How can you make sure your digital money isn’t being spent more than once? If you’re familiar with cryptocurrencies, you probably know that these coins face the tricky problem of double-spending. To ensure the integrity of cryptocurrencies, consensus mechanisms like Proof-of-Stake (PoS) came on the scene of different blockchain systems.
Cryptos such as Ethereum (ETH) and Cardano (ADA) use PoS systems, which use transaction fees as a reward. Because both specialize in smart contract technology, ADA and ETH are often compared with one another. But when it comes to the best PoS system, which coin takes the lead? Should you buy Ethereum or try Cardano instead?
Understanding ADA and ETH
Ethereum and Cardano both offer unique and innovative uses. To help you better understand how they work, let’s take a look at their similarities and differences.
Ethereum: The world’s programmable blockchain
Ethereum was developed by Vitalik Buterin in 2013 and was introduced to the world in July 2015. It’s best known as the “world’s programmable blockchain” that houses ETH, the second-leading crypto in the market after Bitcoin, as well as global payments and thousands of applications you can use today.
Ethereum was created to become a global open-source platform that can create custom assets and economic applications. It was also dubbed as one of today’s most ambitious blockchain projects because of the use-cases it offers. When Ethereum was still in the works, Buterin intended it to run and unify decentralized applications (dApps), which essentially cut out intermediaries in different industries. As more and more crypto folks have started to discover its wonders, Ethereum came under the spotlight in the fintech world.
Cardano: First blockchain built through peer-reviewed research
On the other hand, Cardano is a Proof-of-Stake blockchain platform established by Jeremy Wood and Ethereum co-founder Charles Hoskinson in 2015 and launched in 2017. Its native currency, called Cardano or ADA, was named after Ada Lovelace—an English mathematician known as the first computer programmer. ADA ranks third in terms of market capitalization, following ETH.
Like Ethereum, Cardano also allows developers to use its technology to power and build secure decentralized apps. It prides itself as “the first to be founded on peer-reviewed research” and “developed through evidence-based methods.” Many folks from the finance and technology industry are fascinated by Cardano’s research-driven design approach—this is most likely one of many reasons it’s also in the market’s top spot.
A quick look at ETH and ADA’s network design
Now, which of the two has a more fascinating network design? If you can recall, Bitcoin uses a Proof-of-Work (PoW) system consensus mechanism. Here, miners are rewarded with the cryptocurrencies they acquire. In the PoS system, the participants are more likely to gain extra blocks if they have more money. Simply put, the PoS relies on proof of how much stake the miners or participants have.
Like BTC, Ethereum also employs PoW mining to run its blockchain. But to further improve the initial blockchain, Ethereum started to migrate towards Ethereum 2.0 and switch to the PoS consensus mechanism.
The series of planned technical upgrades will make the network more secure, scalable, and sustainable. As per Buterin, this network overhaul will minimize the energy consumption by nearly 99%, making Ethereum 2.0 more environmentally friendly than BTC.
Here, the participants or validators are tasked to choose the next blocks for the Ethereum blockchain. Like miners in the PoW system, validators can also get rewards by confirming that a block is accurate and follows the rules. On the flip side, validators can get penalized too when they go offline or propose a block with a false transaction or data history.
This August 2021, Ethereum’s London hard fork was activated. This upgrade, which is part of the Ethereum 2.0 roadmap, allows the calculation of transaction fees to be even more seamless and makes the fees less volatile. If you’re wondering when ETH 2.0 will be fully launched, no definite date has been released yet, we’ll have to wait and see.
Cardano, on the other hand, uses Ouroboros. This consensus mechanism that’s similar to PoS allows users to validate or confirm transactions and earn newly minted ADA. It’s dubbed as an environmentally sustainable PoS because of its improved energy consumption.
It uses cryptography and other technologies to ensure the integrity, performance, and longevity of the protocols and networks that depend on it. Cardano’s Alonzo upgrade is expected to take place in mid-September this year. This upgrade includes smart contracts development, which makes decentralized finance (DeFi) applications, non-fungible tokens (NFTs), and gaming applications possible.
Which is which?
Based on what we’ve discussed, both Cardano and Ethereum offer many applications. It’ll now depend on which among the two best fits your needs. To help you better decide, don’t forget to do your research to see the bigger picture of how these two networks work. So, will it be the world’s first research-based blockchain or the world’s programmable blockchain?
The post The Race to the Best Proof of Stake: Ethereum vs. Cardano first appeared on Mind My Business.