The race between the Ethereum alternatives — so-called “Ethereum killers” — is heating up. Solana (SOL) has overtaken Cardano (ADA) in the crypto charts. It’s now the fourth biggest cryptocurrency by market cap, pushing Cardano into sixth place. Binance Coin (BNB) knocked Cardano out of third place a few days ago.
Solana has steadily risen for months, gaining over 70% since the start of October. Cardano has bucked the trend — where the rest of the overall crypto market is on the up, it has lost almost 3% since Oct. 1.
So what’s going on with these two coins, and should ADA investors be worried?
Solana vs. Cardano
Solana and Cardano have a lot in common. Both are third-generation smart contract cryptocurrencies that aim to solve some of the problems faced by Ethereum. Ethereum was the first cryptocurrency to introduce smart contracts — tiny pieces of self-executing code that live on the blockchain — but it has struggled with network congestion and high fees.
Third-generation cryptocurrencies are designed to be faster, more scalable, and more affordable. Older cryptos like Ethereum or Bitcoin (BTC) need upgrades or additions to improve their performance, but these solutions are built into Solana’s and Cardano’s ecosystems.
Rising costs on Ethereum mean developers are looking for alternatives, and both Solana and Cardano hope to pick up the slack. That’s been a big driver for several programmable cryptocurrencies, but particularly Solana, one of the fastest cryptocurrencies on the block.
Solana has gained almost 16,000% since the start of this year, taking its market cap to over $72 billion.
In contrast, Cardano has gained around 1,000% since Jan. 1, and its market cap is now almost $66 billion. Cardano’s price saw significant gains in the run-up to its smart contract launch in September, but it hasn’t held those increases.
Applications play an important role
There’s a huge amount of hype in the crypto industry. With limited regulation, it can be difficult for investors to find solid fundamentals they can use to evaluate these investments. For example, unlike stocks, cryptocurrencies don’t have to publish regular earnings reports.
But there are other metrics we can use to judge crypto investments — such as the number of projects running an ecosystem, market capitalization, or the amount of money that’s tied up in its applications.
One reason Solana keeps going from strength to strength is that there are over 350 projects on its network, including several popular decentralized finance (DeFi) applications. According to DeFi Llama, there’s $14.86 billion locked up in Solana’s DeFi applications, while Cardano isn’t even on the chart.
There are now around 70 projects running on Cardano. However, like many things related to Cardano, it will take time for the ecosystem to develop. Cardano takes a slow-and-steady approach to growth, preferring to peer-review each step and not rush into things. This can be at odds with the headline-driven quick wins that often drive crypto prices.
Cardano has made some announcements since September, and is currently in the middle of an African tour. Indeed, Cardano’s relationships in Africa set it apart from many cryptocurrencies. You only need to look at its partnership with the Ministry of Education in Ethiopia to find real-world utility. But those relationships are not what investors are looking for right now.
Don’t put all your eggs in one basket
If you take a long-term approach to investment, these short-term market fluctuations shouldn’t affect you much — unless you feel that Cardano’s slightly muted smart contract launch changes your initial investment thesis.
It isn’t a question of either-or: Solana and Cardano are both interesting long-term investments that you can buy from most top cryptocurrency exchanges. Both will face different challenges in the coming months and years. Both operate in an extremely competitive space, and both may be affected by any additional cryptocurrency regulation.
- For Cardano, as we’re seeing right now, its heavy technical (and at times dry) approach lacks the pizazz of other projects. As the ecosystem attracts more projects, we’ll need to monitor how it handles the additional stress, and how those projects perform.
- Solana’s surge in popularity has already caused some technical problems. And its novel proof-of-history validation model is nowhere near as tried and tested as Ethereum’s system.
Ultimately, there’s unlikely to be a single Ethereum killer. Indeed, it’s unlikely Ethereum will die out completely. We’re more likely to see a situation in which four or five smart-contract-capable cryptocurrencies lead the pack — and Solana, Cardano, and Ethereum may well be among them.
