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A Beginner’s Guide: Ethereum vs Cardano

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With cryptocurrencies and blockchains rising rapidly as a form of personal investment, navigating where to invest your money may seem daunting for many.

With the highly volatile world of cryptocurrency, it’s always best to first do your research before you invest. While there are hundreds of different types of blockchains and cryptocurrencies at the moment, we’ll compare the two major players: Ethereum 2.0 (upcoming release) and Cardano (current state as of October 2021).

If you're looking to invest in cryptocurrencies or just want to learn more about how the top two cryptocurrencies work then this comparative guide will help get you started.

Development Strategy

On Ethereum 2.0 there are a lot of smart developers, but they move fast and use the “break-things approach”. Meaning that projects can be rather unreliable at first.

Cardano’s development strategy makes use of scientific, peer-reviewed research functioning as an academic formal development strategy. With Cardano, a lot of the research is done upfront. Please see IOHK Library for more details.

Proof of Stake (POS)

Casper is Ethereum 2.0's POS (Proof-of-Stake) protocol of choice. As stated by the Securities and Exchange Communication (SEC) Casper staking may be regarded as a security, implying that the stakeholder has a genuine chance of losing his or her money.

This smart-contract-based POS requires a minimum of 32 ETH, is locked, and a small portion of the supply is staked. However, there is a chance of losing your ETH through slashing.

Ouroboros is Cardano’s POS protocol of choice. Ouroboros is the most balanced solution for the blockchain trilemma (Decentralized, Security, Scalability). Since this is backed by scientific research, it is proven to be safe because the risk of losing your stake/ADA is non-existent, meaning the only risk is no/fewer rewards.

This stakepool-based POS makes use of over 2500 stake pools and requires a modest minimum of 10 ADA, creating the most decentralized network. Since it is not locked, and over 50% of the wallet supply is staked (meaning you'll need over 51% of supply to control the network, your ADA moves freely.Because of this, stakers are encouraged to switch stake pool if it is saturated to keep the network decentralized.

Fees

On Ethereum 2.0, fees are rewarded to smart contract owners and stakers.

On Cardano, fees are rewarded to stakepool owners, stakers, and the treasury.

Transactions

Ethereum 2.0 makes use of an accounting model with variable fees at an expected rate of 1000 transactions per second.

Cardano makes use of the Extended UTXO model with fixed parameterized fees that are adaptable and have a rate of 256 transactions per second.

Voting

Voting on Ethereum 2.0 requires the use of smart contracts.

Cardano has voting functionality that is embedded in the system. All projects developed or researched are voted for by the Cardano community. Additionally, there is a large treasury that will be used in the future when Cardano becomes community-driven.

Tokens

There is an unlimited supply of tokens on Ethereum 2.0 with token burns.

Token supply for Cardano is limited to 42 billion and there are no token burns. However, this is considered unsustainable especially when there is a fixed supply.

NFTs

Using Ethereum 2.0, you have access to a large, thriving community of NFT projects. However, the blockchain requires smart contracts for the development of Non-Fungible Tokens (NFTs).

Using Cardano, you also have access to a large thriving community, however, the creation functionality of NFTs is already embedded in the system.

Alt Token Creation

Again, in order to create alt tokens on Ethereum 2.0, you need to enter into a smart contract.

For Cardano, the alt token creation is embedded in the system. An example of an alt token using Cardano is the World Mobile Token.

CodeBase

Ethereum 2.0 code is partially rewritten from the Bitcoin source code and is fully open-source. Ethereum code is available on Github.

Cardano is the only blockchain project doing a full rewrite from the ground up, except for Bitcoin itself. This code is 100% rewritten, is 100% pure Haskell, and is fully open-source. Cardano code is available on Github.

Smart Contracts

Ethereum 2.0 makes use of Solidity, a crypto standard that is a static type EcmaScript. One of the good things is that Ethereum smart contracts do not force programmers to write safe code. Ethereum Virtual Machine is available in many other blockchain projects and ETH smart contracts are easily ported into other blockchain projects like Solana or Binance SmartChain.

However, a large number of smart contracts are expected to be hacked, along with all other EVM blockchains. There are a lot of dApps, Solidity developers in Crypto, and a lot of EcmaScript developers in web development, however, there is not a lot of Solidity in mainstream Fintech.

Note: When referring to 'a lot', it is important to understand that the Crypto space is still small, and thus 'a lot' is relative to that space.

Cardano makes use of the Plutus (Haskell) engine, which is currently only available for Cardano. And while Plutus requires programmers to write their own safe code, it’s expected that this will lead to fewer smart contracts being hacked.

The first dApp is yet to be made available, but Cardano smart contracts are being developed for release, soon. A few of these include SundaeSwap, Meld, and Singularity.Net. And since no smart contracts are needed for POS, Voting, NFT's, Token creation, there will be fewer smart contracts developed anyway.

Haskell is a Fintech and NASA standard where there are relatively a lot of Haskell developers in mainstream Fintech. However, there are very few Plutus developers in Crypto.

Organization

Ethereum 2.0 is a community-driven cryptocurrency that mostly makes use of unpaid volunteers.

Cardano is made up of paid employees and will become community-driven when all five phases of the road map are completed. Cardano is developed by a Non-Profit Organisation called Input Output Global, but that doesn't mean it's centralized, it means that developers and researchers are paid for their hard work and all stake pools operate independently.

Blockchain

Ethereum 2.0 is a single layer on the blockchain. But smart contracts are cumbersome to process and therefore congest even the most simple transactions. This makes hardforks and blockchain changes a much more complex ordeal.

Cardanomakes use of a dual-layer on the blockchain. The first is the Settlement Layer where transactions take place, while the second is the Computational Layer where the smart contracts are stored.

Because of the multi-layer approach, simple smart contract transactions will not cause congestion and the Hardfork Combinator makes hardforks a more secure event.

Network Effect

Ethereum 2.0is adopted by many users, developers, and companies.

Cardano adoption is still in the early stages and adoption needs to grow. But since we have only scratched the surface of the Crypto world, there is still much that needs to be explored and there are many reasons why Cardano might take over network effect.

Such as improvements in safety, and with quality being preferred over-development speed. Not only that but the functional program Haskell is mainstream Fintech and allows for staking without risk.

Number of Active Wallets

There are approximately 8 million active Ethereum 2.0 wallets.

There are approximately 2 million active Cardano wallets.

Issues

Although widely used, Ethereum 2.0 is not without major issues. Ethereum encountered the first DAO hack, and it probably won't be the last with the growing list of other smart contract hacks and bugs. Not only that, but Ethereum almost split the blockchain due to a bug, and unfortunately, the public are the guinea pigs.

The one issue with Cardano is the mismatch in the understanding of Solidity vs Plutus. For example, take a look at the eUTXO discussion.

Other than that, Cardano has been stable in function since its launch in 2017. By conducting scientific research and peer reviews, the use of Haskell means one thing - a safe and reliable cryptocurrency network.

Key Takeaways

In the above list, Cardano is compared to Ethereum. But in a few key aspects Cardano is unique to all other blockchain projects:

  • Scientific peer-reviewed research (externally reviewed)

  • Ouroboros (blockchain trilemma solution)

  • Haskell (functional programming enforces safer coding)

  • 100% rewritten from the ground, so there is no bitcoin or Ethereum clone.

Some Scientific research papers from the IOHK Library are already used by some other blockchain projects as well. At the moment there is at least one blockchain project implementing Ouroboros POS algorithm.

If you need any help making the jump to Cardano like we did, reach out and one of our team members will be happy to assist you.

In the end, Cardano is trying to accomplish one thing only: building a safe third-generation blockchain using a safety standard applied by traditional fintech and governments. And this is common sense for high-stakes software.