Cardano has long been hailed as a potential “Ethereum killer”.
That is entirely the claim. After all, Ethereum – the name of the blockchain platform itself is often used synonymously with its native cryptocurrency token Ether (ETH) – is the second most valuable cryptocurrency project on the market, just behind Bitcoin (BTC). Yet even if Ethereum tries to overtake Bitcoin, it has a newer rival trying to take its place.
Bitcoin is still firmly entrenched as the largest crypto asset, largely because it is the oldest and best known of the group. However, Ethereum has gained market share in cryptocurrency due to its compelling integrated applications. That is one area where Bitcoin is missing.
Cardano tries to surpass both as it offers the best of both worlds. It solves Bitcoin’s excessive energy consumption problem while challenging Ethereum’s fascinating smart contracts. What investors should know:
- What is Cardano?
- Cardano’s mission for more efficiency.
- The advantages of Ethereum.
- How to invest in Cardano.
What is Cardano?
Cardano is a blockchain platform based around Ouroboros.
Ouroboros is a groundbreaking proof-of-stake protocol that instantly sets Cardano apart from previously invented cryptocurrencies that rely on proof-of-work protocols instead. That difference is key to Cardano’s value proposition.
For the sake of clarity, it’s also important to note that Cardano is the name of the blockchain platform, while ADA is the name of their native cryptocurrency token. Cardano’s ADA token, on the other hand, takes its name from the mathematician Ada Lovelace.
Cardano deserves all of its comparisons to Ethereum. For one, Cardano’s founder Charles Hoskinson was a co-founder of Ethereum. However, he had an argument with Ethereum’s key person, Vitalik Buterin. Hoskinson wanted to take Ethereum in a more commercial direction and accept venture capital. Other Ethereum founders wanted to take a less business-oriented approach.
After leaving Ethereum, Hoskinson decided to improve Ethereum with his own cryptocurrency project. Hoskinson’s invention would retain many of Ethereum’s attractive features but make up for some of its weaknesses.
Cardano strives to offer many of Ethereum’s most compelling features, such as: B. Robust Smart Contracts. Meanwhile, from day one, Hoskinson designed Cardano to be energy efficient and support fast transactions with minimal transaction fees. In addition, Cardano has another great advantage for hard money enthusiasts. It has a strict cap of 45 billion coins outstanding compared to Ethereum, which has no absolute limit on its total supply.
Cardano was pretty successful. It is currently the fifth largest cryptocurrency by market capitalization. The programming community for Cardano is active, and the project has generated particular interest in 2021 as the environmental impact of crypto dominates the discussion.
Cardano’s mission: more efficiency
The big advantage for Cardano is the demand for energy efficiency.
According to Marie Tatibouet, Chief Marketing Officer of the leading cryptocurrency exchange Gate.io, Cardano’s Ouroboros proof-of-stake algorithm is 20,000 times more efficient than Bitcoin’s mining system. In terms of energy consumption, Cardano’s bigger competitor is Ethereum. As things stand, Ethereum is not very energy efficient. However, Ethereum plans to move on to a proof-of-stake algorithm like Cardano, which would significantly improve its own position.
Bitcoin and many other traditional cryptocurrencies use a proof-of-work protocol. This is where miners use powerful graphics cards or specialized computer rigs to guess complicated math puzzles. Those with more computing power win more puzzles and thus receive more of the mining reward.
What is the difference between the proof-of-stake? Howard Poston, a writer for cybersecurity education company Infosec, explains that the proof-of-stake bypasses the computationally intensive mining process.
“Proof-of-Stake uses its cryptocurrency as a scarce asset. As with putting money in a CD or stocks, stakers promise not to spend their money to get the opportunity to create blocks and earn block rewards. The likelihood of being selected for creating a particular block is roughly proportional to the percentage of the total stake that the user controls, “says Poston.
Instead of having to spend huge amounts of computing power and environmental resources on maintaining the blockchain, proof-of-stake protocols can use a miner’s tokens as security that makes the system work. Cardano’s Ouroboros was novel in that it was one of the first successful proof-of-stake protocols that created a realistic alternative to proof-of-work tokens. The proof-of-stake has become so fascinating that even Ethereum could switch to it in the coming months.
Why don’t all cryptocurrencies use a proof-of-stake model? One problem is that these systems can over-concentrate ownership. “Proof-of-stake has problems like the proof-of-stake time bomb. The user with the most widely used cryptocurrency will build the most blocks and get the most block rewards. If they keep reinvesting those profits, they will have an ever-increasing Percentage of participation and could eventually control the entire participation, “says Poston.
This goes against the ethos of the cryptocurrency community regarding distributed authority. Another problem is the so-called “nothing at stake” problem. This makes it easier for users to pollute the blockchain with double votes and other such inaccurate information as it is less penalized than in a traditional proof-of-work ecosystem like the one used by Bitcoin. Some purists insist that without proof-of-work, cryptocurrency will not solve many of the decentralization problems it should be addressed with.
However, with numbers like Tesla (Ticker: TSLA) CEO Elon Musk bringing energy usage concerns to the fore, the proof-of-stake has just received a large round of free advertising. And Cardano’s Ouroboros looks like one of the most compelling proof-of-stake options available.
The remaining benefits of Ethereum
While Cardano has numerous technical advantages, it can still be a loser overall.
That’s because, according to Jahon Jamali, co-founder and chief marketing officer of Sarson Funds, Ethereum has several key advantages.
“Ethereum has a considerable first mover advantage over Cardano. While Cardano’s focus on science and nonprofits has become its hallmark, it can be argued that the lack of private sector engagement has limited the scope of market-driven use cases – not a big decentralized app of importance built on top of ADA, Jamali said.
Several experts pointed out the technical difficulties involved in programming for Cardano as opposed to Ethereum. The simplicity of Ethereum has allowed it to achieve real mass market acceptance. “Cardano may have some technological advantages, but Ethereum is the only blockchain that is truly enterprise-grade and boasts supporters including Accenture, FedEx, JP Morgan Chase and Microsoft – all members of the Enterprise Ethereum Alliance,” said Jamali.
Cardano promises a robust smart contract environment that will compete with Ethereum’s decentralized financial platform or DeFi platform. Cardano is not yet in the Ethereum league, however.
“When it comes to smart contracts, Ethereum is obviously ahead of the game for the time being. Ethereum has an enviable developer community and has built the multi-billion dollar DeFi and Non-fungible Token (NFT) ecosystems. Cardano, on the other hand, has still not fully integrated smart contracts. With the Alonzo Blue upgrade, you have initiated the process of smart contract integration. It remains to be seen whether these contracts can be properly implemented in the real world, “says Tatibouet.
Although Cardano may have superior technical specifications, in practice it needs to gain more utility and acceptance before it can overtake Ethereum.
How to invest in Cardano
It’s not difficult to invest in for people who believe in Cardano’s technological advantages.
The ADA token is listed on many major crypto exchanges and has enormous liquidity and an enormous trading volume. Coinbase Global (COIN) added support for Cardano in March of this year and gave the project a high-profile validation. In addition to Coinbase, Cardano is traded heavily on Binance, Kraken and Gate.io, among others.
Cardano’s price has been volatile both this year and in the past. Potential investors should be aware of this and view Cardano as part of a more diversified cryptocurrency portfolio. However, a Cardano investment could make a lot of sense as it has a real chance of taking some of the business out of Ethereum. “Cardano can use Ethereum’s inflated gas fees to eventually carve out a niche for itself,” says Tatibouet.
Cardano might not be an overnight success, but it has enough merit to remain a high-profile competitor in the crypto space.