A quick overview of two ETH killer projects: Cardano and Polkadot.
2021 will be the year of smart contract blockchain. Except for Tether (USDT), half of the top 10 cryptocurrencies by market capitalization are compatible with smart contracts. These projects are all trying to compete with the leading position of the Ethereum ecosystem.
Among these high-value smart contract cryptocurrencies, two are most likely to compete for the crown: Cardano and Polkadot.
In 2020, the development and adoption of these two projects is unprecedented, and the market value rankings are basically on par.
The push data shows that just last week, Cardano surpassed Polkadot and the platform currency BNB to become the third largest cryptocurrency by market value.
Both Cardano and Polkadot are about to release major network updates. Industry insiders are also curious, which one will become the real Ethereum killer in 2021?
This article compares the two projects from multiple angles so that investors can make clearer judgments.
Creator
There are many different metrics you can use when comparing crypto projects. This article starts with the most basic indicator-the project founder.
Gavin Wood, the founder of Polkadot:
1. Computer scientist;
2. Doctor of Human-Computer Interaction;
3. Founder of the Swiss non-profit organization Web3 Foundation, which is responsible for overseeing the development of Polkadot (DOT);
4. The founder of Parity Technologies, a British software development company, was commissioned by the Web3 Foundation to develop and maintain Polkadot.
Charles Hoskinson, the founder of Cardano:
1. Mathematician, no doctorate;
2. The founder of the for-profit software development company Input-Output Hong Kong (IOHK), IOHK and the Japanese for-profit software development company Emurgo were commissioned by the Cardano Foundation to develop the project, which is also a Swiss non-profit organization .
3. Charles does not have any official title in the Cardano Foundation, which has 5 board members.
In contrast, Gavin Wood is one of the three board members of the Web3 Foundation.
As we all know, Charles and Gavin co-founded Ethereum in 2013 with Vitalik Buterin and others.
In June 2014, 13 months before the Ethereum mainnet went live, Charles and Vitalik left the team due to differences in venture capital funding.
Gavin left the Ethereum team in January 2016 for various reasons. Before leaving, Gavin served as the CTO of Ethereum, wrote the "Ethereum Yellow Paper", developed the Solidity coding language, and even wrote the first functional version of Ethereum.
Although both Gavin and Charles play a pivotal role in the Ethereum team, Charles seems to have invested much more in the Cardano community than Gavin has invested in the Polkadot community.
Charles' daily YouTube videos and live broadcasts are enough to prove this point. More importantly, Charles and Gavin adopted completely different methods when setting up their respective projects, which is also due to their own personalities. Eventually, all the projects that go live on Polkadot (DOT) will pass the test of the sister chain of Polkadot (DOT) KUSAMA (KSM).
In contrast, all content on Cardano will be reviewed by some of the "smartest peers" in the world before being tested and implemented. Peer review is also an important feature that distinguishes Cardano from other projects.
technology
In terms of technology, both are Proof of Stake (PoS) blockchains. But they have a very different structure.
Polkadot is committed to fulfilling the promise that Ethereum cannot fulfill, so Polkadot is indeed similar to Ethereum 2.0 in some respects.
Polkadot (DOT) uses a complex hybrid consensus mechanism called Grandpa / Babe, which enables the network to process approximately 1,000 transactions per second. Gavin pointed out that Polkadot's theoretical upper limit is the use of parallel chains and multithreading to process 1 million transactions per second.
Polkadot is essentially a blockchain ecosystem called "parachain", which is connected to a core blockchain called "relay chain". These parachains will host all smart contracts and applications in the Polkadot ecosystem, initially limited to 100 parachains.
However, it is not yet clear whether these parachains can be interoperable immediately after they go online, which will become a key factor affecting the adoption rate of Polkadot.
Compared with Polkadot, Cardano's design is more original. The Cardano blockchain is divided into two layers: the Cardano settlement layer (used to track token balances and transfers), and the Cardano calculation layer (used to run all smart contracts). Cardano uses the Ouroboros Proof of Stake (PoS) consensus mechanism. The execution efficiency of the network under this mechanism is: processing hundreds of transactions per second.
However, after deploying the Hydra scaling solution, Cardano will be able to process one thousand transactions per second for each validator connected to the network. This means that if it is to compete with Polkadot's top speed, Cardano will need 1,000 validators.
At this point, Cardano's products are still in the immature stage. According to its development roadmap, it is currently only in the second stage of the five stages, and the remaining stages are scheduled to start next year or the next year. Among them, Goguen will be launched in March this year, and the smart contract function is within easy reach.
mortgage
This is where the two projects are really interesting.
Currently, more than 1,500 validators have participated in more than 70% of circulating ADA token pledges. You can operate directly from the delegation center in the YOROI and DAEDALUS wallets, and get an annual rate of return of about 5%.
Polkadot has about 300 validators, and the tokens pledged by these validators account for more than 60% of the tokens in circulation. Users can choose to use the Polkadot {.js} browser extension to operate, and the annual return rate is 14%.
Seeing this, you may think that Polkadot is the obvious winner, but don't ignore a small detail: when you pledge Polkadot DOT tokens, if you decide to withdraw the coins, the unlock period of DOT is 28 days.
On Cardano, you can withdraw ADA at any time. Cardano's design mechanism is: within the first 20 days, no rewards will be received, and after 25 days, users can mortgage or withdraw at will without receiving any penalties.
Having said that, the bet on Cardano seems a bit risky, because Daedalus and Yoroi are not the most stable wallets, and any major update of Cardano may have technical issues such as delegation errors.
Token design
The most obvious difference between Cardano and Polkadot is the difference in the supply of tokens.
The current supply of ADA is approximately 31.8 billion, and the maximum supply is 45 billion.
The current supply of DOT is 960 million, and the initial supply is 1 billion. Logically speaking, the greater the supply, the lower the price of the token, which is why the DOT price is $36 and the ADA price is $1.40, even though the market value of the two is not so different.
Polkadot's inflation rate does not exceed 8% per year. Additional issuance is used to reward verifiers and nominators, and 1% of the unused DOT tokens in the fund library will be destroyed every month.
Even if ADA will not be issued by inflation, about 13.9 billion ADA will be slowly mined in the next 20 years to pay pledge rewards. In this way, the annual inflation rate is about 7%. Of course, the supply dynamic curve of ADA is higher than this. Much more complicated.
Another big difference between ADA and DOT is the token distribution. Of the 31 billion initial supply of ADA, more than 80% is in the hands of the community, compared with 50% for DOT. Compared with DOT, where tokens are mainly concentrated in the top 100 wallets, ADA's supply distribution is more fair.
Judging from the total number of wallets, there are nearly 300,000 Cardano wallets instead of 110,000 Polkadot wallets. However, Polkadot has been available for less than a year, and Cardano has been developing since September 2017.
From a technical analysis point of view, this also gives DOT an advantage because it has no obvious historical highs and lower price .
In contrast, ADA broke through its previous high of approximately US$1.25 to reach US$1.4, entering the altcoin bull market cycle that began in February 2021.
ecosystem
In terms of adoption, more than 350 projects are based on Polkadot development, Bondly Finance, the first and currently the only DApp that has migrated to Cardano. So the current leader seems to be Polkadot.
Polkadot is still building a bridge to Ethereum. Cardano completed the ERC-20 converter in the fall of 2020 and demonstrated it in its October update.
In the demo, the IOHK team pointed out that they are ready to help the Ethereum project clone or migrate it to Cardano. The ERC-20 converter allows the destruction of tokens on Ethereum to mint the same amount of tokens on Cardano, so many of these operations can be done easily.
According to previous reports, Charles Hoskinson recently stated that Plutus, a dedicated smart contract environment for Cardano, will be ready for stress testing in March 2021.
This will give Cardano a huge lead. Polkadot plans to test its parachain auction at Kusama first, so we may not see any DApp officially launched in Polkadot until the end of this year. In addition, each Dapp on Polkadot needs its own parachain, and only 100 slots are available. Technically speaking, this means that there are 100 DApps online.
Cardano (ADA) has no such restrictions. However, although the number of DApps on Polkadot is limited, the parachain loan provision mechanism will ensure that every DApp can change the rules of the game.
In terms of raw price potential, you might say that choosing ADA would be better because it has a lower price and will attract inexperienced retail investors. However, you can also argue that the performance of DOT will be better, because the current 28-day unlocking period of hundreds of millions of DOTs limits the total market supply.
In terms of technology, both technical architectures have adopted a two-tier design approach. The bottom layer is responsible for security and verification, and the upper layer is responsible for specific business calculations. Of course, the two projects are different in terms of specific implementation. Polkadot's design is more innovative. Its second layer supports 100 parallel chains. These parachains are provided by the market and obtain operating qualifications through slot auctions. The mechanism of the second layer on Cardano's chain is more similar to that of Ethereum.
In terms of design concepts, Cardano pursues the largest distributed computing. In terms of the number of nodes, it strives to become 50-100 times the number of Bitcoin nodes. In the distribution of tokens, Cardano also strives for equality. Nearly 90% of its total tokens will be held by the community. In addition, the design of each node of Cardano only supports an optimal number of staking tokens. When the number of staking tokens in this node exceeds this optimal value, the revenue earned by each token will decrease. Such a design approach is to avoid excessive concentration of tokens held by certain nodes, and promote the entire system to be more balanced and equal. Among Polkadot's issued and circulating tokens, about 60% are held by the community. Therefore, the Cardano project is even more advanced in terms of the democratic equality of the system being built.
In terms of ecological construction and community promotion, the two also adopted different strategies. The Polkadot Foundation provides funds to developers in the community to support the development of various applications in the Polkadot ecosystem. Therefore, so far, various types of projects have been developed in the Polkadot ecology. The Cardano project mainly relies on its companies IOHK and Emurgo for the underlying development. So far, it has not supported the developer community to develop projects on its chain. Its plan in this regard is to select and support projects to be developed in its ecology in the future through community voting.
In terms of the types of users served, Polkadot follows the characteristics of the blockchain project, which is mainly aimed at the developer community and retail users, while the Cardano project focuses more on institutional customers. Cardano has a dedicated team responsible for cooperation with some African and Central Asian regional governments. In the near future, it will announce a cooperation with African countries, and about 5 million users will establish identities on the Cardano project and use applications on top of it. Cardano is also very confident in migrating about 100 million users to its platform in this way in a year or two. And Polkadot is obviously totally dependent on the natural growth mode of ecology. In this respect, it is the same way that Bitcoin and Ethereum developed.
In terms of supporting the automatic operation of the system, both are realizing the automatic operation of the public chain. The operation and maintenance of the system is also supported by the foundation. Cardano went live in 2017. It is launched in phases. On March 1, 2021, it will launch its third stage, the Goguen stage. At this stage, the Cardano system will begin to support the operation of smart contracts and various types of assets on top of it. After the Goguen phase, there will be an expanded Basho phase and a governance Voltaire phase. Polkadot was launched in May 2020 and became an automatic system in August. However, its parachain needs to be launched through slot auctions, and this process management is conducted through the Web3 Foundation.
Despite the above differences between these two projects, I think the competition between the two is definitely not a zero-sum game. The development of the blockchain-based encrypted digital ecology has just begun. Various underlying distributed accounting technologies including the public chain will provide basic support for such a digital ecology. Therefore, the public chain project market still has a huge space for long-term development. Both projects have huge room for development. This is similar to the early development of the mobile Internet, and various underlying operating systems have huge room for development. In this sense, Ethereum 2.0 also has a huge room for development. As long as these public chain projects have their own distinctive characteristics, including the characteristics of technology, governance model, service user groups and service industries, etc., differentiated competition can be formed. For public chain users, the development of these public chain projects also provides more choices. For investors in public chain projects, Polkadot and Cardano have made very good progress so far, and each has its own characteristics, so these two projects are worthy of attention. As these projects progress, corresponding investment strategies can be adopted. In the long run, these two projects provide very good investment opportunities.
Conclusion
Charles and Gavin have the same qualifications, but Charles is more stable and deeply involved in the development of Cardano, which is an important reason why Charles enjoys such a large and active community.
Polkadot also has a huge community, but the reasons are completely different. As a pioneer of smart contract technology, Gavin seems to attract developers with the same vision, who are building DApps that can develop the community.
Although completely different methods are used in development, Cardano (ADA) and Polkadot (DOT) seem to be similar in terms of size. If you value decentralization, then you may prefer Cardano (ADA);
If you value staking rewards, then you may prefer Polkadot (DOT); if you value interoperability, then Cardano seems to be the winner; but if you want to find the next 100 times altcoin, you may It is found in a huge ecosystem.
Given the strength of both sides, which will you prefer ?