Cardano vs Ethereum: Which one is better?

Smart contracts. We have smart contracts everywhere inside the cryptocurrency world. They work to build a lot of digital tools, so, this isn’t exactly weird. Different (and often numerous) blockchains have this offer for their users, but the leaders so far, per market capitalization, are Ethereum (ETH) and Cardano (ADA).

Cardano has been racing this year to catch up with Ethereum. The latter, on the other side, has been providing for years the infrastructure to make popular applications, such as Initial Coin Offerings (ICOs), Decentralized Finance (DeFi) platforms, and Non-Fungible Tokens (NFTs). None of them are free of some disadvantages, though.

Let’s make a quick comparison between them.

Same origins for Cardano and Ethereum

A year before Ethereum’s initial software release in July 2015, Hoskinson stepped away from the project (in June 2014), alleging differences with Vitalik Buterin about Ethereum. Specifically, it was because Hoskinson favored making Ethereum a commercial entity, while Buterin aspired for Ethereum to be a not-for-profit project, according to a Bloomberg report.

In 2015, Hoskinson began the development of Cardano, named after Gerolamo Cardano (an Italian polymath). For this new project, Hoskinson was supported by Jeremy Wood, who also left Ethereum. Finally, in September 2017, the first version of the Cardano software was released. It should be noted that this blockchain is the flagship project of IOHK (Input Output Hong Kong), a company formed by both developers.

Features in different languages

Both of them are the basis for the creation of smart contracts and internal tokens inside these platforms. If we focus on usability, we must know that Cardano and Ethereum — beyond their currencies — were mainly built for developers to create new apps with numerous purposes. We’ve already seen them: ICOs (internal tokens), DeFi apps, NFTs, Decentralized Autonomous Organizations (DAOs), games, and so on.

The great difference with other apps out there (the ones by Google or Microsoft, for example), is the decentralization. This means that no corporation, government, or group can control or censor these platforms or coins. The users are in control.

That was always the case for Ethereum but is more recent for Cardano. The team of this blockchain is focused on researching, so, its development has been slow and many of its functions are still pending. The arrival of the Shelley phase took place in July 2020, opening the “mining doors” to the whole community. Previously, in the Byron phase, Cardano production was centralized.

Additionally, this same year, Cardano introduced new features: the creation of native tokens and multi-asset support. That includes stablecoins, DeFi assets, and NFTs. Also, this September 12, the update “Alonzo” finally introduced real smart contract capabilities. The competition with Ethereum seems more matched this way.

Different mining and coins

Ethereum native cryptocurrency is called ether (ETH), and it has no maximum issuance limit. Moreover, its supply has increased by 4.5% every year so far. However, the update “London” in August introduced a new system that tends to be more deflationary to reduce the high gas fees. In the current Ethereum system, newly mined ETHs are given as a reward to miners for each new block added to the network.

Nevertheless, as the Ethereum Foundation mentions, the plan has always been to migrate towards a Proof-of-Stake (PoS) consensus mechanism. In PoS systems, the energy isn’t required and the figure of the “miner” is replaced by the “validator”. This validator locks a certain amount of coins to gain the right to verify transactions, mint new coins, and receive rewards.

The Ethereum Foundation claims that PoS increases “immunity to centralization”. Although, the opposite can be inferred from the description of this system, as miners would become validators based on the number of cryptocurrencies they hold. Ethereum 2.0 is already in the advanced stages of development, though.

With PoS on Ethereum, only those users with a minimum of 32 ETH (around $106,000) would be eligible to add new blocks to the chain. They’d get about 5.4% passive earnings per year, but they’ll have to wait until Ethereum 2.0 is activated, with their coins currently unavailable.

Beyond Ethereum, in Cardano…

As stated on the Cardano website, through Ouroboros “ADA holders may delegate their stake to a specific stake pool, increasing its chance of being selected as the slot leader, and share in the stake pool’s rewards”.

Contrary to Ethereum, Cardano has a maximum issuance limit of 45 billion ADA, of which 32 billion are already in circulation. Its staked value is over $60.7 million, and its promised yearly reward is around 6.2%.

Speeds and fees

In terms of network fees, Cardano features lower transaction fees than Ethereum (at least, so far). According to BitInfoCharts, the historical average fee on Ethereum is 0.0056 ETH (around $18.5), while Cardano records an average of 0.51 USD in fees, according to Messari.

Cryptofees website estimates that approximately $35 million in daily fees are generated on Ethereum. Inside this network, the fees are partially burned and partially paid to miners. On Cardano, the total daily fees are estimated to be around $44.500. The fees model is similar to Ethereum: there are no miners here, but users pay the fees to validators.

Additionally, in Ethereum there’s the so-called “gas”, which is necessary to carry out operations with smart contracts. According to Ethereum.org, “gas refers to the unit that measures the amount of computational effort required to execute specific operations on the Ethereum network”.

Gas prices on Ethereum are specified in gwei and are paid with ETH (1 gwei equals 0.000000001 ETH or 10–9 ETH). By the time of writing, this fee is at 70.5 gwei (around $0.0023).

Cardano or Ethereum?

Ethereum has a total market capitalization of over $397 billion, and it’s the indisputable leader in DeFi applications. According to DeFi Prime, over 90% of DeFi platforms are Ethereum-based. ICOs, NFTs, DAOs, and games have been very numerous as well in this blockchain through all these years.

Meanwhile, Cardano is just starting this journey. The team behind this currency is meticulous, always focused on academic development. But that has taken away all the years of use that Ethereum already has. Even if some hacks are very common in the latter one.

Despite all this, Cardano has gained a lot of popularity and investors in the last two years. Now, with over $81 billion, it’s the third cryptocurrency by market cap; following Ethereum very close. The price of ADA has increased by over 1,370% year-to-date [CoinMarketCap], and several All-Time-Highs (ATHs) have been reached this 2021.

Ethereum is growing as well. The PoS system is closer, and the updates in the middle are promising further improvements. ETH has also surpassed records this year, increasing by over 349% year-to-date. So, which one can you choose? Both of them. Everything depends on what do you want to build and/or what do you want to achieve.

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