The crypto Ethereum (CRYPTO:ETH) has a big problem: transaction speeds. The blockchain network has fewer transactions processed per second than the newer, smaller rival Cardano (CRYPTO:ADA). And this is just one of the reasons why Cardano has gained ground. Cardano is currently the sixth-biggest cryptocurrency by market cap. (ETH holds second place, after cryptocurrency leader Bitcoin.)
But Ethereum will not have transaction speed issues forever. An upgrade is in the works, with the rollout coming next year. Transaction speeds will soar. Energy use will decrease. And ETH will gain more efficiency overall. Now here’s the question: will this upgrade mean terrible news for Cardano? Let’s find out.
First, why should we even compare these blockchains with one another? Well, they do have a lot in common when it comes to their history. The co-founder of ETH, Charles Hoskinson, went on to build Cardano. And he believes Cardano is an improvement on cryptos before it. Hoskinson brought his experience to Cardano from Ethereum and had the goal of making his new project even better.
So now let us take a look at the ETH upgrade. Basically, it will move the process of validation from the proof-of-work (PoW) method to what’s called the proof-of-stake (PoS) method. Proof-of-work involves complex computations to validate the transactions, which can take time and uses a large amount of energy. Proof-of-stake cuts down on both of these. It does not rely on computations. Instead, it depends on how an algorithm picks validators primarily based on the how many coins they have. Cardano already uses proof-of-stake.
By making the switch, ETH plans to move from around 30 transactions per second today to about 100,000. At first, that might surpass Cardano’s speed. Cardano can currently process about 250 transactions per second, but it will not be left behind. The blockchain is currently working on Hydra, a layer-two scaling project that can eventually let it reach up to 1 million TPS.
Being more efficient
I see the ETH upgrade as a pathway for the blockchain to generate more efficiency, and that should attract more investors and users. But I do not see it as a move that would take investors and users away from Cardano.
Here is why. Each of these platforms is still a work in progress. Which means one might temporarily beat the other by one particular measure. For instance, Cardano has faster speeds than Ethereum now. ETH may become quicker than Cardano until it’s Hydra launch. Investors and users may switch in and out of cryptocurrencies on a daily basis if they were to base their decisions on these elements.
Instead, it is best to look at each cryptocurrency’s ultimate plan and goal to get there. In the case of Cardano, the future is looking bright. Cardano’s Hydra will drive it to the forefront when it comes to efficiency and speed. Cardano’s dependence on peer review before releasing updates means less technical glitches in the future.
Of course, when ETH rolls out its upgrade, we might see a short-lived decline in Cardano. But I think the Cardano story is just beginning — and investors and users will want to stick around to see what comes next.
Author: Blake Ambrose