When it comes to the future of cryptocurrencies, everyone generally agrees that the future lies in decentralized apps (DApps). While the anger usually revolves around the market capitalization and volatile prices of these cryptocurrencies, at the end of the day they are a piece of software. And as with any software, their value depends on how useful they are. After all, would Google have played a role if search wasn’t what it is today?
Thinking from this standpoint, a person can see how one cryptocurrency competes with another, just like Yahoo Search or AOL once were to Google. And this is no more true than for the three cryptocurrencies that are fighting for victory in the field of “smart contracts” – Ethereum, Solana and Cardano.
At the heart of all cryptocurrencies, including these three, is the algorithm that runs them. In fact, Ethereum, Solana and Cardano are actually names for these blockchain platforms and not the actual cryptocurrencies. The Ethereum chain uses a token called ETH for trading, while Solana and Cardano use the SOL and ADA tokens, respectively. So when you talk about the differences between the three, you also need to talk about how their algorithms differ.
All three of these cryptocurrencies can be traded on WazirX, India’s leading crypto exchange. Ethereum, Cardano, Solana can be bought directly with rupees.
Before we get into the differences, let’s talk about the big similarities.
What are smart contracts?
Smart contracts differentiate Ethereum, Solana, Cardano and even the Binance Smart Chain from Bitcoin. Tiny pieces of code are defined in their algorithms that are executed when certain conditions are met. Essentially, these are “if, if, then” statements that are executed automatically.
Imagine a lease that says your rent should increase by 10% every 11 months. In the traditional banking system, you could set up a standing money order where the rental amount is paid to your landlord every month, but you have to change it every 11 months, right? With a smart contract, the system knows that the rent has increased and could theoretically increase the amount once smart contracts can be redefined on a blockchain platform and cannot be changed by anyone. The parties involved can define any number of “if, when, then” conditions within a smart contract.
How do Ethereum, Solana and Cardano fit into the picture?
As mentioned earlier, smart contracts are one of the reasons the Ethereum, Solana, and Cardano platforms are similar. The other is the fact that they – or in the case of Ethereum we will be using it – used a “proof of stake” system. More on that later.
Unlike Bitcoin, which is best for applications that involve exchanging things like paying for apps and services, smart contracts open up a world of possibilities. As a result, the three platforms mentioned above can be used to build DApps, be it a decentralized finance app (DeFi) or a social media platform.
Think of it like this: On the Bitcoin platform, you can use algorithms to define situations in which you could take a Bitcoin and exchange it for something. With smart contracts, you can literally have a contract run on the computers that process them, they’re just another transaction on the network.
Do you remember the Google example? This basically means that platforms with smart contracts have a lot more functionality than those that don’t.
Ethereum – the origin story
Bitcoin is and will always be blamed for introducing crypto to the world, but Ethereum could outperform it in revolutionizing finance. When the 27-year-old Russian programmer Vitalik Buterin created the platform, he derived the name Ethereum from the scientific term ether from the 19th century. If you’re a fan of Marvel’s Avengers films and think of Thor’s Ether, this works too.
In 19th century science, aether was considered a weightless and frictionless material that filled all of space and carried light waves. While this theory has been refuted, Buterin’s idea for his platform should be the same – the invisible medium that potentially powers every book in the world, according to former Bloomberg journalist Camilla Russo’s 2020 book, The Infinite Machine.
The introduction of smart contracts made Ethereum different from Bitcoin and answered one of the questions critics had at the time – why cryptocurrency? Bitcoin was an alternative to the world’s currencies, Ethereum was an alternative to all of this and everything else. It gave developers the ability to use blockchains and build things that governments and central banks didn’t need to worry about.
How is Cardano threatening Ethereum’s dominance in the market?
Ethereum grew rapidly between its launch in 2013 and today, but despite what was good, it had one big flaw – it ran on the proof-of-work system.
You see, crypto transactions are authenticated by computers owned by large organizations called miners. These miners can only provide the computing power required to authenticate transactions and have no way of actually changing the blockchain or the transactions taking place in it. And for this “work” they are rewarded by the platform with new crypto currencies.
In essence, the platform is like a bank, the miners are like Visa and Mastercard, and the bank pays Visa and Mastercard to authenticate their customers’ transactions around the world.
The problem with this is that both Ethereum and Bitcoin reward every miner involved in a transaction, which means an overwhelming amount of computing power goes into every transaction. Instead, Cardano has what is known as the “Proof of Stake” system, which is more efficient.
In this system, miners must first deploy their own crypto in order to be eligible for rewards. The platform then selects the best miners – a predefined number – to authenticate transactions. As a result, the computing power is significantly reduced overall and with it the power consumption of the computer. All of this makes Cardano much more environmentally friendly than Bitcoin or Ethereum right now, and that goes for Solana too.
Why are Solana and Cardano called Ethereum killers?
The proof-of-stake system is the main reason these two crypto platforms are called Ethereum killers. Right now, they’re more efficient and answer the only major concern many governments, experts, and billionaires around the world have about cryptos – their environmental footprint.
However, Ethereum will introduce version 2.0 of the platform next year, which will also bring the same system to the platform. It is said to reduce the energy requirements of Ethereum by up to 99%. Last month, the Ethereum London Hard Fork set the stage for version 2.0 by introducing the proof-of-stake system on the platform.
Platforms with smart contracts like Ethereum are expected to gain wider adoption, making environmental sustainability absolutely essential.
Who is likely to come out on top?
Needless to say, the two arguments for Ethereum, Cardano, and Solana are the fact that they use, or are already using, the proof-of-stake system and that they offer smart contracts. The big problem with the Ethereum platform right now is scalability.
Every Ethereum transaction requires a transaction fee – also called a gas fee – and it doesn’t matter what type of transaction it is. Currently, these gas charges can be as high as $ 150 or more and are very volatile due to the volume of transactions that occurs every second on the network.
Imagine building a chat platform where every new message is a transaction. Could a company pay $ 150 for every message we, the users, send? Would users want to pay some of that cost? In comparison, transaction fees on the Cardano and Solana platforms currently cost a dollar or less.
“Solana solved this (the scalability problem) with a cryptographic time stamping system that can currently handle 65,000 transactions per second, which is amazing. Nobody got around to it, including Visa, ”crypto investment analyst Brett Hope Robertson told MoneyWeb.
On the other hand, as explained by The Motley Fool, the problem with Cardano and Solana is adoption. Both currencies have a market capitalization that is less than half of Ethereum’s current one, which means they remain speculative for now. Whether you buy the ADA and SOL tokens or build an app on them, you are taking a risk on a platform that currently only works in theory.
“Risk can be measured in a number of ways,” Meltem Demirors, Coinshares chief strategy officer, told CNBC last month. “But many of these assets are much riskier than Bitcoin and Ethereum,” he added.
Disclaimer: This is a sponsored post made in partnership with WazirX.
source https://www.bisayanews.com/2021/09/29/ethereum-vs-solana-vs-cardano-who-is-defis-darling/
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