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See all posts Frank GogolCardano vs. Ethereum: Comparing the Two Cryptocurrencies
Updated on October 13, 2023
Written by
Written by
Reviewed by
Rohit Mittal
Reviewed by
Rohit Mittal
Rohit Mittal is the co-founder and CEO of Stilt. Rohit has extensive experience in credit risk analytics and data science. He spent years building credit risk and fraud models for top U.S. banks. In his current role, he defines the overall business strategy, leads debt and capital fundraising efforts, leads product development, and leads other customer-related aspects for the company. Stilt is backed by Y Combinator and has raised a total of $275M in debt and equity funding to date.
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At a Glance: Ethereum and Cardano are blockchain platforms designed for decentralized applications. Ethereum uses a Proof-of-Work (PoW) protocol, while Cardano utilizes a Proof-of-Stake (PoS) protocol. Ethereum is a well-established platform with a focus on smart contracts and has plans to transition to a PoS model with Ethereum 2.0. Cardano, positioned as a third-generation cryptocurrency, emphasizes safety and scalability with its PoS protocol. Considerations for investing in Cardano include the success of the Ouroboros protocol and academic research, while Ethereum offers longevity, the upcoming Ethereum 2.0 update, and its current market presence.
If you are investing in cryptocurrencies, you will most certainly have heard of the Cardano vs Ethereum debate.
Cardano and Ethereum are often compared to each other because both their networks provide similar offerings.
Developers can use both the Ethereum (ETH) and Cardano (ADA) blockchains for similar features, including running custom programming logic (smart contracts) and building programs (decentralized applications).
The heart of any blockchain platform is the algorithm it uses to create blocks and validate transactions. Cardano and Ethereum use different blockchains.
The major difference at the moment is that Ethereum’s Proof-of-Work blockchain is proving less flexible than Cardano’s Proof-of-Stake Ouroboros consensus protocol.
For more detail on Cardano vs Ethereum, take a look below.
Difference Between Ethereum and Cardano
Ethereum and Cardano are blockchain platforms that were both created to function as decentralized application platforms. This distinguishes them from cryptocurrencies like Bitcoin which functions as a medium of exchange and a store of value.
Where Bitcoin is seen as a first-generation cryptocurrency, and Etherum is generally considered a second-generation cryptocurrency, Cardano is setting itself up as a third-generation cryptocurrency. The reason for this is the safety and scalability of its Proof-of-Stake (PoS) protocol.
What is Ethereum?
Ethereum is a blockchain platform created in 2015. Ether is the cryptocurrency of the platform. Ethereum has its own programming language, called Solidity.
Ethereums is a much faster blockchain than Bitcoin, making blocks very easy to mine. It is also not a capped cryptocurrency. But like Bitcoin, its blockchain relies on a Proof-of-Work (PoW) protocol to mine blocks and verify transactions.
Although Ethereum can function as a medium of exchange similar to Bitcoin, its main purpose is to act as a decentralized application platform. As a blockchain network, Ethereum is a decentralized public ledger for verifying and recording transactions. The network’s users can create, publish, monetize, and use applications on the platform, and use its Ether cryptocurrency as payment. Insiders call the decentralized applications on the network “DApps.”
The Ether token acts as the medium for contracts and applications built on the platform. Users can create smart contracts on the Ethereum blockchain. Smart contracts are the main feature of Ethereum and what sets it apart from other players in the crypto space.
What is Cardano?
Cardano is a blockchain platform created in 2017. Ada is the cryptocurrency of the platform. Cardano runs on the Proof-of-Stake Ouroboros consensus protocol.
The heart of any blockchain platform is the algorithm it uses to create blocks and validate transactions. Cardano uses Ouroboros, an algorithm that uses Proof-of-Stake (PoS) protocol to mine blocks. The protocol is designed to reduce energy expenditure during the block production process to a minimum.
Cardano aims to be a decentralized application (DApp) development platform with a multi-asset ledger and verifiable smart contracts.
What’s the Difference?
Cardano has positioned itself as an alternative to Ethereum. Both platforms are used for similar applications, such as smart contracts, and have goals of building a connected and decentralized system.
The heart of any blockchain platform is the algorithm it uses to create blocks and validate transactions. Cardano and Ethereum use different blockchains.
Ethereum’s Proof-of-Work blockchain has a well-established record. A network of miners computes complex calculations to keep the blockchain running. Proof-of-Work allows Ethereum to attach a physical value to its transactional system. An Ether is worth a certain amount of computing power.
A Proof-of-Stake consensus, like Cardano’s Ouroboros, replaces miners with validators. Proof-Of-Stake mining requires a lot less energy and fewer resources than Proof-Of-Work systems since Proof-Of-Work miners have to do much more ‘work’ to mine blocks. Ouroboros requires a small number of Ada holders to be online and maintain good network connectivity. This means that transactions can be validated quickly and cheaply.
Scalability, interoperability, and sustainability on PoW networks like Ethereum are limited by the infrastructure burden of growing costs, energy use, and slow transaction times.
Seeing the advantages of a Proof-of-Stake mechanism, Ethereum 2.0 intends to move from a PoW to a PoS model. Cardano does have the advantage of being the first-mover in this field and Ethereum will have some catching up to do.
If you are investing in cryptocurrencies, which should you choose? To see which side of the Cardano vs Ethereum debate you fall on, read the considerations for each blockchain platform below.
Cardano Considerations
Considerations that weigh in favor of Cardano are:
- Ouroboros consensus protocol. The Cardano platform runs on the Ouroboros consensus protocol. Ouroboros, created by Cardano in its foundation phase, is the first PoS protocol that was proved to be secure. When choosing to invest in Cardano, the success of the Ouroboros protocol is a huge plus.
- Scholarly academic research – Cardano’s development has been unique in that it has been informed by scholarly academic research. Each of Cardano’s development phases is supported by a research-based framework, incorporating peer-reviewed insights with evidence-based methods. This creates a strong foundation from which to make progress toward the future of both the blockchain network and the Ada token.
- Current price – In the short to medium term, Cardano appears to be a better purchase. Its price is more affordable than Ethereum’s price right now. As the DApp market grows, both Etherum and Cardano are likely to see an increase in value.
Ethereum Considerations
Considerations that weigh in favor of Ethereum are:
- Longevity – Ethereum is the third-largest cryptocurrency worldwide. It also offers smart contracts and other decentralized applications on its network. This makes it a very appealing asset for clever investors.
- Ethereum 2.0 – The Ethereum 2.0 update will address some of the concerns with its PoW protocol. Long-term, this should increase Ethereum’s value.
- Current price – As the DApp market grows, both Etherum and Cardano are likely to see an increase in value (don’t forget cryptocurrencies are also subject to tax! Read more here.). Ethereum has shown that it is a major market player and is likely to continue to increase in value.
Read More
- How to Make Money with Cryptocurrency
- How to Withdraw from Binance
- How to Transfer From Coinbase to Coinbase Pro
- How to Transfer from Coinbase to Binance
- How Does Cryptocurrency Gain Value?
- How to Read Crypto Charts
Final Thoughts
Cardano and Ethereum are often compared to each other because both their networks provide similar offerings.
Developers can use both the Ethereum (ETH) and Cardano (ADA) blockchains for similar features, including running custom programming logic (smart contracts) and building programs (decentralized applications).
The major difference at the moment is that Ethereum’s Proof-of-Work blockchain is proving less flexible than Cardano’s Proof-of-Stake Ouroboros consensus protocol.
Ultimately, as an investor, the Cardano vs Etherum debate is a false dichotomy. These two blockchain networks are not going anywhere, and are both likely to increase in value in the long term.
In the short to medium term, Cardano seems like a good buy. It is reasonably priced and as the DApp market grows, both are likely to see an increase in value.
In the long term, Ethereum, with its large market share and the improvements expected in Ethereum 2.0., is likely to be a good cryptocurrency to hold.
Frank Gogol
I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.