Cardano (ADA) is the first research-driven proof-of-stake blockchain platform. 

That doesn’t mean it’s solely for academics, rather Cardano is focused on rigorous peer-reviewed research to create the safest and most technically sound cryptocurrency.

Following his removal from Ethereum, mathematics expert Charles Hoskinson had an entirely new vision for cryptocurrency. He wanted a smart-contract platform that didn’t run and gun it like Ethereum. 

So Charles created Cardano along with his for-profit software company Input-Output Hong Kong [IOHK], which designs, builds, and maintains Cardano.

Despite having no applications on its platform to date, Cardano quickly skyrocketed to the top 5 coins by market cap. 

Some investors predict that once Cardano rolls out its application ecosystem in late 2021, the platform could quickly eat away at Ethereum’s market share.

The question is can Cardano kill Ethereum?

Understanding the Technology Behind Cardano

There are three generations of cryptocurrency technology, each improving upon the last. Cardano is a gen three token. Here’s the difference between each:

First Generation (Bitcoin, Litecoin, Dogecoin): Bitcoin introduced blockchain technology, which in simple terms, is a distributed ledger that anyone can access. In the years after, several cryptocurrencies forked from Bitcoin, including Litecoin and Dogecoin. These early technologies were innovative at the time, but have become the slowest and most expensive to transact. 

Second Generation (Ethereum): Ethereum introduced the world to programmable money through its adoption of smart contracts. Smart contracts plain and simple are automated digital transactions that don’t require a middleman. Imagine an entire financial system without a central bank or a social media network resistant to censorship. 

Vitalik Buterin, the creator of Ethereum, realized many sectors of life could benefit from decentralization. The problem here, however, as the Ethereum network grew it became slow and expensive to use. Like Gen 1, it needed an upgrade.

Third Generation (Cardano, Polkadot, Ethereum 2.0): Like Daft Punk this generation of cryptocurrencies are harder, better, faster and stronger. These tokens are predicted to handle 1,000 transactions per second and still have all the great features of decentralization. The primary system behind these tokens is proof-of-stake (POS), not proof-of-work (POW). More on that later.

Cardano and Polkadot are native gen three cryptocurrencies while Ethereum will join the fold after merging with its proof-of-stake test net and become Ethereum 2.0.

Staking Through Cardano

Cardano is the most staked token in existence. More than 70% of the network is staked. 

Think of proof-of-stake like holding your funds in a savings account. When you stake these tokens you’re essentially activating the ability for them to validate the network. Like miners in a POW system, you need users to consistently validate the legitimacy of the blockchain’s ledger. This is known as a consensus mechanism. Cardano’s is called “Ouroboros”

As a thank you for choosing to stake you are rewarded with random transaction fees. This is why the individuals are called forgers, and not miners in this system. In order to stake Cardano you can use the Daedalus or Yoroi wallets.  Rewards for staking average out to 7.31% APY. 

Hoskinson and company wanted to create sound tokenomics around ADA. So Cardano’s native token is deflationary and goes through a halvening cycle just like Bitcoin. This is opposed to Ethereum’s inflationary coin which has an unlimited amount of tokens.

The more you “stake” the more power you have in the network and the better the chances of you winning the transaction fee. For example, if you staked 100 coins and 1,000 were in circulation total, you’d have a 10% chance to win any given transaction fee. Got it? Got it!

By locking away your Cardano you’re letting your tokens work for you, and in doing so, strengthening the network by validating transactions.

Cardano’s Accomplishments

Besides being the most academically proven blockchain, Cardano boasts two monumental achievements. 

The first being its Africa project. Earlier this year Cardano landed a partnership with the Ethiopian government to improve education with blockchain technology. Furthermore, Cardano aims to give financial accessibility to the 2.5 billion people without a bank account; many of which are in third world countries. 

The second achievement is Cardano’s interoperability. Earlier this year ADA developers announced a new ERC20 converter that bridges Ethereum over to Cardano. This makes Cardano an excellent scaling solution for Ethereum.

Cardano Vs. Ethereum

David Vs. Goliath. Rocky Vs. Creed. Cardano Vs. Ethereum. 

Do you see the pattern? All of them are an underdog versus a powerhouse. 

While Cardano and Ethereum are top 5 tokens by market cap, the difference between the two is Herculean. 

Both blockchains are trying to become the best platform for designing smart contracts and ushering in a new wave of decentralized applications. However, only one of them has nearly 3,000 running applications while the other has, well, none. 

This is Cardano’s Achilles heel. Both cryptocurrencies want to be crypto-Google, but only one has any skin in the game. Think of Ethereum as a racecar on the 40th lap of the Indie 500 and Cardano stuck in the pitstop tuning up its engine. It hasn’t even started yet.

Cardano can keep tuning up, but it has to get in the race eventually.  

Bottom Line

Charles Hoskinson himself once said the first-mover advantage is overrated. 

He may be right. 

Maybe rigorous academic proofs will win the great crypto race, especially since cryptocurrency is already a fringe volatile technology that is mistrusted by the mainstream. Perhaps a little stability is what the industry needs.

Cardano, however, cannot play the slow game for too long. This tortoise and the hare approach only works if the hare doesn’t get too far ahead. 

If Ethereum continues on a tear, and keeps outpacing all other cryptocurrencies in terms of volume, the gap will be too wide for Cardano to catch up.

Will Cardano’s fine-tuning payoff, or bite it in the ass?

We’ll likely find out who wins the battle over the next few years.