Cardano vs. Ethereum: How They Differ

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Since bitcoin arrived on the scene, cryptocurrencies have been a hot topic in the financial world. The basic concept behind crypto is “decentralization,” creating a monetary system outside of the control of governments and banks. 

Read: 5 Things You Must Do When Your Savings Reach $50,000

Although many cryptocurrencies have been created, only a few will hold or increase their value. Cardano (ADA) and ethereum (ETH) are among these. As of 2022, these coins were in the top 10 of all cryptocurrencies as measured by total market value. 

The Birth of Cardano  

Cardano is closely related to ethereum, as it was created by Charles Hoskinson, one of ethereum’s original developers. The ADA coin arose from a disagreement between Hoskinson and Vitalik Buterin, another ethereum founder. Buterin wanted to keep the ethereum blockchain a non-profit operation and Hoskinson favored a for-profit model financed by venture capital. 

When it was released, Cardano became a tradeable asset in 2017. With a two-year headstart, ethereum had already established itself as one of the most valuable and useful cryptocurrencies. Cardano, in the meantime, rose in value from $.02 to about $.44 in September 2022, a gain of more than 2,000 % for investors who jumped into the ADA coin early. 

Cardano and ethereum can be used as payment for services and speculative assets. Traders and investors can join cryptocurrency exchanges to buy and sell ADA and ETH in hopes of making a profit. But the similarities end there. When investors are considering cardano vs. ethereum, they should keep in mind several key differences between the two coins before risking any money in the crypto market. 

Smart Contracts and Transactions

Ethereum has been around longer as a medium of exchange for smart contracts. These are agreements that run on a blockchain system. The terms of the agreement are executed automatically and without using a paper document or a third party such as a bank or agent. 

Cardano has been used for smart contracts since only 2021. For ADA, the ability to run programs and applications on a blockchain took a major step forward with smart contract functionality. This places the younger coin in direct competition with ethereum as a platform for crypto programmers and developers.     

Measured by the number of transactions, however, ethereum still dominates cardano — and most digital currencies. The younger coin logs approximately 75,000 transactions daily, while ethereum has reached about 1 million daily. 

Cardano’s Gas Fees, Speed and Expenses

A “gas fee” is the cost of a transaction on a blockchain. These fees rise and fall depending on various factors, but as of mid-2022, cardano gas fees were consistently lower, averaging .16 or .17 of one cardano coin per transaction. 

By contrast, Ethereum transactions charge considerably higher fees. An Ethereum transaction on the OpenSea NFT platform, for example, charged a fee of $2.61 as of late October 2022. 

In addition to charging lower fees, the Cardano system also enjoys higher transaction speeds. While the cardano blockchain can process about 250 transactions per second, Ethereum reaches about 30 TPS. An important development in the Ethereum world known as The Merge may increase that speed substantially. 

Crypto Price and Market Cap

Investors seeking longevity and stability in cryptocurrencies often compare price and market metrics. Ethereum has a longer history than cardano, and its total market value is more than 10 times as high. 

As of mid-October 2022, cardano’s market price was $0.37, and its total market value stood at $12.47 billion. The coin had a circulating supply of $33.7 billion. 

At the same time, ethereum had reached a price of $1,310, with 122.4 million coins circulating and a total market value of $160.3 billion. Ethereum has been the second most valuable crypto after Bitcoin for several years. 

What Is the Proof-of-Stake Model?

In the crypto world, there are two models for creating crypto on blockchain networks: proof-of-work and proof-of-stake. Proof-of-work means ETH mining: running complex calculations on a linked network of computer servers to validate transactions. Proof-of-stake means putting up digital coins as a kind of collateral, that is “staking,” in the work of validating transactions.

Cryptocurrencies exist to facilitate transactions on blockchain networks. These are digital ledgers used to validate transactions. Theoretically, this prevents fraud while ensuring that the use and creation of digital currencies are public and transparent. 

Cardano runs on a PoS protocol known as Ouroboros, created by the coin’s founders. It was the first PoS protocol shown to be secure, giving Cardano a vital advantage.       

What’s the Future for Cardano and Ethereum? Current Work in Progress

This slow and deliberate rollout means Cardano is still in the early stages of its development. But ethereum is also going through changes. For example, an important transition in the Ethereum network took place in September 2022, when it changed from a proof of work to a PoS protocol. 

This event, also known as The Merge, means that validating the ethereum coin no longer requires huge amounts of computing power and energy. This lends an important advantage to an investment in ethereum, which is more versatile in the functions it can support, such as its use in games and as a currency for non-fungible tokens, which are digital versions of art, text and other tangible assets.