Ethereum is the largest and best-known decentralized open source blockchain system in 2021. Ethereum allow other crypto applications to run on the Ether network. Ethereum's success has led other parties to do the same, with the aim of becoming a bigger, better and faster blockchain system.
The most talked about competitors of Ethereum at the moment are Cardano and Solana. Both have recently come out with major updates and have many more planned for the future. However, do Cardano and Solana have the potential to overtake Ethereum? In this article I'm going to tell you what makes Ethereum, Cardano and Solana unique, take a look at their market value and discuss the potential of the three currencies.
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Ethereum (ETH), Cardano(ADA) and Solana (SOL) were designed with the following goal: to have a global platform on which decentralized applications (dApps) can operate. This facilitates developers to write software that is resistant to censorship and fraud on any of their networks anywhere in the world.
Because there are many dApps running on the Ethereum network, you can speak of a blockchain ecosystem of its own. The number of dApps running on Cardano and Solana is currently substantially lower, therefore you may not ( yet) speak of a fully developed ecosystem.
More and more developers are deciding to develop dApps on the network of Cardano and Solana. Although they both currently only have a relatively small range of dApps, this will only grow (exponentially) in the coming years.
Ethereum, Cardano and Solana are all open source blockchains, and therefore share common features. Yet they are quite different in several aspects and use a different operating procedure. Let us take a closer look into these differences.
Ethereum is the cryptocurrency with the largest market capitalization after Bitcoin. The coin was created by Vitalik Buterin in 2013 and the blockchain launched officially in 2015, with the aim of creating a global platform for decentralized applications.
A part of Ethereum's platform are smart contracts. Smart contracts are computer programs that automatically execute an online agreement between different parties. This eliminates the need for an intermediary, which reduces transaction costs and increases the reliability of the transaction. Thanks to the smart contract application, Ethereum is very interesting for developers for developing dApps.
In addition to dApps, Ethereum is a platform that is widely used for DeFi applications and NFT markets. DeFi stands for Decentralized Finance and NFT stands for Non Fungible Tokens. Both markets have given Ethereum a big boost since 2020.
Upgrade to Ethereum 2.0
Despite being the largest blockchain ecosystem at the moment, Ethereum has some serious fundamental flaws. One of these flaws is the transaction speed. In August, Ethereum could handle a maximum of 30 transactions per second; by comparison, Visa has about 1,700 transactions per second and says it can even handle 24,000 transactions per second.
Furthermore, the transaction costs of Ether - Ethereum's digital currency - are unprecedentedly high. For a transaction over Ethereum's network, you will easily pay more than $10. In some cases, this may even exceed $100 dollars. On a transaction of a few thousand dollars this is not so bad, but these transaction costs apply to all transactions. So even for transactions of $50 dollars. Disclaimer; transaction fees on the network can fluctuate significantly.
$100 to buy anything on Opensea. 🤣 The system is broken. pic.twitter.com/pmMnYSR6IL— Josh Ong 🍌 (@beijingdou) September 2, 2021
With the upgrade to Ethereum 2.0 (Eth2), Ethereum is trying to overcome these shortcomings. Recently Ethereum completed 'The Beacon Chain' upgrade, thanks to the London Hard Fork update. This is the first of the three major upgrades and has enabled Ethereum to transition from a Proof-of-Work (PoW) blockchain to a Proof-of-Stake (PoS) blockchain. Developers of Ethereum claim that Proof-of-Stake is up to 99.95% more environmentally friendly than Proof-of-Work. In addition - when Ethereum 2.0 is fully integrated - Ethereum will be able to process up to 100,000 transactions per second.
Cardano, like Ethereum, is a decentralized Proof-of-Stake open-source blockchain platform. it was founded in 2017 by Ethereum's co-founder Charles Hoskinson. Charles stepped out of the Ethereum project in 2015 due to a difference in philosophy about the direction to take.
Last August, Cardano released a new major upgrade called Alonzo. This upgrade implemented smart contracts on the platform, allowing developers to build dApps and DeFi on Cardano's network from now on.
In terms of transaction speeds, Cardano, too, has considerable room for improvement. They are currently around 250 transactions per second. Their aim is to be able to perform up to 1 million transactions per second in the future.
In the months preceding the Alonzo update, a full-blown price movement took place around Cardano. Obviously, the currency rose hard due to the bull run but was hit by a huge correction in May. But after the correction, ADA recovered swiftly to reach a new all-time high in August.
Solana was officially launched in March 2020, though the project was set up by Anatoly Yakovenko back in 2017. Whereas Cardano and recently Ethereum use the consensus algorithm Proof-of-Stake, Solana uses a combination of PoS and a unique consensus, namely Proof-of-History (PoH). This new consensus algorithm was developed by Anatoly Yakovenko himself.
Proof-of-History is designed to keep track of time between computers on a decentralized network without requiring all computers to communicate and agree.
Analogy: If we all agree that it always rains after a thunderstorm; you know what to do the next time there is a thunderstorm if you don't want to get wet.
The Proof of History mechanism therefore ensures that nodes do not have to agree with each other before a decision is made. Nodes are a critical component in the blockchain infrastructure. The main purpose of a node is to verify each series of network transactions, also known as blocks.
As a result, actions can be performed much faster, allowing Solana to achieve speeds of 50,000 transactions per second. That is currently much more than what its competitors are capable to achieve.
In addition to having extremely fast transaction speeds, Solana, like Ethereum and Cardano, is a computing platform that can interact with smart contracts. This also makes it possible to build a wide range of applications - such as dApps, DeFi, NFT markets, and so forth - to build on Solana's network.
500,000 – The last few months have seen tremendous growth of the community, and the launch of dozens of new companies, protocols, and institutions building on #Solana— Solana (@solana) September 5, 2021
What's your favorite project or builder that more people should know about? Tag them below #SolanaSummer pic.twitter.com/xjrxPWCKXh
In terms of market value, there are significant differences between the three blockchains. Ethereum has been in the #2 spot for years, behind Bitcoin, and currently has a market value of over $400 billion. Compared with the beginning of the year, the total value of Ethereum has increased by 400%. Ethereum is even closing in on Bitcoin in terms of 24-hour market cap.
Cardano advanced massively in 2021 and has grown relatively to the market capitalization of Ethereum this year. Currently, ADA -Cardano's currency - is at an All-Time-High around $3 USD and is ranked #3 in terms of market capitalization. Cardano currently has a market value of $97 billion. The tremendous growth of Cardano can be clearly seen in percentages, as it has increased by more than 1600% since the beginning of this year.
Solana can definitely look back on an extremely good 2021 so far. At the moment, 1 SOL - Solana's currency - is worth more than $140. At the beginning of the year, 1 Sol was only worth about $1.5 dollars. In the top 100 cryptocurrencies according to CoinMarketCap (CMC), Solana has experienced the fourth largest growth, in terms of market capitalization, since the beginning of the year. Namely by more than %7000 percent. Solana is ranked #7 according to CMC and the total market value now exceeds $35 billion dollars.
🌟@solana - $SOL replaces Dogecoin as 7th largest cryptocurrency#Solana ecosystem is booming, & the blockchain has garnered the support of major investors thanks to the scalability, low transaction costs & fast processing speed— Solana Daily (@solana_daily) September 3, 2021
Cryptocurrencies can be extremely volatile. Values can increase and decrease rapidly.
Looking at the characteristics and especially the market capitalization of the three crypto currencies, one notices considerable differences. Ethereum is worth more than 12 times as much as Solana and still 4 times as much as Cardano. Yet Ethereum's technology seems the most outdated, in terms of transaction possibilities and user-friendliness. Ethereum 2.0 should solve many of these problems, but Cardano and Solana are also developing further. It remains to be seen whether Ethereum can stay ahead of Cardano or Solana.
If Cardano or Solana do indeed surpass Ethereum in terms of technology, Ethereum has something to fear from regard to its market position. There is a chance that investors will move from Ethereum to Cardano or Solana. In that case, they will overtake Ethereum in terms of market capitalization and will thus live up to their name as potential 'Ethereum killers'.
Dapps, DeFi & NFT's built on #Cardano & #Solana will be the next big wave in the Crypto World.— Josh 💎🙌 (@CryptoWorldJosh) September 5, 2021
This new wave could be around the same scale as the #Ethereum "ICO Phase" during 2017.
Many new projects went up 100X in a matter of months.
However, before that happens, there is still a lot of development to be done in terms of technology among the three crypto currencies. Ethereum is currently sovereignly in the lead of the three and does not appear to be under any strain in the short term. But still, the crypto world is a strange one and shifts in the landscape may occur promptly. In the coming months and years, we will keep a close eye on the developments regarding these three crypto currencies, as they have great potential for the future.
Have a look on our Cryptocurrency overview.