Bitcoin Vs Cardano: Which Crypto Is The Better Investment?

Bitcoin and Cardano are two of the biggest cryptocurrencies on the market, but which is the better investment? Bitcoin is the oldest and most well-known cryptocurrency, and it is the biggest in terms of market capitalisation. However, Cardano is no less impressive, banking on energy efficiency to win over users and currently sitting as the fifth-largest cryptocurrency by market capitalisation. So, which is the better investment?

Bitcoin's price history

Bitcoin was created in 2009 and traded at pennies after its initial launch. It did not even match the US dollar until 2011, when it reached a value of $2. Once Bitcoin was out of the blocks, its price soared. When it hit $1,242 in 2013, the wider financial sector began to take notice, and there was a rush to invest in Bitcoin as digital currency came to be seen as a huge opportunity for investors willing to take on a little risk. This drove up prices until Bitcoin hit a record $19,783.06 in 2017.

Bitcoin continued to trade at impressively high prices. The coin reached an all-time high of $68,789.63 in November 2021. In March 2024, Bitcoin's price again reached an all-time high, exceeding 73,000 USD. This particular price hike was connected to the approval of Bitcoin ETFs in the United States. Previous hikes in 2021 were due to events involving Tesla and Coinbase. For instance, Tesla's announcement in March 2021 that it had acquired 1.5 billion USD worth of Bitcoin fuelled mass interest.

Cardano's energy efficiency

Cardano's founder, Charles Hoskinson, claims that Cardano is 1.6 million times more energy-efficient than Bitcoin. This is due to Cardano's use of a 'proof of stake' protocol, which bypasses the computing-intensive mining process. In a 'proof of stake' system, users buy tokens to join the network, and the cryptocurrency acts as a scarce asset. This is in contrast to Bitcoin's 'proof of work' system, where miners use high-powered computers to compete and solve complex equations, requiring a lot more energy.

Cardano's low energy consumption has led to it being labelled a potential "Ethereum-killer". Its energy efficiency has gained attention in light of the recent focus on crypto's environmental impact, and it is considered one of the most environmentally sustainable blockchains.

Ethereum vs Cardano

Ethereum and Cardano are two of the most well-known cryptocurrency projects today. Both networks provide similar services, such as the execution of smart contracts and the creation of decentralised applications (dApps). However, there are some key differences between the two.

Ethereum is the older, more established, and more valuable of the two cryptocurrencies. It is also the third most valuable digital currency overall, after Bitcoin and an unnamed second-place cryptocurrency. It is further along in development, especially when it comes to smart contracts. Ethereum is also more widely used, handling approximately 1 million daily transactions compared to Cardano's less than 100,000. Ethereum is also more expensive to use, with transaction costs in its autonomous economy occasionally topping $20.

Cardano, on the other hand, is a newer technology that is being rolled out more slowly and carefully. It is still in the early stages of developing its features and user base. Cardano uses a system called Proof-of-Stake, which does not require the energy-intensive computing process known as mining. Instead, users may participate in a process called crypto staking to help verify transactions and earn cryptocurrency rewards. Cardano is also cheaper to use, with transaction costs frequently under $1 this year.

Cardano has the support of academics and is building its community on research to significantly impact less fortunate parts of the globe. It has a lot of money for development and a strong team guiding the project. The system is also open to review by its peers, which gives Cardano a lot of credibility that most other coins don't have. Cardano's blockchain has more potential to scale and ensures that transactions happen quickly.

However, Cardano has many competitors, including other third-generation cryptocurrencies like Avalanche, Cosmos, Polkadot, Solana, and Tezos. It also doesn't have the brand-name recognition of being one of the original cryptos like Bitcoin and Ethereum. Additionally, experts say Cardano still has limited uses compared to other smart contract blockchains and has been losing ground to Ethereum for a while.

When it comes to risk, there may be little difference between Cardano and Ethereum in the short term. However, looking further ahead, Ethereum is probably the safer option, as its prices have generally appreciated throughout its existence.

Bitcoin's block creation protocol

The process of mining keeps Bitcoin secure and prevents the 'double spend' of Bitcoin, i.e. the same token being used more than once. This protocol is known as 'proof of work' and it can take up to ten minutes for a new block to be added to the network.

The Bitcoin protocol is the set of rules that govern the functioning of Bitcoin. It is a peer-to-peer decentralised network with no central oversight, using blockchain technology as a public ledger that records all Bitcoin transactions. Mining and proof of work are the processes by which new bitcoins are created and transactions are verified.

Each node in the Bitcoin network has a copy of the ledger's entire transaction history. If a transaction violates the rules of the Bitcoin protocol, it is ignored, as transactions only occur when the entire network reaches a consensus that they should take place. This "full network consensus" is achieved when each node on the network verifies the results of a proof-of-work operation called mining.

Mining packages groups of transactions into blocks, and produces a hash code that follows the rules of the Bitcoin protocol. Creating this hash requires expensive energy, but a network node can verify the hash is valid using very little energy. If a miner proposes a block to the network, and its hash is valid, the block and its ledger changes are added to the blockchain, and the network moves on to yet unprocessed transactions.

The block creation fee changes at every 210,000 blocks. The block creation fee started with 50 BTC, fell to 25 BTC at block 210,000, to 12.5 BTC at block 420,000, and to 6.25 BTC at block 630,000. The reward for mining halves every 210,000 blocks and will continue to do so a maximum of 64 times before new coin creation ceases.

Cardano's scalability

Layer 2 solutions, on the other hand, involve additional chains or layer 2 solutions that boost the main-chain performance. One such solution is the Hydra Head Protocol, an open-source framework for creating off-chain ledgers. Hydra acts as a DApp, allowing developers to scale their own protocols. It enables actors to perform transactions at a faster pace on their private network, or "Hydra Head", before settling the results onto the main Cardano chain.

The combination of these Layer 1 and Layer 2 solutions contributes to Cardano's scalability, enabling it to support an expanding user base and ensure growth without sacrificing throughput.

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