Blockchain technology offers a promising solution to financial and governance problems currently affecting the world. The Solana blockchain is a high-performance layer-1 platform created to support the development of decentralized applications (dApps) and smart contracts. A combination of proof-of-stake (PoS) and proof-of-history (PoH) consensus mechanisms drive the Solana protocol. With the PoH consensus mechanism, Solana creates historical records with attached proofs of time. Consequently, Solana achieves a higher efficiency and throughput rate.
The Cardano blockchain platform operates on a decentralized PoS consensus mechanism. The PoS consensus mechanism is more energy-efficient than the proof-of-work (PoW) mechanism used by legacy blockchains like Bitcoin (BTC) and Ethereum (ETH). Projects using Cardano’s protocol include payments, voting and national currency management.
Cardano and Solana experienced unprecedented price growth, exploding to all-time highs in 2021, but they were brought down—with all other cryptocurrencies—in the summer of 2022 when Terra was depegged.
The recent addition of smart-contract capabilities and the imminent arrival of the Alonzo main net hard fork could be responsible for Cardano’s price increase. Solana’s move into non-fungible tokens (NFTs) with Degenerate Apes may account for 2021’s price explosion. The sale of this collection of costumed apes required SOL and reached trading volumes of over 600,000 SOL (over $66 million).
Although Solana and Cardano can take the lead in the crypto space, other projects such as Polkadot, Algorand and Phantasma also pose a considerable challenge.
Smart Contracts Explained
Essentially, smart contracts are programs stored on a blockchain that execute when specific conditions occur. In smart contracts, the terms between a buyer and seller are written in the code to guarantee the outcome will be certain without the involvement of an intermediary. The code controls execution, and transactions are tracked and immutable. Additionally, smart contracts can automate a workflow to execute actions when particular conditions transpire.
Smart contracts have a wide range of applications. They can be used for exchange of financial instruments, the management of supply chain logistics, the sale of real estate, and the exchange of medical records, among other uses cases.
That said, smart contracts are by no means full proof. Firstly, there is a lack of regulation. This means that many smart contracts operate outside traditional regulation systems, which can make it difficult to resolve disputes or enforce the terms of the smart contract. Secondly, they are very complex, which means that there is a risk of errors or bugs in the code. Lastly, they depend heavily on external data feeds or oracles. If these third parties are malicious or unreliable, it could result in breaches or errors in the smart contract.
Proof of History vs. Proof of Stake
Bitcoin and Ethereum pioneered the concepts of blockchain and smart contract platforms. However, both have come under heavy criticism for their lack of scalability and high energy consumption. The scalability challenge is primarily due to use of the Proof of Work consensus method. The Proof of Stake mechanism removes the bottlenecks caused by PoW, while also achieving security.
Alternatively, Solana can handle up to 50,000 transactions per second using the Proof of History consensus mechanism to determine the passage of time, considerably reducing the weight of data needed for consensus. The goal of PoH is to lessen the workload of validator nodes that process blocks by facilitating the encoding of time itself into the blockchain. Time stamping is vital because it alerts the network that transactions have occurred in a particular sequence.
Cardano has a unique Proof of Stake system to validate transactions called the Ouroboros system. It works by rewarding validators through a series of random and selected rewards through its staking system. Peer-reviewed research went into Ouroboros, the first provably secure PoS protocol. Ouroboros combines unique technology and mathematically verified mechanisms to ensure the security and sustainability of the blockchains that depend on it.
Solana vs. Cardano Market Capitalization
Cardano and Solana each have multi-billion dollar market caps. Experts believe that a larger market cap makes a token a safer and more stable investment than small-cap tokens. Here are a few reasons for this:
- Liquidity: large market cap cryptos tend to be more liquid than small market cap cryptos. This means that it is easier for an investor to buy and sell large market cap cryptos as there are more buyers and sellers in the market.
- Network effects: cryptos with a larger market cap tend to have a more established network and a larger use base. This makes the less resistant to attacks and more valuable as the network grows.
- Scrutiny: large market cap cryptos are scrutinised more often by the media, investors and regulators. This can increase their transparency and reduce the risk of fraud.
- Development: large market cap cryptos tend to have a larger pool of resources, which can make them more robust and better suited to adapting to changes in the market.
However, stability is not guaranteed in the volatile crypto markets, and price predictions are notoriously unreliable. As of early of 2023, Cardano was sitting below $0.50, while Solana was trading at just over $10.
Ethereum, the number 1 protocol for decentralized finance (DeFi), opened the floodgates to the next generation of financial solutions. In 2021, DeFi is undergoing growth at breakneck speeds. However, Ethereum’s inability to scale and its high transaction fees hinder the further expansion of the DeFi space. In this area, blockchains like Cardano and Solana can take advantage and continue accelerating the mass adoption of DeFi by delivering higher throughput and cheaper transactions.
Cardano’s recent integration of smart contracts is pivotal for the project to play a significant role in the growth of DeFi. The project is now on a mission to increase its market share of the DeFi space. To accomplish this goal, EMURGO, the venture capitalist arm of Cardano, is investing $100 million to boost the development of the Cardano DeFi ecosystem. SundaeSwap, similar to Uniswap, is a decentralized exchange (DEX) aiming to be the leading DEX on Cardano.
Throughout 2021 and early 2022, Solana quickly became a hub for DeFi dApp utility. Solana’s total value-locked (TVL) grew from $900 million to over $10 billion. However, after the collapse of FTX in latter half of 2022, TVL in the Solana ecosystem dropped significantly. Currently, it sits just over $200 million.
Use Cases of ADA vs. SOL
The utility of ADA within the Cardano ecosystem is vast and includes rewarding nodes, staking and peer-to-peer transactions. The ADA token’s purpose is to be a global token used as a valuable asset like cash, perform any function and utilize services offered by Cardano. This feature allows ADA to facilitate the transfer of value and have utility similar to Bitcoin and Ethereum.
Cardano has its stake delegator pool where token holders can delegate their tokens to earn rewards by contributing to the network’s security. The ADA token plays a vital role in the governance of the Cardano ecosystem. The ADA token facilitates users to vote on improvements or funding proposals proposed by the team or Cardano community. ADA tokens are required to create smart contracts and applications on the Cardano blockchain. Developers need to have ADA to execute their smart contracts on the blockchain.
SOL is Solana’s native cryptocurrency, which works as a utility token. The SOL token has 2 prominent use cases in paying for transactions and staking tokens as part of its PoS consensus mechanism. The network burns SOL as part of its deflationary model. SOL holders can also become network validators. Developers need SOL to build smart contracts and create projects on the blockchain. dApps building on Solana is also creating new SOL use cases. Chainvote is creating a DeFi voting app for corporate governance using SOL tokens to vote.
Where to Buy Solana and Cardano
Solana is an established cryptocurrency, so you don’t have to jump through hoops to get it. You can buy the ADA and SOL tokens at crypto trading platforms, including Coinbase Global Inc (NASDAQ: COIN), Crypto.com, and SoFi Technologies Inc(NASDAQ: SOFI). Coinbase, a centralized exchange, is straightforward and excellent for newcomers to the crypto markets. It would be wise to research several exchanges because each has unique benefits to offer users.
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What Has More Room to Grow: ADA or SOL?
Even though Cardano has limited upside potential due to its large market cap ($9 billion in January of 2023), in comparison to Ethereum, it has lots of room to grow. Projects that can facilitate the growth of Cardano include the development of a blockchain-based digital identity system for students and teachers in Ethiopia.
Solana’s market cap ($5 billion in January of 2023) is less than Cardano and now has over 400 projects building on its protocol. This aspect gives Solana colossal growth potential in the years to come. Some notable Solana projects include SolAPE, a DEX created to appeal to the masses through easy accessibility and a rewarding and fun ecosystem.
Supposing the crypto markets remain bullish and Ethereum continues to have scalability and high fee issues, Solana and Cardano are well-positioned to emerge as 2 of the top smart contract blockchain protocols.
Current Cryptocurrency Prices
The depegging of Terra brought down the entire crypto industry, making it difficult for investors to know if their investments will grow again, or if they can buy at the dip and make a profit.
So, What’s Better: Solana or Cardano?
Solana is leading as an Ethereum competitor with hundreds of projects building in its ecosystem. That’s because Solana delivered smart contract support long before Cardano. However, Cardano ecosystem developers can now deploy hundreds of DeFi dApps. More NFT and DeFi apps will likely be developed on its blockchain.
If Hydra and the Cardano scaling solutions are delivered in time, a massive migration of developers from Ethereum and Solana to Cardano could result. Meanwhile, Solana seems to be way ahead of Cardano in regards to development. However, Cardano has more substantial financial support and a larger market cap.
Frequently Asked Questions
Can you make a profit from Cardano?
You can make a profit from Cardano if you have invested wisely, monitored the market and entered and exited your position correctly.
Can you make a profit from Solana?
You can make a profit from Solana if you are investing wisely, watching the markets and monitoring current events.
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