ETH set to become deflationary while ADA welcomes Vasil hard fork.
Both Ethereum (ETH) and Cardano (ADA) aspire to be the operating system through which custom decentralized applications (dApps) can be built upon using programming logic. Though the final objectives are similar, their approach to design are poles apart. In fact, the difference stems from the philosophies of these respective blockchain founders Vitalik Buterin and Charles Hoskinson. Vitalik envisions Ethereum to be a world computer by building and experimenting fast while Charles, who also helped co-found Ethereum, emphasizes a research driven approach to the design of Cardano. In this article, we will take a look at the key differences between Ethereum and Cardano in terms of vision, network design and monetary policy.
Ethereum was launched in 2015 by the 19 year old prodigy Vitalik Buterin (with the help of few other contributors) to leverage blockchain technology to build an open source platform to decentralize products and services beyond money. Entrepreneurs flocked to Ethereum for the first time during the Initial Coin Offering (ICO) boom in 2017 that allowed creators to raise money for new projects using the crypto assets created on Ethereum blockchain. Fast forward a few years – decentralized finance (DeFi) started to flourish from the 2020s and currently a new protocol upgrade Ethereum 2.0 in the works with Beacon chain, merge and shard chains in pipeline to achieve a more secure and scalable Ethereum.
Cardano was created by Charles Hoskinson and Jeremy Wood in 2017 with the vision to provide economic identity to billions of people by enabling the creation of dApps to manage identity, value and governance. Cardano differs from most blockchain projects by relying heavily on peer reviewed research and formal development methods. The launch of Cardano is designed in five successive phases namely Byron, Shelley, Goguen, Basho and Voltaire which aims to achieve decentralization, scalability and sustainability in a systematic manner. Cardano is currently entering the Basho phase.
Ethereum allows developers to write programs called smart contracts that can be deployed on the blockchain. Similar to Bitcoin, Ethereum validates the transactions through proof of work (PoW) mining method. However, the plans to upgrade the network to proof of stake (PoS) which drastically reduces energy consumption is underway. Post this upgrade, any user who owns a minimum of 32 ETH could lock those funds in a contract and earn rewards for solving computations needed to add new blocks to the blockchain.
To secure its network, Cardano uses a consensus mechanism called Ouroboros protocol (PoS) which boasts a high level of security enabling users to validate transactions. Ouroboros determines the user responsible for choosing the blocks that get added to the blockchain and lets them earn the native token ADA as rewards. Arguably, Cardano is ahead of Ethereum only in this regard as it paves way for more energy efficient implementation at the beginning itself while Ethereum has to transition from PoW to PoS without affecting the user experience of the existing users.
ETH, which powers the Ethereum blockchain, is currently an inflationary asset meaning the supply of ETH is programmed to increase every year at 1.9% per year. With proposed ‘Merge’ upgrade only months away, ETH will turn deflationary (issuance of ETH to be reduced by 90%) making it scarcer in the future. ETH has broken $3,000 again in the last 24 hours riding on the positive sentiment brought about by the new upgrades.
ADA, which powers the Cardano blockchain, is minted every block and users are distributed with ADA for verifying transactions. It has a limited supply of 45 billion out of which 31 billion is already in circulation with the other 14 billion to be issued through minting. ADA, which has been trading at sub $1 for quite some time, finally broke out of its accumulation range to trade near $1.13 today. The price surge is attributed to the Vasil hard fork which is likely to happen in June that will allow the developers to incorporate pipelining in the dapps.
Outlook: ETH or ADA?
The market cap of Ethereum is $367 billion at the moment, which is almost 10 times that of Cardano. If ADA reaches ETH’s market cap, it has to do a 10x from the current price level. While it’s not entirely impossible, it all depends on the real world value that Cardano can generate in the future. At the same time, Ethereum is also trying to mitigate some of its issues (high gas fees and transaction times) with protocol upgrades. The answer to which will gain mass adoption will take years to unfold but an exciting one to observe.
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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.