This is a short article that explains the differences between Cardano and Ethereum.
This is a technology overview, and not a financial one. Therefore it is not a financial advice. Use the information as you would any other information, with caution and double checking. Do your own research. This is provided as it is with no guarantees that it is correct.
Also it is written by Gwearon from ADA Point Pool so take into the account that we run a Cardano pool and therefore we are biased.
Generations of cryptocurrencies
- Generation - Bitcoin
First time in history we have a decentralized money.
- Generation - Ethereum
First time in history we have a decentralized consensus.
- Generation - Cardano
First time in history we have a *scalable decentralized consensus.
*scalable — in safety, governance, throughput
So looking at these definitions it is a logical next step for the blockchain. You can always argue that this is just an upgrade as Ethereum 2.0 is partly embracing 3. generation features.
Given this general description, overview lets have a bit deeper look at Ethereum and Cardano.
What is Ethereum?
Ethereum is a second generation blockchain — bitcoin being the first generation. Ethereum supports general purpose programs that are executed inside the blockchain, meaning their computations are agreed upon by all participating actors, miners. Its code called Solidity is executed in an EVM, Ethereum virtual machine.
With bitcoin the application is hardcoded, that application being (transfer of) hard money. This enables a whole range of 3rd party ecosystem to easily code decentralized applications and deploy them on the network.
Some most prominent uses of Ethereum are fungible tokens and non-fungible (NFTs ) which are basically just a smart contract.
Ethereum network effect is huge as it has a first mover advantage. It has a lot of users and companies building on it.
What is Cardano?
Cardano is a 3rd generation cryptocurrency adding critical features that are needed for large scale decentralized applications.
Cardano initial progress was slow as it is a research first project. A lot of the research went through peer review which always takes a lot of time.
After that we got a first implementation codename Byron in 2017 in Haskell. Haskell is a great language but not quite production ready therefore IOHK had to bridge that to market gap helping with Haskell foundation. The complete much more scalable rewrite came with codename Shelley in 2020. The codebase came with a hardfork combinator, which allows for easy transition to a new incompatible data structure, which would otherwise require a hardfork.
Fungible and non-fungible token support came in early 2021 with Mary combinator event. The biggest plus is that tokens are natively supported without a need for smart contract. This means they will be able to have all the native Cardano functionality and require just the transfer fee.
Ethereum supports Solidity and Viper. Almost all the code is written and is being written in Solidity. It is quite error prone, especially if you are not a professional or just beginning to understand the EVM. Must use safe libraries or be really careful to have a basic safe set within which you operate. Almost all programs start with using and importing safe libraries.
The Ethereum ecosystem is huge and encompasses almost all smart contract activity for now. The network effect is remarkable. There are bunch of developer tools and companies who provide meaningful services, like Infura, Metamask and a lot of others.
Given so many other blockchains build on Ethereum their platform is proven that is works and a lot of different standards have emerged like ERC20 and ERC271 (NFT), being the most popular ones. Of course there is a dark side here as there have been many known hacks/exploits of Ethereum smart contracts loosing hundreds of millions of dollars. Some of these could be easily prevented with better programming language safety.
Language wise Cardano will support Plutus which is an extension to Haskell. That means that programs can be easier to formally verify, safe applications should be easier to write and reason about. They do not have this lower level programming language problems. Also their running cost is deterministic which is huge.
It will also supports a DSL called Marlowe which uses a DEFI standard for writing financial contracts. With this you can safely and easily write standard financial contracts. As it is in the finance domain financial experts should be right at home. These contracts should also be safe by default as they are not general purpose and the parts and their composition can be proven to be correct.
Cardano can have a clear advantage for big institutional and countries with solid and safe fundamentals which value precision and scalability.
Cardano will support many languages through KEVM and IELE virtual machines. They also enable running Ethereum smart contracts. In the future you can define any langue in K-semantics and run in on KEVM. Note: In the future company working on K will also support languages for Ethereum so this will be a big win for the industry as a whole.
Cardano runs on PoS which is much more scalable, decentralized and eco-friendly that Ethereum PoW algorithm. The consensus algorithm is called Ouroboros Praos. As it was created with safety, modularity and scalability in mind it has extensions in the pipeline like Ouroborous Hydra and Chronos which further improve scalability and privacy. Scalability will be corelated by how many users are connected into the network. Idea is that when the resources are added the network throughput should go up (something similarly to torrents). It is also the first provably secured PoS algorithm.
Ethereum runs on PoW algorithm. It is secure, slow, decentralized not really eco-friendly. It does the job and is time tested with Ethereum and also Bitcoin. As a lot of other protocols Ethereum also recognized that PoW is maybe not the best option for fast, eco-friendly scalable currency and is now also transitioning to PoS, also called Ethereum 2.0. It should be much more scalable using almost no energy. It will also run on multiple shards when fully functional what means it should be better than a basic PoS as it is broken down into subsets.
Currently there are technologies that can mitigate the scaling part like zk snarks and optimistic rollups. The solution is just save the proof of the computations. The problem is that one of the Ethereum biggest advantages are interoperability between contracts but using these technics we break that compatibility.
We have also not talked about one more elephant in the room which is transaction fees. Currently the resources are finite for ever growing user base, which is not sustainable.
Problems that Ethereum transactions have are also non-deterministic cost and all tokens being second level citizens on Ethereum. Cardano gives a spin on this with deterministic runtime cost and enabling first class citizens on its’ blockchain.
Ethereum has a huge network effect and that does not mean just the end users. The development system is really important and is even harder to move. It helps a lot that the smart contracts layer has been out since the beginning.
Cardano network effect is not bad at all. The staking and price appreciation really put it on the map. It also helps that staking is really simple and there is no time lock on the spending. Also because it follows a more rigorous process it also attract some of the great developers.
Ethereum twitter: 2m
Cardano twitter: ~1m (CF + Emurgo + IOHK)
Ethereum reddit: 1.2m
Cardano reddit: 680k
Given Cardano does not have smart contracts yet this is a great achievement.
To do a summary here, I would say that Ethereum has a huge network effect in all groups — projects, companies, users, development tools. Of course huge in the context of current space, which is quite small for now. It will also sooner or later switch to Eth 2 PoS which will should also add it a further competitive advantage.
The biggest upside for Cardano is determinism, interoperability and fees. Given how much money is at stake we need that more than ever. Past events have further confirmed that. Scalability is also an essential part and Cardano has a big advantage before Ethereum 2.0 is live. This 2 things will be essential especially supporting bigger entities like banks, sp500, companies and even government bodies of different countries or even widely used open global contracts.
So the big battle as of now is between network effect and technology. Also how quickly can Cardano ship its’ technology and capture the network part that it is targeting and is most close to its core values.
Also the most probable future is where multiple chains exist so we must not look at this as winner takes all, but as a healthy plural ecosystem of blockchains. Improvements in Ethereum and Cardano will help everyone in the crypto-ecosystem.
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