As mentioned in my previous articles, the upcoming Ethereum Merge is a real technical challenge, and hence, it could fail. All the large investors are getting ready for this possibility and have started to invest into other coins and tokens, in case of. Today, we are going to explore Cardano (ADA).
Why Cardano (ADA) is an alternative to Ethereum (ETH)
Both of these blockchains are competing to be the world's top smart contract blockchain, which allows decentralized applications (dapps) to run on the blockchain - e.g., DeFi (Decentralized Finance) protocols including lending platforms, like Aave on Ethereum or Aada on Cardano. However, there are only DEX (Decentralized EXchanges) and NFT lending protocols on Cardano for the time being (i.e., you can borrow ADA by using NFT as collateral). There is no equivalent to Aave on this blockchain yet. Aada is still in the testnet phase. The Vasil hard fork might allow to launch lending protocols. However, it has recently been delayed, which raises some new concerns about Cardano's real potential.
Ethereum network currently does about 15 Transactions Per Second (TPS), whereas the actual on chain transaction throughput of Cardano would be around 1 TPS... Furthermore, Vitalik Buterin (co-founder of Ethereum) recently explained that the Ethereum road map, including the Merge, will allow Ethereum to utltimately reach 100,000 TPS. In the meantime, there have been some assumptions about the TPS of Cardano after the Vasil hard fork, but nothing has been confirmed yet. Therefore, Cardano seems to be far away from Ethereum performance, and it could be a major drawback for the future.
Regarding the average transaction fee, which has been one of the major drawbacks of Ethereum, it is currently about $0.6 for Ethereum whereas it is about $0.5 for Cardano. Therefore, this transaction fee has significantly decreased for Ethereum, and if it had to increase again, there would still be the possibility to use layer-2 chains like Optimism. Regarding Cardano, its relatively low transaction fee is not a key advantage vs. Ethereum layer-2 chains.
The number of validators on Ethereum 2.0 Beacon Chain (which will replace the Ethereum POW chain after the Merge) is currently over 400,000, while there are currently 1,115 "block producers" on Cardano. However, the main problem of Ethereum staking consensus is the minimum threshold of 32 ETH which urges the small ETH holders to stake through pools like Lido, Binance or Kraken. Over 66% of the Beacon Chain validators, represented by only 4 entities (e.g., Binance), would adhere to OFAC regulations, i.e., to regulator sanctions. Therefore, Ethereum 2.0 would not be as decentralized as it looks. That's why Cardano can be considered as a more decentralized blockchain than Ethereum, since there is no minimum staking requirement.
Another interesting point about Cardano is the number of projects which are currently being developed on its blockchain, which is close to Ethereum:
How Cardano (ADA) price could evolve in the near future
No forecast can be guaranteed. However, it is worthwhile to look at the trend:
We can see on the 1 day chart above that ADA price currently shows a bearish trend, bringing it down to $0.4. This could be a support for ADA, if there was no bad news again about the Vasil hard fork in the mean time. However, the recovery could take some time, and the price might consolidate at first.
How to make money with Cardano (ADA)
If you own ADA, you can stake it on Cardano blockchain, which uses a proof-of-stake consensus, with an average return of 5% per year. It is the most secure solution. There is no unbonding period. Therefore, if you need liquidity, you can immediately use the staked ADA. Another option is to stake ADA on centralized platforms like Binance, which currently offers APRs (Annual Percentage Returns) up to 11% for 90 days through the locked staking option.
In summary
Cardano (ADA) seems to be a long term alternative to Ethereum (ETH) since it still needs some improvements to really compete against ETH, for instance by completing the Vasil hard fork which might allow to use lending protocols similar to Aave on Ethereum. Cardano is a really decentralized alternative to Ethereum, and is still supported by a strong community, which is a key advantage. In the short term, ADA price may consolidate before a rebound.
Disclaimer: this article does not contain any financial advice. The information is provided for general informational and educational purposes only.
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