherum debate is a false dichotomy. These two blockchain networks are not going anywhere, and are both likely to increase in value in the long term.

In the short to medium term, Cardano seems like a good buy. It is reasonably priced and as the DApp market grows, both are likely to see an increase in value. 

In the long term, Ethereum, with its large market share and the improvements expected in Ethereum 2.0., is likely to be a good cryptocurrency to hold.

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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