Since the emergence of blockchain technology, it has raised and evolved exponentially. In 2013, the total capitalization of crypto assets in blockchain was around 1 billion USD. Nowadays, in mid-May 2022, it is between 1 and 2 trillion USD. That means, the amount of money placed in blockchain technologies has multiplied by a thousand in less than 10 years — and that is only considering crypto assets -.
From the concept of cryptocurrency and distributed ledger implemented by Satoshi Nakamoto in 2009 to the current ecosystem of decentralized applications (dApps), many implementations have come in place to make blockchain the technology that everyone is talking about. Ethereum, the first blockchain to integrate smart contracts, paved the way for a new era in blockchain. Nonetheless, as a pioneer, Ethereum is failing to deliver in all the natural challenges inherent to new advances. To that end, other blockchains are stepping up to deliver better options to tackle not only those issues but others.
This exciting and innovative ecosystem, plagued with new blockchains and different backbones and mechanics, also translates into an immense sea of options that blockchain newcomers and OGs need to navigate in order to succeed in their digital quests. In here, we aim to deconvolute two of the titans that followed Ethereum’s steps and are aiming to come on top of this new blockchain era, Cardano and Solana.
One important thing to consider about Ethereum is that, while innovative, its efficiency fails to scale up and deliver according to its growing popularity and users. That has led to blockchain saturation, transactions failing to be validated, and exasperatingly high gas fees. For those new to blockchain, gas is the terminology employed to represent the fees paid for your transaction to be validated and integrated into the blockchain. In addition, like Bitcoin, Ethereum uses proof of work (PoW) as a consensus mechanism, which has proved both secure but also energy-consuming to an extreme that is not acceptable given the demand, costs, and impact in our world. For those new to blockchain, a consensus mechanism is a way by which all users in a blockchain agree on the veracity of every action recorded in the blockchain with the need for mutual trust among users. Of note, when I mention unacceptable energy consumption, I talk about country-level consumption. Get your head around the idea that Ethereum can consume similar amounts of energy as countries like Slovakia or Ecuador. If you add Bitcoin on top, comparable to Argentina or Ukraine, as well as other blockchains, that would make PoW only less energy-consuming than around 20 countries in the world.
Importantly, Ethereum aims to migrate to proof of stake (PoS), a consensus algorithm used by both Cardano and Solana. However, both Cardano and Solana aim to increase the scalability of blockchain in comparison to Ethereum. Therefore, both intend to hold more transactions and users per unit of time. In addition, they do so by getting rid of PoW and therefore, by decreasing their energy consumption considerably and being more eco-friendly and sustainable in time (99.2% less energy-consuming, to be specific). But, how do they do this?
Blockchain Mechanics
Cardano, created in 2017 by one of the original co-founders of Ethereum, Charles Hoskinson, relies on a technology termed Recursive Internetwork Architecture (RINA). In a nutshell, RINA partitions the main network into several subnetworks that communicate with each other and are thus, interconnected. However, as of today, Cardano is questioned to be a slow-working (and growing) blockchain, as we will see later in this section.
In this regard, Solana has been raised as one of the fastest (and cheapest) blockchains to use, with blocks being processed every 400 milliseconds and transaction fees of $0.025 on average. In addition, while Cardano implemented only recently (September 2021) the use of smart contracts, Solana had them integrated right from the beginning. However, this speed of growth has come with a cost in security and Solana has already suffered a substantial amount of blockchain clogs and security issues that have highlighted a dependency on the Solana Foundation and thus, a degree of centralization that Cardano lacks.
Lastly, the reason for Cardano being a slow blockchain in implementing changes and enhancing its capabilities is due to a novel and reliable mechanism to do so. Cardano was born from scientific and technological innovation and thus, exploits part of the reliability of the scientific method, peer-review. Every technical implementation to be built on Cardano is scrutinized by other scientists from that field and put to test theoretically before it is implemented. This is a slow process when compared to simply launching updates and addressing the problems triggered by them on-chain. However, it also ensures the reliability of each and every update performed on Cardano.
In order to fully understand the mechanics, benefits, and issues inherent to both blockchains, it is important to understand what consensus mechanisms they rely upon.
Consensus Mechanisms
Both blockchains are considered pioneers in the consensus mechanisms they use and their strengths, as well as their weaknesses, are derived from them.
On the one hand, Cardano deployed the Ouroboros proof of stake (PoS) consensus mechanism. Following this model, users can validate blocks only when they stake their ADA, the native token of the Cardano blockchain. For the blockchain newbies, stake means to block or escrow your coins to prove your commitment to the blockchain. You are still the owner of those coins, but they are subject to growth or decrease based on your honest actions while validating transactions and blocks. In addition, you can stake ADAs to other staking pools, releasing you from the validation duties but enjoying parts of the aforementioned benefits (percentage of returns based on the correctly validated blocks). By this mechanism, Cardano not only improves and reinforces decentralization but also gets rid of the energy-consuming PoW. The main distinction between the Ouroboros PoS and other PoS mechanisms is that such stake only needs to be present at a specific time point (snapshot) and not constantly, which provides an unforeseen dynamic economic system to participate in the consensus mechanism and of other decentralized features of blockchain with the same assets.
On the other hand, Solana employs proof of History (PoH), which is based on the time difference between two different events in the blockchain. By implementing timestamps in blockchain, Solana achieves a lighter and quicker blockchain and therefore, reduces the load in all the network nodes. On top of PoH, Solana has built a Tower Byzantine Fault Tolerance (Tower BFT), a system that allows users to stake their SOL tokens to vote on the validity of a PoH hash, increasing the security of the network. However, this token is allowed to vote for the trust of nodes, but not to increase the number of people participating in the validation process. In fact, the number of validators is limited to a few over 1,000; making Solana limited in its decentralization.
Performance parameters snapshot
Although many similarities and differences can be found in how Cardano and Solana blockchains were born and function, the ones stated above are the main theoretical ones. But perhaps, it is best to look as well at the practicalities of how these blockchains work and how they quantitatively differ.
Performance parameters over time
Volatility and cryptocurrencies go hand in hand in these early stages of blockchain technology development and establishment. Therefore, a snapshot of some of those parameters can help us compare the strengths and weaknesses of blockchains at a certain point. However, as critical thinkers, we need to put into context that information to really understand and extrapolate what the future might hold for us.
Along those lines, while the total value locked (TVL), serves as a proxy for how much each blockchain and its dApps are being used, Solana could be seen as 30 times more used than Cardano. However, since February (the time were the first decentralized exchanges and dApps were implemented in Cardano) we have seen a 100x expansion of the TVL while Solana has been steadily decreasing.
Regarding the number of stakers, serving as a proxy of the active network participants, we can observe how, while Solana has found a plateau phase, Cardano keeps steadily growing due to their PoS mechanism, the growing amount of incentives in the shape of ADA rewards, airdrops and initial stake pool offerings (ISPOs).
All in all, Cardano, as an evolving blockchain, is implementing the new updates, aiming to scale up transactions and the overall capacity of the network and users. While speculative, the addition of all these factors could mean a tremendous boost for the dApp ecosystem and the advantage against its blockchain competitors, amongst which, Solana is placed.
In brief
Cardano and Solana were born to fix the issues that arose from the expansion of blockchain use cases driven by Ethereum. Both of them aim to be more sustainable in time with regards to the number of users, ecological impact, and others. However, Cardano uses Ouroboros PoS as a consensus mechanism, while Solana uses PoH. The difference in consensus mechanism also accounts for differences in blockchain and transaction mechanics, safety, decentralization, and scalability. While Solana grew fast with innovative technology, which made it from the beginning a fast and able to hold many transactions, a few security attacks and breaches have lately occurred, damaging the concept and making evident the need to implement updates. On the contrary, Cardano has been slowly but safely and steadily implementing updates (from which the newest one is soon to be released). This means that while the roadmap and thus, the path and expectancies for Solana are not as clear and transparent, Cardano’s pathway is evolving and improving on a regular basis with the security of a peer-reviewed system.
