Cardano and Ethereum are often compared to each other due to their blockchain providing similar features, including smart contracts for building decentralized applications. Ethereum is an open-source blockchain platform with its native currency, ETH. Cardano is a third-generation, decentralized proof-of-stake (PoS) blockchain platform that is designed to be a more efficient alternative to proof-of-work (PoW) networks.
What is Cardano?
Cardano was founded by the co-founder of the Ethereum blockchain, Charles Hoskinson, in 2015. The network was created as Hoskinson understood the challenges behind PoW blockchains. Eventually, Cardano’s primary cryptocurrency ADA was launched alongside the network in 2017.
Cardano offers similar functions on its platform to Ethereum. However, it differentiates itself through a research-driven approach to its design. The primary use case, as envisioned by its co-founders Hoskinson and Jeremy Wood, was to allow transactions in ADA and enable developers to build decentralized applications on the network.
Behind the network are three independent organizations that oversee the development of Cardano, including the Cardano Foundation, Input Output Hong Kong (IOHK) and Emurgo.
Cardano continues to progress through different development phases, eras that are based on the research-based framework, allowing peer-reviewed insights to achieve improvements and milestones for future directions of the use of the network and its native token. The five stages that govern its progress are its foundation, decentralization, smart contracts, scaling and governance, also known as its eras, categorized as Byron, Shelley, Goguen, Basho and Voltaire, respectively.
Get to know more about Cardano in our in-depth Cardano guide
What is Ethereum?
Ethereum is a decentralized blockchain network that allows users to verify and record transactions. The platform also allows participants to create, publish and use its applications as well as its native currency, Ether.
Ethereum was launched in 2015 by a group of blockchain enthusiasts and has distinguished itself from the bellwether network, Bitcoin. One of the most well-known co-founders of the Ethereum blockchain is Vitalik Buterin, who was responsible for creating the network concept. Since the value of Ether has risen significantly since 2015, Buterin has become the youngest cryptocurrency billionaire.
While Ethereum runs on the PoW consensus mechanism, its long-awaited upgrade known as ETH 2.0 will allow the network to scale up and solve its congestion issues as the blockchain moves over to the PoS algorithm.
Ethereum 2.0 marks one of the most essential upgrades in the blockchain’s history. Scalability and security issues would be tackled as the network also enhances speed and efficiency on Ethereum blockchain.
The first phase of the upgrade for Ethereum 2.0, called the Beacon Chain, went live in December 2020 and witnessed native staking on the blockchain. The second phase is expected in Q2 2022, which will see the merge of the Beacon Chain with the Ethereum mainnet. The final phase, also known as Shard Chains, will eventually solve scalability issues, as shard chains spread operations on 64 new chains instead of one.
Cardano vs. Ethereum: What are the differences?
Both the Cardano and Ethereum blockchains would allow participants to stake their native currencies on the network. In Cardano’s PoS system, Ouroboros enables users to validate transactions and earn ADA. As the protocol divides time into epochs and slots, a leader is picked within each slot to choose the blocks that would be added to the blockchain.
Ethereum 2.0 will see its consensus mechanism shift to PoS and require operating nodes to stake at least 32 ETH in a contract to earn rewards by validating transactions to produce new blocks on the network.
Before Ethereum migrates to ETH 2.0, the blockchain will continue to rely on PoW, also known as mining. Ethereum miners run software with computational power that processes transactions and produces new blocks.
While miners verify transactions to prevent fraud, they must compete to find a new block to add to the blockchain. Miners get paid a fee for their efforts, but the Ethereum mining difficulty will determine the extent of computing power needed to mine a new block. The more miners there are on the Ethereum blockchain, the more difficult it is to discover the block to be rewarded.
The supply of Cardano’s native token, ADA, is limited to 45 billion. According to the platform’s rules, ADA is minted every block and distributed to slot leaders as rewards for their work of verifying transactions.
Unlike Cardano, Ethereum does not have a limited supply, and its supply is programmed to increase by 4.5% every year. However, developers can propose changes to the existing monetary policy, while nodes and miners that run the software can vote on new rules.
Ethereum gained more traction through the decentralized finance (DeFi) boom in 2020. Decentralized applications were increasingly created to automate financial services, including lending or borrowing, without the need for a third-party intermediary.
Cardano has introduced smart contracts on its platform following the Alonzo hard fork. This could mean that the blockchain would be able to gain a bigger foothold in the DeFi industry, competing with Ethereum.
The Ethereum killer network’s ability would also be able to run a range of cryptocurrency applications on top of smart contracts, including non-fungible tokens (NFTs), as it continues to be a competitor to Ethereum.
The Alonzo hardfork enabled Cardano to support programmability, while ADA price has gained significantly ahead of the upgrade.
Where can I buy Cardano?
Investors interested in knowing how to buy Cardano can simply open an account with a crypto exchange that supports ADA. Some of the most well-known exchanges offering ADA include Coinbase, Kraken, KuCoin, Binance and Huobi.
How to stake Cardano
As part of Cardano’s PoS system, users can earn an annual interest rate of 4.6% of their crypto by staking. Participants would be able to stake their tokens through stake pool operators and get paid in ADA.
Once an individual has chosen their preferred staking pool, delegators would support a pool to increase their chances of being selected to validate transactions. ADA holders would then be compensated accordingly if their pool has been chosen and receive rewards every five days if they have staked their tokens.
For most investors, staking tokens in a cryptocurrency wallet may be the most straightforward option. Wallets including Exodus and Ledger and centralized exchanges including Binance, Bittrex, KuCoin and Kraken also allow for staking ADA.