In this article I set out to investigate Cardano and Polkadot, the two most promising blockchain usability platform proposals for DeFi and Dapps.
I will analyse the differences between the two based on the issues that have the greatest impact on the development and operation of the networks.
Quantitative data is from February 2021.
Delegation
Polkadot
It has nominators and validators.
When nominating, tokens are locked for 28 days.
The nominator can lose DOT as punishment if a validator is sanctioned for misbehaviour.
There is a minimum amount of DOT required to earn rewards. This amount is dynamic.
It can be delegated to up to 16 validators and once pools are chosen to produce blocks, the protocol will choose one of those 16 validators to support with your nomination.
A pool is “oversubscribed” when it has more than 128 nominators. This means that only the top 128 nominators, as measured by the amount of nominations assigned to that validator, will receive rewards. All other nominators do not receive rewards.
In order to manage a validator pool, a minimum amount of DOTs is required. This amount is dynamic and depends on certain factors.
Annual yield: ~ 14%.
Cardano
Cardano has delegators and pools.
Tokens are not locked. You can move them whenever you want.
There are no penalties, Cardano works with incentives instead. You can never lose ADA, you just might not collect rewards if a pool doesn’t sign blocks in an epoch (every 5 days) or collect less rewards if it gets saturated with delegation.
There is no minimum amount required to earn rewards. You only need a deposit of 2 ADA to register your wallet (returnable upon delegation cancellation) and 0.17 ADA for the one-time network transaction fee.
Pools can become saturated. Any delegation that exceeds 100% saturation decreases the rewards per delegator, which incentivises some delegators to seek out unsaturated pools, thus promoting decentralisation of the pool network.
Annual return: ~ 5%.
Monetary policy
Polkadot
Native currency: DOT
Total initial supply: 10 million
Supply in circulation: 908 million
Total planned inflation: Unlimited
Maximum token supply: Unlimited.
Inflation rate: Depends on the nomination rate on the network, but reaches a maximum of 10% when the nomination rate approaches 50%.
Cardano
Native currency: ADA
Supply in circulation: 31 billion.
Total expected inflation: 14 billion.
Maximum token supply: 45 billion.
Inflation rate: Every 4–5 years half of the reserves (the 14 billion) will be deployed. So the inflation rate will be reduced over time.
This is basically the monetary policy of Bitcoin, where the circulating supply every 4 years is halved and thus curbs inflation due to scarcity.
Treasury
Polkadot
If you want to make a funding proposal from the Polkadot treasury you need to deposit 5% of the requested funds or at least 100,000 DOT. This amount is burnt if the proposal is rejected. Proposals are decided by the board consisting of a maximum of 24 “actors” (currently 13).
Cardano
Proposals in Catalyst for the Cardano treasury do not require a deposit. You make a proposal, get feedback from the community, refine it and then all ADA holders can vote on it and the proposals with the most votes get funding.
Governance
Polkadot
Polkadot’s governance solution is to use a centralised board that makes many of the decisions.
Changes to the parameters of the protocol, among other essential matters, go through a referendum process. Anyone can propose a referendum by depositing the minimum amount of tokens for a set period of time. The proposal with the highest amount of token support will be selected to be a referendum in the next voting cycle. There can also be council referendums. When all board members agree with a proposal, it can go to referendum.
The council is primarily called upon to perform three tasks of governance: proposing sensible referenda, overturning uncontroversially dangerous or ill-intentioned referenda, and electing the technical committee. A proposal can be cancelled if the technical committee agrees unanimously.
Cardano
Governance is in progress and under construction. Project Catalyst is in experimentation, and will be refined over time. It is the first implementation of the Voltaire era.
Community proposals are currently being voted on in Catalyst for funding. CIP (Cardano Improvement Proposal) procedures are also enabled to propose changes to the blockchain.
Cardano has a DAO (Decentralised Autonomous Organisation) type governance format starting with Catalyst.
Consensus protocol
Polkadot
Proof of Stake nominated.
Hybrid consensus separates the consensus mechanism with the block production mechanism.
BABE is the block production mechanism that runs between validator nodes and determines the authors of new blocks. BABE (Blind Assignment for Blockchain Extension) is comparable as an algorithm to Ouroboros Praos, with some key differences in the chain selection rule and slot time settings. It is 51% Byzantine-resistant.
GRANDPA (GHOST-based Recursive ANcestor Deriving Prefix Agreement) is the final device implemented for the Polkadot Relay Chain (main chain on which the parachains are mounted). Byzantine resistance 30-20%.
Cardano
Proof of Stake dynamic
Ouroboros. 51% Byzantine resistance.
Scalability
Polkadot
Uses sharding, and claims to eventually be able to do 1 million TPS (transactions per second).
Cardano
Cardano will use Hydra as a second layer solution that will scale to around 1000 TPS per head, and with 1000 heads (stake pools) could reach a maximum of 1 million TPS.
Interoperability
Polkadot
It focuses on interoperability with other blockchains much more than Cardano. It calls itself "the blockchain of blockchains" and the idea is that complete blockchains can easily be developed on top of Polkadot blockchains, which share the security of the main blockchain and benefit from interoperability with each other.
Cardano
It seeks to be interoperable with the legacy native systems of other blockchains and other cryptocurrencies. To this end, Cardano will integrate KMZ sidechains.
Smart contracts
Polkadot
Will not support smart contracts natively. This feature will be built by other projects on top of its parachains.
Cardano
Supports smart contracts natively starting with Plutus and Marlowe, which will be released in February 2021.
Plutus is a completely new smart contract language based on Haskell.
Marlowe is a domain-specific language (DSL) based on the Plutus platform, which uses visual programming tools (lego-like blocks) and allows building standard and simple financial contracts without having to master a difficult programming language, in an online development environment.
Decentralisation of the network
Polkadot
Validators (pools): 297
Nominators (delegators): 6751
Total nominated of circulating currency: 60%.
Cardano
Pools: 1626
Delegated wallets: 220K
Total staking of circulating currency: 70%.
Community @Reddit
Polkadot
r/dot has 13k users.
Cardano
r/cardano has 170k users.
Test network
Polkadot
Kusama is basically an incentivised permanent testnet. It replicates real-world scenarios much better than other test networks.
Cardano
It Develops the ITN on demand before running changes on the Mainnet.
Network analysis sources:
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₿itcoin
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₳da (Cardano)
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