Right now, Ethereum is the king of smart contract platforms, with a market capitalization of over $200 billion. Cardano and Polkadot are second and third, with market capitalizations of $26 and $25 billion, respectively. These smart contract platforms, albeit significantly smaller in adoption, offer features far surpassing those of Ethereum, but this may not be enough to account for Ethereum’s first-mover advantage.
In 2014, Ethereum was released, and promised to be a next-generation blockchain capable of hosting decentralized applications. It was an instant hit, and since then has been the main smart contract platform, hosting nearly all of the ICOs of 2017 and having the vast majority of DeFi applications in 2020, like Yearn Finance, Aave, and Compound. When it was initially released, three of the eight co-founders were Vitalik Buterin, Charles Hoskinson, and Gavin Wood. Very early into the project’s release, Hoskinson was asked to leave the project. In response, he founded IOHK, and has released a rival smart contract platform Cardano, which he hopes will be an Ethereum killer. Gavin Wood also left and founded the Web3 Foundation to advance blockchain. They created Polkadot in 2016, a smart contract platform whose goal is to connect many blockchains, including Ethereum, together, and created a decentralized and open-source internet. In the recent 2021 bull run, all three projects have seen massive price increases. Let’s look at some of the technology and adoption behind Ethereum, Cardano, and Polkadot to see if these competitors are capable of rivaling Ethereum.
Ethereum cannot only be looked at in its current state, as improvements are being made daily, and Ethereum 2.0 is being developed. When it is released, Ethereum will be a proof of stake blockchain instead of proof of work, and will be capable of handling nearly 100,000 transactions per second, and at a fraction of the cost of today’s transactions. This will be a huge upgrade for Ethereum, possibly the biggest since its initial release.
On paper, Cardano or Polkadot appear far superior to Ethereum, due to their newer technology and architecture. However, arguably more important than the technology is the adoption, partnerships, and real-world use-cases of a blockchain platform, and Ethereum has plenty. Of the top 100 tokens, only a handful are not found on Ethereum, and the platform has $35 billion locked into DeFi, significantly more than all other platforms combined. Furthermore, many of the world’s largest companies are using Ethereum in some form, including Microsoft, Intel, and JPMorgan. It also has the greatest retail exposure, as it is traded nearly everywhere Bitcoin is traded. It also has the benefit of officially being declared sufficiently decentralized to not be a security by the SEC, which means that Ethereum will not face a Ripple-esque lawsuit. Here is a list of the members of the Enterprise Ethereum Alliance, a group focused on helping corporations use Ethereum in their businesses:
Polkadot, being the 6th largest cryptocurrency by market cap, has some dApps being built on the network, but not anywhere near Ethereum’s number. There are approximately 253 projects building on Polkadot, but over 3,000 on Ethereum. Polkadot does not have any significant partnerships with companies, but all of this can be explained by the fact that their mainnet has been live for less than a year. If momentum builds on the network, the number of projects could grow exponentially. Additionally, the fact that Polkadot’s goal is to connect different blockchains means that the success of other blockchains could relate to success for Polkadot. For example, if Ethereum is connected to Binance Chain through Polkadot’s interoperability feature, then the success of both of those blockchains could be beneficial for Polkadot.
Cardano is in a similar situation, and they have projects planning to build on their platform once smart contracts are released, but nothing yet. However, they do have some significant partnerships, including IBM, New Balance, the Georgian Government, and the Ethopian government. This could be significant for the platform in the future, and offer them a chance to be seen as a legitimate solution by other governments.
Do Cardano and Polkadot stand a chance to take down the king of smart contract platforms? In cryptocurrency, anything can happen. There could be numerous issues with Ethereum in the coming years, such as an Ethereum 2.0 delay, some exploit or hack, or another unprecedented event that causes users to switch to another platform. However, catching Ethereum will be difficult, as it has the clear first-mover advantage. With the amount of dApps and value locked into DeFi, users will need to have a clear incentive to move platforms. Furthermore, the real-world partnerships that Ethereum has developed will not disappear overnight, and the other two projects need to work to catch up. Nonetheless, the lower fees, higher staking, and future interoperability that Polkadot and Cardano offer may be enough to attract users and their money.
Cryptocurrencies, especially smart contract platforms, are still incredibly new, and trying to guess which platform will be dominant in ten years is nearly impossible. Maybe it will be a platform that has not been created yet, or one supported by a powerful government. One thing is certain: the competition between these three protocols will drive them to innovate further, and the winner in the end will be the users of these platforms.
By Lincoln Murr