Ethereum and Cardano are both networks that are seeking to improve the efficiency and scalability of blockchain technology. The tokens associated with these blockchains, ETH and ADA, made waves in the crypto sphere for both their price increases and development. The 2 tokens are very similar, but a few key differences differentiate the 2 projects.
Both can serve as an investment for supporters of the projects. Ethereum and Cardano are major players in the blockchain industry. While the 2 tokens are often talked about in unison, it is important to understand what makes each token unique for both developmental and investment purposes.
Use Cases of ETH vs. ADA
While Ethereum and Cardano are both chains that promote the use of decentralized apps (dApps) and smart contracts, the projects look to accomplish different goals. Cardano is known for its emphasis on sustainability. Its proof of stake system is much better for the environment, as it uses less energy.
One area it is hoping to help with is agriculture. It aims to provide supply chain information for farmers so they can verify and track their relationships with others. It also partnered with the Ethiopian Ministry of Education, looking to store tamper-proof records of education for 5 million children. These records remain with the students on the blockchain and allow them to prove the extent of their education.
Ethereum, on the other hand, is looking to provide services on a larger financial scale. Ethereum can be used to send transactions to anyone, anywhere. The development team is extremely focused on the scalability of this process, allowing for fast and secure transactions between anyone. This feature can be useful in a variety of scenarios, ranging from supermarkets to investment banks.
Smart Contracts Explained
Smart contracts are programs that run on a blockchain. They store code and data on a specific place on the blockchain. They can help facilitate transactions and automate other tasks. Smart contracts are similar to a vending machine in that they can complete tasks without a person there to facilitate the task.
Actions taken by the smart contract are irreversible, just like how you can't get a refund from a vending machine. All smart contracts are public on public blockchains, and you can use parts of other contracts to make your own. Ethereum and Cardano both offer smart contracts on their respective chains. They both operate very similarly, but Cardano is more research driven while Ethereum aims to provide the best security.
Cardano recently released a new smart contract language called Haskell. The language allows non-programmers to get involved with the chain. It also has a peer review system, meaning ideas are looked at before being released onto the blockchain. The chain also focuses heavily on research in the social sciences. All of these traits set the Cardano chain apart from Ethereum.
Ethereum looks to provide better scalability in the near future. It offers a much larger network than Cardano, but its transactions are slower and more expensive. The Ethereum blockchain seeks to improve collaboration through programs such as the Enterprise Ethereum Alliance.
Proof of Work vs. Proof of Stake
As of October 2021, the 2 blockchains rely on different methods of verification. Cardano uses a proof of stake system to verify transactions. A proof of stake system employs validators who lock up ADA for the chance to verify transactions and receive block rewards. Block rewards are a portion of transaction fees that go to the users verifying transactions. However, block rewards can only be given to 1 person.
To combat the singularity of the rewards, users stake their funds into pools, allowing the users to collectively have a high amount of currency staked and then share the rewards. Users essentially prove that they have a stake in the coin to receive rewards. This system means that individuals don’t retain control of their investment while it is staked, which helps prevent fraudulent activity.
Proof of work, on the other hand, is what Ethereum relies on to complete transactions. Proof of work uses computing power to verify transactions. Computers compete to solve difficult math problems to receive block rewards. The block rewards are split depending on the amount of math problems solved.
This system uses massive amounts of energy. Also, proof of work blockchains have a much smaller throughput than proof of stake blockchains, making Ethereum less scalable than Cardano in its current state. However, Ethereum developers, concerned by high energy usage, plan to switch to a proof of stake system. It hopes to unveil “Ethereum 2.0” in 2022.
Ethereum vs. Cardano Market Capitalization
Ethereum and Cardano currently take up spots 2 and 3, respectively, in market capitalization. Market capitalization refers to the total amount of money invested into an asset. Cardano has a market capitalization of over $69 billion, and Ethereum has a market capitalization of over $415 billion. In the stock world, these both would be considered large-cap stocks based purely on market capitalization. However, Ethereum’s market cap is nearly 4 times the size of Cardano’s.
Large and institutional investors have placed lots of capital into Ethereum investments. Many of these investors strongly believe in the uses of Ethereum and its chain. Cardano also has high growth potential. Its emphasis on sustainability and social impact can be exciting for many investors. If larger investors move their funds to Cardano, there is much more room for growth. Both tokens are wildly popular and provide growth potential.
Where to Buy ADA and ETH
Because Ethereum and Cardano are so popular, they are available on most crypto exchanges. Some of the most efficient and fastest exchanges are Coinbase (NASDAQ: COIN), eToro, Webull and SoFi (NASDAQ: SOFI). Each platform offers its own incentives and drawbacks, so make sure to pick the exchange you are most comfortable with.
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What Has More Room to Grow: ADA or ETH?
Cardano’s token ADA is currently trading between $2 and $3 with a market cap of nearly $70 billion, while Ethereum’s ETH token trades between $3,000 and $4,000 with a market cap of over $415 billion. Due to its smaller market capitalization, ADA may have more room to grow. This being said, ETH provides many more practical uses revolving around its decentralized finance (DeFi) ecosystem. Cardano use cases deal with high throughput transactions. While these uses are very important, some investors value Ethereum's security and ecosystem over fast and cheap transaction fees. ADA has more room to grow in terms of price while ETH has more room to grow in terms of overall usability.
Current Cryptocurrency Prices
In early October 2021, Bank of America (NYSE: BAC) said that Bitcoin (BTC) is too large to ignore, citing the opportunity it sees in the project. This statement marked a huge moment in the cryptocurrency world as many institutional investors have been hesitant to get involved with crypto. This move could be the beginning of many large firms taking a look at the benefits of crypto. However, volatility is still prominent, with major coins’ trading volumes fluctuating much more than usual.
Increased volatility is defining the current market. Volatility provides opportunities to profit but can also lead to severe losses. Make trades with a calculated approach to mitigate risk. If you want to see where prices are, take a look at the table of major currencies and their prices.
So, What’s Better: Cardano or Ethereum?
Cardano and Ethereum both offer a variety of uses and interesting ideas. Cardano focuses on scalability, while Ethereum aims to provide the most robust and secure ecosystem of decentralized applications. Both can be great investments. However, Ethereum offers a much more usable platform due to the amount of applications the network offers. Ethereum has also been around longer, surviving several bear markets and reorganizations. For long-term usability and effectiveness, Ethereum is slightly better than Cardano. Nevertheless, Cardano still has its own unique uses and can be very impactful.
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About Caden Pok
Caden has been involved with crypto since 2018, when he began investing, trading, and mining tokens. He took part in undergraduate research studying cryptoeconomics at the University of Michigan, where he will graduate Phi Beta Kappa with a bachelor’s in economics in 2025. He is experienced with DeFi technology and multiple blockchains, currently investing in Ethereum and Bitcoin.