Investing in the native tokens of blockchains that support smart contracts has been an exceptionally smart move in 2021. So far this year, Ethereum (ETH 0.73%) is up more than sixfold. Cardano (ADA -1.80%) has been an even bigger winner, with a nearly eightfold gain.
But which of these cryptocurrencies is the better buy now? Two Motley Fool contributors weigh in with opposing views.
About to get even better
Keith Speights (Ethereum): Bitcoin (BTC 0.37%) remains the most popular cryptocurrency based on market cap. However, Ethereum is in a solid second spot. Its market cap of around $500 billion is nearly 5 times as large as the No. 3 contender. Some even think it could dethrone Bitcoin in the future.
No other blockchain platform comes close to Ethereum in terms of adoption. More than 40 of the top 100 cryptocurrencies in the world are built on the Ethereum blockchain. Other applications range from decentralized insurance to games to trading exchanges.
The biggest knocks against Ethereum are its slow-as-molasses transaction speed and its sky-high fees. If this status quo remains unchanged, it's a near certainty that other blockchains will continue to gain ground on Ethereum. But changes are a-comin'. Big ones.
Ethereum 2.0 (Eth2) is a major upgrade that will make the blockchain much faster, more secure, and more sustainable. There are three phases in this upgrade. The first one, the Beacon Chain, is already in place. It paved the way for future updates and enabled staking with Ethereum.
The two other phases are planned to roll out in 2022. The mainnet Ethereum will merge with the Beacon Chain. Then, Shard chains will be introduced that help reduce congestion and improve transaction speeds.
Eth2 should be able to scale up to 100,000 transactions per second. And gas fees will be slashed. The reasons for adopting Ethereum will be greater than ever -- making this cryptocurrency arguably one of the best bets around.
A roadmap to future opportunity
Rich Duprey (Cardano): Open-sourced and decentralized blockchain platform Cardano is in the middle of its strategic roadmap, having recently entered the third of its five phases of development with the launch of smart contracts, or self-executing, programmable agreements, that also added the ability to build decentralized applications (dApps). Eventually, Cardano will support decentralized exchanges (DEX).
Yet in many respects, it remains at the earliest stages of its full growth potential because the first two eras it went through -- called the Byron and Shelley phases -- really set the foundation for all that is still to come. They were the building blocks upon which the real growth will happen.
Cardano is a third-generation blockchain with a proof-of-stake (PoS) system, created using research from engineers and academics that was peer-reviewed, and features a rigorous formal development model. The PoS system is preferable to proof-of-work (PoW) systems, such as that used by Ethereum, because it uses less energy and has lower hardware requirements, thus allowing for faster transaction time.
Where Ethereum maxes out around 10 transactions per second (TPS) and Bitcoin at 30 TPS, Cardano's superior platform can process 250 TPS. Although the plodding nature of its roadmap rollout means it is slower than other cryptos in offering new features, it also means they're typically not buggy and subject to errors because Cardano wants to get it right the first time.
It's currently in what it calls its Goguen phase that will add new functional beyond just smart contracts, such as allowing a multicurrency ledger for creating fungible and nonfungible tokens (NFTs), developing new cryptocurrencies, and the tokenization of digital and physical assets.
This will be followed by the scalability of its Basho phase, after which comes the final Voltaire era, where it will achieve self-sustainability. It means Cardano might not be first to market, but it will be the best, more efficient crypto when it does.
Which cryptocurrency is the better pick? It largely depends on the buyer. If you prefer up-and-coming tokens, Cardano will probably be more up your alley. If you like the relative security of a more established platform, Ethereum is probably the better choice.
Of course, both Ethereum and Cardano could either move much higher or sink over the coming months. Each of these cryptocurrencies offers a high-risk but potentially high-reward proposition.