- Cardano is a decentralised blockchain platform that uses the Proof of Stake mechanism.
- Cardano beats Ethereum in terms of scalability as it can process a high number of transactions and energy efficiency.
- It remains far from dethroning Ethereum in the crypto market.
Investors rushed to digital currencies amid times of economic instability created by the pandemic, making 2020 a great year for all digital coins. However, in 2021, several top cryptocurrencies set new highs, indicating even more remarkable growth.
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Aside from Bitcoin and Ethereum, Cardano (ADA) is a cryptocurrency worth noticing since it combines the best of both worlds.
What is Cardano?
Cardano is called a third-generation cryptocurrency system developed on the ground rules set by Bitcoin and Ethereum. It is a platform to develop and handle decentralised applications via smart contracts.
Cardano is a decentralised blockchain platform that aims to be more secure, sustainable and scalable. The cryptocurrency's history began in 2015, but the coin was launched in 2017. This came after Charles Hoskinson- cofounder of the proof-of-work (PoW) blockchain Ethereum, took note of the limitations of PoW networks.
Cardano’s current price is US$1.31 a piece, up 24% from the previous close and has a market cap of US$42.038 billion.
How is Cardano different from Ethereum?
Cardano is increasingly called an Ethereum rival as it provides the same functionalities but with improvements.
Cardano's key point of differentiation is the way it handles new transactions.
When a transaction is created on the Cardano blockchain, a lot of information is transmitted, including who moved the coins, to whom, where, how much, what the transfer conditions are, and why the transaction occurred.
Cardano utilises the Proof of Stake (PoS) consensus method for transaction verification, which is many orders of magnitude quicker than the Proof of Work (PoW) consensus mechanisms used by Ethereum.
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The PoS system permits the crypto blockchain to retain its integrity by prohibiting cryptocurrency owners from spending their coins twice or more in any transaction chain. In addition, PoS limits the number of devices used to verify transactions while PoW does not restrict the same, leading to high energy usage.
Cardano also has a tight limitation of 45 billion coins in circulation, as opposed to Ethereum, which has no absolute limit on its entire future supply.
Why is Cardano unique?
Cardano uses a 2-tier blockchain that provides improved scalability (handling a large number of transactions) and prides on its efficiency.
Cardano's main appeal is that its development is based on data and science. This implies that all platform proposals and changes are based on peer-reviewed research publications. This is unusual in the cryptocurrency business as most projects include modifications based on community feedback.
Peer review helps in detecting security problems, which if left undetected can lead to severe problems.
Cardano is expected to gain market share, but it is yet to be seen if it can ultimately dethrone Ethereum.