Updated on: Feb 20th, 2023
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3 min read
Over the years, users have compared Ethereum and Cardano because they have similar features. Both blockchains run smart contracts and have a range of decentralised finance applications for their users. Developers can use both these blockchains as they come with features that are quite similar.
However, there are a few key areas where they differ. Let’s find out more about how these two cryptos differ.
Let’s look at the following parameters to highlight the differences between Ethereum and Cardano. These include:
Ethereum currently uses the Proof-of-Work (PoW) consensus mechanism to validate transactions on its network. In this process, validators or miners use high-powered ASIC computers to find the correct nonce and validate a blockchain block.
Miners can add new blocks in roughly 12 seconds on this network. This mechanism ensures that Ethereum works in a decentralised manner and all members agree on things like the order of transactions and account balances.
Ethereum uses an algorithm called Ethash for its mining operations. This algorithm makes miners participate in a race of trial and error to find the correct nonce to validate a block. A miner can only add a block on the network when they find a valid nonce. They achieve this by downloading and running the full dataset through a mathematical function. The dataset generates a target mixHash that is below the target nonce.
The mining difficulty set by the blockchain will determine how easy it is for miners to get a valid nonce for validating the block. This entire process though complex makes the network difficult to hack, and malicious users do not get to double-spend their coins.
Cardano uses the Proof-of-Stake (PoS) mechanism to power its blockchain. Here, the validators, known as stakers, need to stake or invest a certain amount of tokens on the blockchain to get a chance to win validation rights for a block. The higher your stake, the chance you will get the right to validate the block.
The PoS algorithm that Cardano uses is called Ouroboros. It divides time into epochs and slots. Epochs are overarching time frames, while the slots are 20-second increments within the epochs. The algorithm chooses a random slot leader among each slot, choosing the block that will be added to the blockchain. On Cardano, you can add a new block every 20 seconds.
There are two types of blocks that you can add to the Cardano blockchain:
It contains all transaction-related information, software update proposals and a list of votes for these updates.
This block contains a series of main blocks and lists all the slot leaders associated with the epoch.
When the epoch ends, the leaders of the previous slot elect the slot leaders of the next epoch. Each slot leader performs a “coin tossing act” to randomly choose the next slot leader.
If you compare both mechanisms, you will see that both have pros and cons. The PoW mechanism is very energy intensive, and you need much computation power to start mining. However, in the case of the PoS mechanism, you need high initial investment to add a stake. Ethereum 2.0 will use the Proof-of-Stake consensus mechanism when it releases in future.
Ether (ETH) is the main cryptocurrency powering Ethereum. When miners validate a block, they get newly minted Ether as block rewards. Ethereum does not have a limit on its supply. Its supply is set to increase at a fixed rate of 4.5% yearly. Ethereum transaction speeds can range from 15 seconds to five minutes. On some days, transactions take longer to validate due to network load. The transaction fee of Ethereum at the time of writing is 0.729 USD.
The native coin of Cardano is ADA. For every successful block, slot leaders get newly minted coins as rewards. Unlike Ethereum, Cardano has a limited supply of 45 billion. The transaction speeds of Cardano are approximately 250 per second. The transaction fee of Cardano at the time of writing is 0.16 USD.
Ethereum mainly uses a set of three nodes to run its operations. They are:
These nodes use limited, shortened data from the blocks. They synchronise with the full blocks to ensure accuracy.
Compared to light nodes, full nodes carry more blockchain data and history. They can also display historical data when commanded.
These nodes hold the entire history of the blockchain, that is, the transaction data and history from all the previous blocks.
Ethereum also uses two more nodes for its functioning. They are Mining nodes and Ethereum Virtual Machine (EVM). The mining nodes belong to the miners on the network, and the EVM nodes are responsible for providing a runtime to execute smart contract code.
Cardano uses three nodes to function. They are:
These nodes are responsible for creating crypto transactions.
You can use these nodes to stake ADA tokens and participate in blockchain governance.
The function of these nodes is to send information between mCore nodes and the public internet.
Founded on 30 July 2015, Ethereum was the brainchild of Vitalik Buterin, who was one of the co-founders. He considered this network as a "world computer" that anyone could use to launch and run an application.
He started the Ethereum Foundation, which sold 72 million ETH at a crowd sale. At that time, the valuation of this amount was $18 million.
Developers like Jeff Wilke, Gavin Wood, Charles Hoskinson and Joseph Lubin made notable contributions that made Ethereum what it is today.
Ethereum aims to use blockchain technology for decentralising products and services in an array of use cases other than just money.
Launched on 27 September 2017, Cardano was founded by Charles Hoskinson and Jeremy Wood. It aims to be a third-generation blockchain project and wishes to solve the issues that Ethereum users face. Its high scalability, energy-efficient consensus mechanism and lower transaction fees make it an attractive alternative to Ethereum.
Unlike Ethereum, which has reached a stable place in the blockchain market, Cardano is still growing and is yet to reach its full potential. At the time of writing, the market cap of Ethereum is $132,321,750,953, and that of Cardano is $14,290,667,586. If you want to invest on either of these platforms, conduct thorough research and find the current market trends.