Cardano, Polkadot and Solana, who are the strong competitors of Ethereum?
The first type of blockchain projects worth noting are those designed to run smart contracts. Blockchains driven by smart contracts are becoming more and more extensive and large. Encrypted media like the term “Ethereum Killer” and are constantly looking for the second largest smart contract platform. Cardano, Polkadot and Solana are often given this title.
In this research paper, we will look at some of the largest blockchains that run smart contracts and evaluate their level of progress based on a set of indicators, including their degree of decentralization, token economics, community, and others.
First of all, smart contracts are coded, fully automated two-party agreements, without intermediaries.
Ethereum is the world’s first smart contract platform. It allows developers to build their projects and applications on the blockchain, facilitates the creation of native tokens, and allows seamless integration between products. Founded in 2015, Ethereum has a first-mover advantage in the industry, and most dapps are built on its network. In fact, more than 250,000 developers have chosen Ethereum, which provides a huge network effect for the platform.
Although the dominance of Ethereum is difficult to be opposed, multiple successful crypto projects claim to be a viable alternative to the success of Ethereum — if not a better one. But which candidate has the technical and social potential to become the next-generation smart contract supplier?
Cardano was launched in 2017 and is the second largest blockchain that supports smart contract functions, providing a platform for encryption projects and decentralized applications. At the time of writing this article, the smart contract has not yet been deployed on Cardano’s blockchain, but based on the developer’s update, the smart contract seems to be deployed soon. The schedule is from early to mid-September after the Alonzo hard fork is completed:
With the launch of smart contracts, Cardano is expected to surpass Ethereum: Although the latter is only a transition to the proof-of-stake protocol, Cardano has successfully run it. In fact, Cardano is currently the world’s largest equity proof-of-stake blockchain.
The concept of decentralization is the core innovation behind blockchain technology. It transfers power from the center to different user networks, and provides higher flexibility and diversified control for encryption projects.
One of the most obvious advantages of Cardano is the high degree of decentralization of the project. Cardano’s 3000 equity pool operators are responsible for 100% of the block’s output. The greater the number of block producers on the network, the higher the degree of security they provide, and the lower the probability of 51% attacks. Compared with the 250,000 validators on the Ethereum network, Cardano still has some room for growth. However, Cardano is indeed the second best smart contract platform compared to competitors with lower market capitalization. In the context of the recent Ethereum London hard fork (especially the Ethereum Improvement Proposal 1559 cut some ETH validators’ rewards), some node migrations may occur between platforms.
Another contribution to the intrinsic value of the blockchain is the quality of the projects built on it. Cardano’s high degree of decentralization is reflected in the degree of power of its network in terms of platform governance. The Dapp built on Cardano was developed “internally” through the Catalyst project-Catalyst is a series of funds that community members can distribute in the proposed project. In any equity proof protocol, the voting power of a node depends on its ADA equity. Part of the reason is that Cardano has pledged crypto assets with the largest dollar value, and more than 70% of the available ADA is pledged on its blockchain.
The distribution of ADA in circulation is another evidence of the project’s preference for decentralization. Only 16% of the crypto assets belong to the team and founders, and 84% of the crypto assets are in the hands of investors.
In terms of network data, the number of addresses with ADA balances has now reached 2 million. This is almost 30 times less than non-zero ETH addresses and more than twice as low as DOGE (DOGE’s market value is actually 40% lower than Cardano). If Cardano can become the fourth-largest cryptocurrency by market capitalization, regardless of its relatively small number of addresses, then when ADA gains more mainstream attention, it will have high growth potential.
Finally, the Cardano community stands out among other projects in the crypto space. Charles Hoskinson, the founder of Cardano, is one of the first eight founders of Ethereum. His particular focus on the development of Cardano lies in peer-reviewed research and evidence-based methods. In the past 4 years, the developers of Cardano have followed a clear project roadmap and are regarded as the most actively developed cryptocurrency project.
Polkadot is a younger project (launched in 2020) that provides a blockchain platform for cross-chain interoperability. Its founder, Dr. Gavin Wood, is also one of the early founders of Ethereum.
The main feature of Polkadot is its parachain-a custom, application-specific blockchain that runs in parallel in the Polkadot ecosystem. After auditing and optimizing the Kusama-Polkadot test network for a period of time, the parachain is scheduled to be released on Polkadot later this year.
In terms of decentralization, the overall picture is not as convincing as Cardano. At the time of writing, Polkadot has approximately 300 open validator positions, and plans to increase this number to 1,000 when the project matures.
Nomination Proof of Rights Agreement refers to being a candidate for the “nomination” and reward node nomination committee. Polkadot’s committee is composed of producers of 13–23 blocks and is responsible for the operation of the system. As in every proof-of-stake mechanism, the power of voting and verification depends on the number of pledged DOTs. The reason why about 60% of available DOTs are pledged on its network.
Although reducing the number of validators contributes to the scalability of the project, it is certainly a step away from decentralization. In addition, if the number of block producers is reduced to 13–23, it will increase the security risk of 51% attacks.
About 55% of DOT is in the hands of investors, and the rest is allocated to project founders and as rewards. This means that the Polkadot team has higher staking (and voting/verification) capabilities than other investors holding tokens.
Projects built on the Polkadot parachain are determined by the Polkadot parachain auction, and DOT holders have the opportunity to support their favorite projects through the first parachain issuance.
Although Polkadot is in a weak position in terms of decentralization, it has impressive social data. In fact, this project has 526,000 followers on Twitter, almost as many as Cardano. Although social interest in the encryption field can promote its development, it is still very impressive considering that the market value of ADA is 3 times that of DOT.
Solana is also a relatively new network-scale blockchain designed to provide fast, secure and scalable applications and markets. The focus is on transaction speed, and Solana solves this problem with a historical proof mechanism. It assigns a timestamp to each transaction to achieve scalability and high throughput.
There are currently 302 projects built on Solana. The ERC20 bridging function has been running from October 2020. Some projects have been migrated from Ethereum to Solana (such as Audius). In this sense, Solana outperforms Cardano and Polkadot, because smart contracts have been launched on their platform together with the Sealevel project, and DApps built on Solana can (or at least optionally) run.
There are currently about 600 validators helping network security, holding more than 75% of qualified tokens. All nodes on Solana are working: the leader’s task is to produce new blocks, and the Solana cluster uses digital timestamps as a reference to verify transactions. Of course, the number of block rewards is proportional to the number of SOL tokens pledged on the network. The number of pledged SOLs also affects the possibility of a node becoming a leader.
In order to accelerate the rapid growth of the ecosystem, the Solana Foundation cooperates with leading crypto projects to organize hackathons (Hackathons)-a competition where expert judges and the community evaluate the technical advantages of the project. Solana and the Solana Foundation receive strong support from Alameda Research and FTX CEO Sam Bankman-Fried (Sam Bankman-Fried), who often provides funding for projects built on Solana.
However, of the three platforms studied in this article, Solana has the least distribution of decentralized tokens. More than 60% of SOL belong to the team and founders, and only about 37% are in the hands of investors. Developers on the Solana network must accept this high degree of centralization and trust the founding team of the project.
So, which project is Ethereum’s biggest competitor?
The simple conclusion is Cardano. At the time of writing, this project is already the largest market capitalization project of the second-generation smart contract platform compared with the competitors of the second-generation smart contract platform. Coupled with the maximum dollar value of the mortgage assets, it confirms that the Cardano project has received strong support from the community.
The driving force behind every crypto project is its community, and the actual connection between people and the project is created on the Internet. In our previous research, we paid special attention to Metcalfe’s Law, a model based on the connectivity between users. Simply put, in a network with 5 users, 10 different connections can be established; in a network with only 12 users, this number will grow to 66. This model technically explains the business concept of “network effect”.
In addition, Cardano is an excellent network based on decentralized indicators such as validators, governance, and token distribution of the blockchain. Both Polkadot and Solana have higher inherent centralization risks, and the project creator owns 45% and 60% of the circulating tokens, respectively.
However, things are more complicated than this. Before the actual launch of the smart contract, none of the projects established on Cardano were operable, and there was no function to create interconnections. From this perspective, Solana is far ahead, and there are already multiple projects running. At the recent SOL conference, we have seen the benefits of having leading projects in its ecosystem. Earlier news reported that Solana-based non-financial projects were virally spreading, and Audius and TikTok were cooperating.
More broadly, all three projects are developing at an alarming rate. They all have different characteristics, whether it is evidence-based peer-to-peer review research, a parachain function with an “internal” test network, or a time-stamped transaction that solves scalability issues.
No Financial Advice
This report does not constitute financial advice or a recommendation to buy in any way. Always do your own research and never invest more than you can afford to lose. Investing in cryptocurrencies is high risk, and you could lose 100% of your investment.