Is Cardano (ADA) Really the Next “Ethereum Killer”?
Cardano, a blockchain platform powered by the ADA coin, has been the subject of quite a lot of hype in the crypto world recently, with a few hardcore proponents going so far as to term the platform the next “Ethereum Killer.” Nonetheless, Cardano does have a few serious shortcomings that serve to highlight the platform’s persistent underdog characterization.
For the uninitiated, Cardano is operated by a non-profit foundation that interacts closely with academia to research and improve all aspects of the blockchain platform. Cardano calls its ADA coin the “first third-generation” cryptocurrency, having the ability to solve the scalability and interoperability dilemma associated with previous-gen coins, including Bitcoin and Ethereum.
Bitcoin received quite a lot of flak recently for its network’s exorbitant energy consumption. At the heart of this issue is Bitcoin’s Proof of Work mining mechanism, where miners expend computational power by performing cryptographic calculations in order to win the chance of authenticating a transaction and then assimilating it in the blockchain. Moreover, each transaction has to be replicated on all nodes – computers that run Bitcoin implementation software and store the entire blockchain.
Unlike Bitcoin, Cardano’s Ouroboros algorithm utilizes a Proof of Stake authenticating mechanism where a collection of nodes is manned by a “leader” who validates transactions and then incorporates those transactions into the Cardano blockchain.
Now, the scalability of the blockchain network is something that all cryptocurrencies have to contend with. The Bitcoin Lightning network aims to boost the processing power of the world’s largest cryptocurrency by adding another layer to the Bitcoin Network that speeds up transaction processing by circumventing the blockchain, thereby allowing the transfer of Bitcoins between two wallets instantaneously and without the associated fees. Of course, the end balance of a series of transactions between two individuals on the Lightning Network would still have to be recorded on Bitcoin’s blockchain.
Similar to Cardano, Ethereum is now moving toward a Proof of Stake mechanism. Ethereum 2.0, expected to be completely in place by the end of 2022, will incorporate two fundamental changes – sharding and staking. Under sharding, the Ethereum blockchain will be broken into distinct “shards”. Each shard would act as an independent blockchain, hosting its own smart contract blocks and transaction validators. Additionally, in order to forge a consensus on the network, Ethereum 2.0 “miners” will simply stake or lock up a certain amount of Ether in master nodes. The transaction processing reward will then be distributed according to how much Ether an authenticator has staked. These two major changes will ramp up the Ethereum network’s processing power to around 100,000 transactions per second while also dramatically curbing its energy footprint.
This brings us to the crux of the matter. Each major update to the Cardano network is peer-reviewed, thereby ensuring optimal execution. Moreover, Cardano is also winning the race when it comes to transaction processing power. For instance, the network’s layer-2 scaling solution, known as Hydra, would boost its processing power to as much as 1 million transactions per second! This means that Cardano would be able to process 10x as many transactions as those processed by Ethereum 2.0. However, Ethereum wins the race for smart contracts and dApps – applications that run on a decentralized computing system such as a blockchain. While Cardano is expected to launch the smart contracts functionality, known as the Alonzo upgrade, on the 13th of August, Ethereum already features 2,822 dApps, corresponding to 78.3 percent of the entire ecosystem.
While Cardano does have an edge when it comes to the transaction processing power, it would be very hard for the nascent blockchain to usurp Ethereum’s first-mover advantage related to smart contracts and dApps. Consequently, I don’t think that Cardano is about to become an “Ethereum Killer” anytime soon.
Of course, as we’ve witnessed throughout this year during the meme stocks saga, hype is a very potent force. And Cardano seems to be garnering bucketloads of hype on the back of ADA’s 894 percent year-to-date gains. In contrast, Ethereum’s Ether coin has registered a much more modest 217 percent gain during the same timeframe. Should this hype persist, dApp developers might just get enough of an incentive to start targeting Cardano aggressively, which would gradually strip away Ethereum’s competitive edge.
Do you think Cardano will succeed in upending Ethereum’s ascendancy? Let us know your thoughts in the comments section below.