Cardano versus Ethereum

With extensive experience as an electrical/software/coding engineer along with having a diverse financial background, Thomas Wettermann’s areas of interest include Machine Learning (ML), artificial intelligence (AI), and Financial Technology (FinTech). For the past few years, Thomas Wettermann has focused on the underlying technologies that support and promote all phases of cryptocurrency, Web 3.0, and metaverse ecosystems.

Cardano (ADA) is a third-generation blockchain that builds upon Ethereum - a second-generation blockchain.

Cardano Mini Logo (source: crowdwisdom.live)

As a third-generation blockchain, Cardano enhances those things that the second-generation blockchain Ethereum excelled at: scalability, efficiency, and security.

What Is Cardano’s Ecosystem?

The Cardano blockchain is an open source blockchain which means that its records are made public and are readily available. Cardano is also a decentralized blockchain network that, like Ethereum, supports self-executing computer programs by way of smart contracts.

The code and the agreements contained within the Cardano ecosystem reside in a distributed, decentralized blockchain network. With these smart contracts, the code controls the execution, and transactions are trackable and irreversible.

As such, Cardano was created to enable developers to build and publish smart contracts and distributed applications (dApps).

Smart Contract (Source: theengineeringprojects.com)

All smart contracts residing on the Cardano blockchain have certain similar traits.

For example, because smart contracts are coded into the blockchain, they have a status. This status or “state” is shared amongst every single blockchain node across the entire network. So, each node running this blockchain has a copy of the present status of every single smart contract residing on the blockchain.

Importantly, these smart contracts are also immutable. That is, they cannot be altered. Although there are ways to extend them or replace parts, there is no way to secretively manipulate the content of a smart contract without drawing the attention of the network.

In addition, the logic of a smart contract cannot be distorted. With a smart contract, there is no room for interpretation of the terms of the agreement. That is why these coded agreements are referred to as “contracts.” They act like an agreement between parties, but one which needs no third party to initiate, interpret, or oversee the results of the contract.

Cardano is structured so as to enhance these smart contracts making them easier to scale. With such a network, almost anyone – not just developers – can create their own decentralized applications.

Is Cardano Better than Ethereum?

There are three main advantages of the third-generation Cardano blockchain over the Ethereum blockchain.

First, Cardano’s blockchain network is a multi-layered blockchain that utilizes two layers: a Cardano Settlement Layer (CSL) and a Cardano Computation Layer (CCL). The CSL is used for token transfers.

The CCL supports the smart contract functionality that enables developers to create decentralized applications. Separated blockchain layers result in operations on both layers being more efficient, increasing scalability and TPS.

A bi-layered approach allows Cardano to upgrade one of the layers while leaving the other layer intact or performing two separate upgrades with independent design criteria.

By contrast, Ethereum is a single-layer blockchain where all token transactions and smart contracts are supported on the same layer. This leads to undesired congestion and high transaction fees or gas fees.

Second, Cardano utilizes a proof-of-stake (PoS) consensus algorithm, referred to as Ouroboros. This PoS system is more scalable and energy-efficient than proof-of-work (PoW) and claims to be the first provably secure system of its kind.

In a PoS blockchain, each node in the network stakes their assets in the PoS blockchain. These staking nodes, referred to as validators, operate similar to the miners in PoW blockchains.

One difference between PoW and PoS is that rather than executing energy-intensive computing calculations, PoS validators put up a stake as a form of collateral. This collateral often takes the form of ADA.

By staking ADA to the network, these nodes now have the opportunity to organize transactions into blocks and successfully write these blocks into the Cardano ledger. Validators act to “validate” or ensure that the transactions within a new block added to the blockchain are indeed true and accurate.

Staked ADA acts to guarantee that the validators’ entries into the ledger are performed according to the network’s predefined rules. For example, if a validator attempts to upload an incorrect block or is offline for a certain period of time, the validator may sacrifice the staked tokens.

Validators help achieve consensus amongst other validators while at the same time build upon the PoS network. Successful validators earn different types of rewards, depending on the network. These are typically provided by way of transaction fees that are paid by network users or by the issuance of new coins.

Each validator has a chance to write the next block to the blockchain. However, the larger the stake or staking power, the greater the possibility of earning the right to validate the next block. Therefore, instead of competing head to head with validators having a large amount of staking power, some validators will combine their staking power by joining staking pools.

PoS provides certain advantages over PoW networks, such as Ethereum. For example, PoS does not require energy-intensive data mining hardware to validate new blocks to the blockchain. In addition, PoS networks are faster and can process more transactions than PoW networks.

Third, Cardano is the first known blockchain to utilize a scientific peer-reviewed process prior to the release of any new service. Peer-review provides a heightened degree of confidence and assurance than is offered by other cryptocurrency projects. Initially, academic papers are written to detail new proposals and outline underlying technologies. These academic papers are made publicly available and are open for critique and comments for independent review by computer scientists and other interested academic parties.

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