The crypto boom brought with it many unique applications and features that users could explore. The rise in the number of decentralised financial instruments led to a massive increase in the investments made in crypto. However, this also gave rise to stiff competition within the crypto ecosystem with newer crypto assets solving the challenges that older cryptos faced. Cardano was popularly nicknamed “Ethereum Killer” and has been the centre of attention for a long time. But can Cardano arrive as a substitute to Ethereum? Let’s explore:
First up, what are the challenges Ethereum is facing?
Being one of the oldest crypto assets, Ethereum ranks second among cryptos in terms of market capitalisation. Most of the decentralised apps today are operated on the Ethereum blockchain, and the most reliable smart contracts are based on the Ethereum-run ERC standards.
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However, Ethereum comes with its own share of challenges. For the longest time, Ethereum has been criticised for its skyrocketing transaction fee (gas fee). Ethereum operates with the proof-of-work protocol, which means that difficult mathematical problems need to be solved to add a transaction to the blockchain. This is typically done by ‘miners’ who charge a high gas fee because of the immense volume of transactions happening simultaneously on the blockchain.
Further, the proof-of-work protocol is also extremely energy-intensive, making it very harmful to the environment. For example, If you want to buy ETH today, then you will need approximately around INR 1,61,500 (for 1 ETH).
Here is where other crypto assets swoop in: they come with the proof-of-stake protocol that charges lower transaction fees besides enabling swifter transactions. In the proof-of-stake protocol, the users can add their funds to a liquidity pool, based on which the transactions get approved. The higher the liquidity pool, the more the chances of the transactions getting added to the blockchain. In exchange, the liquidity providers earn rewards. Cardano follows a proof-of-stake protocol.
What is Cardano’s potential?
In September 2021, Cardano made it to the third position, just behind Ethereum, in terms of crypto ranks by market capitalisation.
Cardano has always attempted to position itself as the coin that will act as a substitute to Ethereum. While this has kept the attention on Cardano, its non-performance could prove detrimental. However, Cardano is focused on not repeating the mistakes that Ethereum seemingly committed.
Cardano’s Architecture explained
Cardano has two layers – the Settlement Layer and the Computation Layer. While the Settlement Layer manages the ADA transfers, the Computation Layer enhances the smart contracts developed on the Cardano platform. This dual system helps them process transactions faster with minimal overlap, making each layer much more efficient. Ethereum on the other hand, has only one platform where all transactions are processed, making it relatively expensive.
Cardano’s potential: A perspective
Cardano uses less energy, processes transactions faster and charges less transaction fees by adopting the proof-of-stake consensus mechanism as opposed to the proof-of-stake mechanism followed by Ethereum.
Further, one of the unique features of Cardano is that it follows methodical peer-review processes prior to the launch of any of its updates. This helps in establishing Cardano as a reliable product, further solidifying Cardano’s potential.
Cardano vs Ethereum: A comparison
Here then are four parameters of comparison between the two leading crypto assets, that might help you judge if Cardano will replace Ethereum.
Scalability often refers to the number of transactions the platform can process at once. Cardano envisions reaching 2 million transactions per second (tps). This is possible through Hydra, a second-layer solution built on the existing Ouroboros (the current layer handling approval of transactions). The additional layer is like an extension, providing more capacity, much like adding storage space to your cloud. Ethereum’s future plans, on the other hand, do not envisage tackling a million transactions per second.
Most blockchains face one common issue – they cannot interact with each other. They operate independently. However, from a user’s perspective, interoperability between blockchains is always welcome. Ethereum has created a robust ecosystem within the network and, therefore, sticks to interoperability within platforms following its standards (ERC-20). Cardano has plans to build an interoperable system that will seamlessly connect bitcoin, Ethereum and many other platforms.
Opting for a proof-of-stake mechanism that is less energy-consuming makes Cardano that much more sustainable. However, Ethereum plans to shift from the proof-of-stake mechanism with its ‘Ethereum 2.0’.
When liquidity providers stake crypto, they earn tokens which they can use to vote for key decisions of the network. This makes the platform extremely decentralised and democratic. If you buy ADA, you will be able to vote on all the matters pertaining to Cardano.
So, will Cardano replace Ethereum? This is a question that most investors might have. However, if we look at individual performances, both Ethereum and Cardano show immense potential.
Only time will tell, whether Cardano can take over Ethereum.
Meanwhile, stay tuned to the latest updates from the crypto world and start your trading journey from the most secure crypto exchange – Zebpay today.