Ethereum (ETH) and Polkadot (DOT) are notable cryptocurrencies for their innovative features. Ethereum pioneered smart contracts in 2015, while Polkadot took it to the next level by enabling smart contracts across multiple platforms in 2020.
Both ecosystems are powered by their native coins, ETH for Ethereum and DOT for Polkadot. Holding either of these coins provides special privileges on their respective platforms.
If you're considering investing in either of these coins, you might wonder which one to choose. In this guide, we'll compare Ethereum and Polkadot to help you make an informed investment decision.
History of Ethereum and Polkadot
Ethereum and Polkadot have different histories, with Ethereum has been around for five years longer than Polkadot.
Despite this, the constantly evolving cryptocurrency industry means both platforms have unique records worth exploring.
The initial Ethereum whitepaper was published in 2013, with a revised version released the following year.
Vitalik Buterin, the founder of Ethereum, spent 2014 speaking at conferences and gaining the necessary crowdfunding and recruitment to launch his vision for a smart contract-enabled blockchain.
In 2015, Ethereum launched, and smart contracts revolutionized the crypto industry. Since then, Ethereum has maintained its position as the second most popular cryptocurrency in the world.
Ethereum 2.0 has been developing for some time and promises to make sending tokens and creating smart contracts cheaper. Although the full version of Ethereum 2.0 was expected to be released by 2022, it is still pending release.
Polkadot's creation is closely linked to Ethereum, as Dr. Gavin Wood, a co-founder of Ethereum, founded it.
While working on Ethereum, Wood planned to create a similar crypto-based across multiple chains.
The Polkadot whitepaper was published in 2016, and the Web3 Foundation was established the following year to research and develop Wood's plans for Polkadot and to fundraise for its launch.
The first Polkadot token sale occurred in October 2017, and despite facing a hack, the platform began rolling out throughout 2020, with Phase 1 launching on May 27 of that year.
What are Ethereum and Polkadot, and why were they created?
Ethereum and Polkadot share the goal of simplifying smart contract execution for investors, but they differ in their approach. Let's take a closer look at these two cryptocurrencies and their objectives.
Ethereum was created to offer more than just an online cryptocurrency like Bitcoin.
Its inventors introduced Ether, a new altcoin, and developed a scripting language for smart contracts.
Smart contracts are virtual agreements powered by cryptocurrency that can be used for various purposes, such as tokenized derivatives, liquidity pools, and synthetic assets.
Ethereum's goal was to go beyond Bitcoin and provide a platform for decentralized applications (dApps) that operate on the blockchain. With smart contracts, dApp developers can create new decentralized platforms without intermediaries.
Polkadot also aims to simplify the establishment of virtual contracts, but it uses multiple chains instead of just one. This approach is intended to modernize not just cryptocurrency but also the internet. The platform is seen as a stepping stone toward Web3.
Polkadot's system consists of multiple chains that operate simultaneously, currently over 100.
By doing so, it can process 1,000,000 transactions per second, making it one of the most efficient cryptocurrency platforms.
The Polkadot Relay Chain is the central component of the platform. Users can interact with other para chains from this chain. While contracts cannot be set up on the Relay Chain, they can be established and interacted with on the parachains.
While Ethereum has had more cryptocurrency highs and lows than Polkadot, both have exciting price histories worth exploring.
As of April 18, 2023, Ethereum is valued at $1,285.53, making it the second most valuable cryptocurrency after Bitcoin.
However, in November 2021, Ethereum reached its all-time peak, with a value of $4,829.57. Since then, its value has dropped significantly, almost four times its current value.
Since its launch in 2015, Ethereum has experienced steady growth and occasional slumps. Despite some dips, Ethereum has never returned to its starting year value of $1.
A single Polkadot coin is currently valued at $5.39. According to CoinGecko records, Polkadot's all-time low occurred on August 20, 2020, when the currency was priced at $2.70.
On November 4, 2021, Polkadot reached its all-time high, valued at $54.98 per coin.
Although Polkadot has experienced a significant drop in value over the last year, it still shows potential for the future.
Market capitalization is a measure of the total worth of a cryptocurrency. You can calculate its market cap by adding up the value of all its coins. This figure indicates the cryptocurrency's influence over the entire market and can fluctuate greatly.
Regarding market cap, Ethereum currently has a total value of $156,899,759,934. On the other hand, Polkadot's market cap is now $6,364,851,229.
Examining the daily transaction level of a cryptocurrency is one of the best ways to gauge its popularity, as price figures may provide a partial picture.
Ethereum Based on Ychart's Ethereum Transactions Per Day information page, Ethereum currently has a daily transaction figure of 923,887.
Polkadot As Polkadot handles transactions across multiple platforms, it is difficult to determine its daily transaction count. However, the system can process up to 1,000,000 transactions per second, making it possible that Polkadot handles more transactions than the Ethereum ecosystem, although this cannot be confirmed.
Block size is a crucial metric for measuring a cryptocurrency's transaction capacity.
The block size of Ethereum 1.0 is 4 MB, which offers a relatively high capacity for transactions. In comparison, Bitcoin's block size is only 1 MB. With Ethereum 2.0, the platform is expected to increase its block sizes.
Polkadot does not have a standard block size like other cryptocurrencies. Instead, it relies on multiple chains, including the relay chain, for faster and more efficient transaction processing.
What are the similarities between Polkadot and Ethereum?
Polkadot and Ethereum share several commonalities as decentralized applications that employ blockchain technology to enable users to take complete control. Both platforms operate without the involvement of a central authority.
Moreover, they serve as smart contract platforms, with Ethereum aiming to simplify contract creation for cryptocurrency investors while Polkadot employs alternative methods to deliver this service.
Finally, both networks use proof-of-stake protocols when executing smart contracts and processing transactions.
What are the main differences between Polkadot and Ethereum?
There are several differences between Polkadot and Ethereum:
Architecture: Ethereum 1.0 and Polkadot have entirely different architectures. Ethereum 1.0 consists of a single chain, while Polkadot started with multiple chains.
However, with the upcoming release of Ethereum 2.0, the platform will support numerous chains or "shards," as they are called in Ethereum.
Transaction capacity: Polkadot has a much larger transaction capacity than Ethereum. While Ethereum can only handle 30 transactions per second, Polkadot can process up to 1,000,000.
Ethereum: The emergence of alternative cryptocurrencies, such as Polkadot, risks Ethereum's position as the second-largest cryptocurrency.
Polkadot's superior transaction capacity and similar capabilities potentially threaten Ethereum's market share.
Furthermore, the continuous delays in the launch of Ethereum 2.0 have caused concerns, as further delays may impact the platform's value and provide opportunities for competitors such as Polkadot to surpass it.
Polkadot: Polkadot faces intense competition from other blockchain networks, including Cosmos and Tezos.
Polkadot's past security breaches have exposed it to vulnerabilities, although the platform has since implemented security measures to address these concerns.
Looking at the future
Looking ahead, both Ethereum and Polkadot have different plans in store for the future, despite the challenges they face.
The priority for Ethereum is to launch Ethereum 2.0 while maintaining its position as the second-largest cryptocurrency.
However, the platform is also exploring other possibilities, such as improving the efficiency of the network and expanding its ecosystem.
Polkadot's roadmap outlines several ambitious goals, including developing XCMv3, which will enable cross-chain communication, and the creation of a Bridge Hub, Nomination Pools, and a Staking Dashboard.
While there are still some hurdles to overcome, Polkadot aims to continue improving its platform and expanding its reach in the crypto market.