Let’s Compare: Polkadot vs Ethereum vs Creditcoin 3.0
In this article, we will explore and dive deep into the side-by-side comparison of Ethereum, Polkadot and Creditcoin 3.0.
With Ethereum being on the top smart contract solutions and, the future of more multichain solution is on it's way.
In this article, we will explore and dive deep into the side-by-side comparison of Ethereum, Polkadot and Creditcoin 3.0.
Key Takeaways:
- Learn about Polkadot, Ethereum (and Creditcoin), as well as a comparison of their key features.
- Understand the different problems that each protocol solves.
- Get an overview of market data comparing each project.
- Discover the advantages and disadvantages of each protocol.
- Explore some of the top dApps built on each blockchain.
What is Ethereum?
Ethereum is a general-purpose L1 blockchain designed to execute smart contracts in a decentralized environment, built on the Ethereum Virtual Machine (EVM).
Emerging as the brainchild of programmer Vitalik Buterin in 2013, Ethereum revolutionized the blockchain landscape by pioneering the very concept of smart contracts we all know today.
Unlike its predecessor, Bitcoin, which primarily facilitated peer-to-peer transactions, Ethereum aimed to establish a Turing-complete decentralized protocol where self-executing contracts could operate autonomously.
Buterin's vision materialized in 2015 with the launch of the Ethereum blockchain, marking a pivotal moment in blockchain technology. Ethereum's smart contract functionality represented a paradigm change for distributed ledger technologies, enabling the creation of decentralized applications (dApps) that transcended the limitations of traditional software.
As the ‘first-mover’ of smart contract technology, it is the world’s most widely known and popular smart contract platform today, as well as a number of L2 ‘follower’ chains aimed at improving the ecosystem’s scalability. The protocol’s utility token, ETH, accounts for around 17% of the total crypto market’s value.
Consensus Model: Proof-of-Stake
Native Token: Ether (ETH)
dApp programming language: Solidity
Key aspects of Ethereum include:
- Smart Contracts: Self-executing contracts that run and execute on a decentralized blockchain. Smart contracts enforce code-based agreements deterministically and do not rely on third-parties to execute, implement or moderate. These contracts operate on the Ethereum blockchain, ensuring transparency, security, and immutability.
- Decentralized Applications (dApps): By leveraging smart contracts, developers can now create self-executing on-chain applications. Common dApps today encompass a wide range of use cases, including finance, gaming, NFTs, asset tokenization, and social networking.
- Ethereum Virtual Machine (EVM): EVM represents the basic computation engine of Ethereum, managing both blockchain state and smart contract execution in every Ethereum node. EVM is not only used by Ethereum, but several other protocols are EVM-compatible too, including BNB Smart Chain, Avalanche, Polygon (and soon Creditcoin as well).
What is Polkadot?
Polkadot is a L0 ‘meta-protocol’ designed to connect multiple blockchains (known as parachains or shards) through a shared security and consensus layer.
Set up by Ethereum co-founder, Gavin Wood, in 2016, Polkadot provides shared security and consensus to these parachains through the Polkadot relay chain, with each parachain usually optimised towards a specific role and function.
This means that, unlike Ethereum, which is an all-encompassing consensus and smart contract execution layer rolled into one, Polkadot is specialized as interoperable consensus and security layer, with smart contracts and other features cases left to each individual parachain.
By enabling parachains within the Polkadot ecosystem to communicate and interact with each other, the Polkadot Relay Chain allows for greater specialisation of dApps and blockchain functions within it’s ecosystem, facilitating greater decentralization, efficiency and scalability.
Put simply, Polkadot acts as a ‘glue’ allowing multiple unique and specialized protocols to coexist, communicate and work together.
Consensus Model: Nominated Proof-of-Stake
Native Token: Polkadot Token (DOT)
dApp programming language: Varies based on the specific parachain.
Key aspects of Polkdatot include:
- Interoperability: Polkadot's primary goal is to enable seamless communication and interaction between different blockchains in the Polkadot ecosystem, fostering a more interconnected, specialized and efficient blockchain ecosystem.
- Relay Chain: The Relay Chain is the central chain of Polkadot and responsible for security, governance and consensus throughout the Polkadot ecosystem. All validators of Polkadot are staked on the Relay Chain in DOT and validate for the Relay Chain.
- Parachains: Independent blockchains connected to the Polkadot Relay Chain, with each parachain (or parathread) specialized towards specific applications, for example, smart contracts, oracles, gaming, decentralized storage etc. These chains rely on the Relay Chain for consensus and security.
- On-Chain Governance: Polkadot has integrated direct on-chain governance into its core feature set, with a multi-cameral governance system including direct referenda, delegated token voting, and direct on-chain upgrades which bypass the need for hard forks.
What is Creditcoin 3.0?
Creditcoin is a multichain real-world asset blockchain designed to to simplify integrations with real-world finance by enabling multi-chain contract coordination through Universal Smart Contracts.
Consensus Model: Nominated Proof-of-Stake
Native Token: Creditcoin (CTC)
dApp programming language: Solidity
What problem does each blockchain solve?
Before Ethereum, blockchain protocols has been restricted to peer-to-peer transactions, greatly limiting their possible use-cases.
Ethereum introduced the world’s first Turing-complete, decentralized, computation protocol, with its own programming language (solidity) to enabled greater blockchain functionality.
In other words, Ethereum invented smart contracts (self-executing, code-governed, peer-to-peer contracts) which have become the foundation for dApps as we know them today.
Today, Ethereum's dApps cover a wide range of global use-cases, including DeFi, NFTs, gaming and more.
While Ethereum continues to be both secure and decentralized, it’s one-size-fits-all approach makes it less scalable and more expensive than many other blockchains. This is because all of Ethereum's dApps and consensus functions must compete for the same computation power.
Polkdat aims to improve scalability and interoperability within the blockchain ecosystem by focusing its relay chain on security and consensus, whilst allowing individual dApps or protocols to function as part of their own independent parachain (or parathread).
This affords dApps and other L1s in the Polkadot ecosystem a greater degree of independence, flexibility, scalability and efficiency, when compared to Ethereum and other blockchain solutions.
Ethereum vs Polkadot: Side-by-Side Protocol Comparison
| Ethereum | Polkadot | Creditcoin 3.0 | |
|---|---|---|---|
| Native Token | Ether (ETH) | Polkadot (DOT) | Creditcoin (CTC) |
| Purpose | A general-purpose L1 blockchain for smart contracts in a decentralized environment. |
A multichain ‘meta-protocol’ designed to connect multiple different blockchains (known as parachains) through a shared security and consensus layer (the Relay Chain). |
A multichain real-world asset blockchain designed to simplify integrations with real-world finance by enabling multi-chain contract coordination through Universal Smart Contracts. |
| Consensus Mechanism |
Proof-of-Stake (PoS) | Nominated Proof-of-Stake (NPoS) |
Nominated Proof-of-Stake (NPoS) |
| Smart Contracts | Yes (EVM-compatible) | Variable (many parachains support smart contracts, the Relay Chain does not) |
Yes (EVM-compatible) |
| Tokenomics | ETH is the native utility token used to pay for all transaction fees within the Network, including transfers and smart contract operations, as well as network staking. |
DOT is Polkadot’s native token used for governance, staking, some transactions, parachain auctions, and parathread fees. |
CTC is the native utility token used to pay for all transaction fees within the Network, including transfers and smart contract operations, as well as network staking. |
Tokenomics Differences between Ethereum and Polkadot
In September 2022, Ethereum underwent a major shift, transitioning from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
Under PoS, the responsibility of securing and validating transactions falls on individuals known as validators. These validators participate by staking a minimum of 32 ETH tokens, essentially putting their skin in the game. This staking serves two crucial purposes:
- Incentivizes honest behavior: By locking up their ETH, validators have a vested interest in maintaining the network's integrity. Malicious activity would result in them losing their staked tokens.
- Secures the network: The more ETH staked in the system, the more difficult and costly it becomes to attack the network.
Instead of having a central authority, anyone can become a validator and participate in the consensus process. Currently, over 800,000 validators compete for the opportunity to propose and vote on new blocks. This ensures that no single entity has undue control over the network.
Validators who contribute honestly and diligently are rewarded with newly minted ETH. This system incentivizes participation and ensures that the network remains healthy and secure.
Polkadot's Nominated Proof-of-Stake (NPoS) offers a similar and yet streamlined approach to consensus, enhancing both efficiency and security.
Unlike traditional Proof-of-Stake, NPoS relies on nominators to elect a limited number of validators to the ‘active set’ who actively participate in validating transactions and securing the network.
This division of tasks boasts several benefits:
- Reduced Participation Burden: Only the elected validators actively participate, decreasing the overall energy consumption and computational resources needed to run the network.
- Increased Efficiency: With fewer validators directly involved, NPoS significantly increases transaction processing speed compared to traditional PoS systems.
- Enhanced Security: By requiring nominators to stake their tokens on validators, with slashing risks in case of dishonest behaviour, NPoS discourages malicious or carless staking activity.
Here's a breakdown of NPoS's key actors:
- Nominators: Stake their DOT tokens on validators they trust, essentially voting for them to participate in consensus.
- Validators: Elected based on the amount of staked DOT they hold and the trust they've garnered from nominators. They actively validate transactions and secure the network.
Verdict: Both Ethereum's Proof-of-Stake (PoS) and Polkadot's Nominated Proof-of-Stake (NPoS) offer robust consensus mechanisms for their respective blockchain networks.
However, they approach decentralization and efficiency differently, leading to distinct advantages and disadvantages.
Ethereum's Proof-of-Stake:
Pros:
- Tried and tested: Ethereum's PoS has been successfully running since September 2022, proving its reliability and stability.
- Highly decentralized: With no limit on the number of validators, anyone can participate, leading to a more distributed power structure.
- Simple and straightforward: The concept of staking and validation is relatively easy to understand, even for non-technical users. Despite this, staking itself is quite a complex process.
Cons:
- Centralization risks: Users with the most ETH have a disproportionate influence on the network, potentially leading to centralized control. The technical nature of staking increases this, encouraging the use of staking pools which further concentrate power away from token holders.
- Less efficient: With a large number of validators, achieving consensus can be slower and require more resources, impacting transaction processing speeds and costs.
Polkadot's Nominated Proof-of-Stake:
Pros:
- Reduced centralization risks: By separating the validator and nominator roles, NPoS mitigates the influence of large token holders, promoting a more equitable distribution of power.
- Improved efficiency: With a smaller set of validators, NPoS achieves faster consensus and lower resource consumption, enhancing transaction processing speed and scalability.
Cons:
- More complex: The dual role system of nominators and validators can be less intuitive for users compared to Ethereum's straightforward staking approach. In an already complex industry, simplicity can help drive user adoption and understanding.
- Less tested: While completely functional, NPoS’s added layers of code and complexity which could make it more vulnerable to exploits.
Ultimately, neither approach is necessarily the ‘best’. Ethereum's PoS offers a more simple and proven approach to consensus. However, if efficiency and scalability are more important, Polkadot's NPoS approach is certainly more elegant.
Revenue Model Between Ethereum and Polkadot
#1: Ethereum Revenue Model
Ethereum’s protocol revenue model revolves around transaction fees as well as block rewards. Currently, around 80% of stake earnings come from block rewards, with the remaining 20% composed of transaction fees.
- Transaction Fees: Users pay gas fees for transactions on the Ethereum network using ETH. Some of these fees are distributed to validators (post-PoS) based on their block rewards, with the rest being burned.
- DeFi Applications: DeFi protocols built on Ethereum generate revenue for the protocol through transaction fees, indirectly contributing to the network's long-term revenue and sustainability.
- Deflation: A portion of the protocol’s transaction fees are burned, adding deflationary pressure to the overall token supply. Deflationary pressure increases in times of network congestion.
Ultrasound Money shows that since the merge, there's more than 300,000+ ETH burnt so far—making it an deflationary asset. (This is as of 12th December 2023)
#2: Polkadot Revenue Model
Polkadot’s revenue model revolves around inter-chain transaction fees, as well as parachain auctions and block rewards.
- Transaction Fees: Users must DOT pay fees for transactions on the Relay Chain, as well as communicating between different parachains.
- Parachain Slot Auctions: Parachain projects bid for slots on the Relay Chain through DOT token auctions. This generates revenue for the network and rewards DOT token holders who participate in the auctions.
- Parathread Fees: Based on a similar concept to parachains, projects can ‘rent’ a limited amount of parachain processing capabilities using DOT.
Verdict: Both protocols rely on their wider ecosystem growth in order to generate sustainable revenue. The more demand there is to generate fees via dApps, parachains and other use-cases, the more value the protocol will capture as value.
Nevertheless, with Ethereum supporting a much larger dApp ecosystem, it also has a more significant revenue base.
Furthermore, Polkadot’s model leaves most transaction fee revenue to parachains. As most revenue is in dApps themselves, this means that parachains get to capture most of the value generation within their respective ecosystems, rather than the Polkadot relay chain itself.
Instead, DOT’s primary utility is for governance votes, staking, parachain auctions, and the limited number of transactions requiring cross-chain contract calls, effectively reducing Polkadot’s ability to capture revenue through the DOT token.
DOT’s limited functionality means the Polkadot relay chain itself only processes around 1% as many transactions as Ethereum (and generates less fees as result). On the other hand, if demand continues to grow for Polkadot-based applications, so will the fees generated by auctions.
Overall, Polkadot’s technical advantages in transaction fees and parachain independence make it attractive for dApps and developers, but it also hinders Polkadot’s ability to generate a similar level of protocol revenue to Ethereum.
Ethereum vs Polkadot: Pros and Cons as an Investor
It’s important to be aware of the relative strengths and weaknesses of each protocol before you make an investment.
In this section, we’ll provide you with a comparison of their relative technical strengths and weaknesses, as well as placing each protocol in the context of wider market conditions.
Ethereum
| Pros | Cons |
|---|---|
| Largest dApp Ecosystem: Over 2,800 dApps and $29.7b in contracts | High Transaction Costs: Expensive fees limit usability for small investors. |
| Potential ETF: Rumors suggest future ETF, boosting adoption. | Limited Interoperability: Fewer features compared to multi-chain protocols. |
| Ethereum L2s Proliferation: Scalable, EVM-compatible chains enhancing Ethereum. | Slow Development Progress: Scalability issues persist a decade post-launch. |
| Mainstream Awareness: Highly recognized in the crypto world. | L2 Revenue Cannibalisation: L2s divert revenue but are necessary for scalability. |
| First-Mover Advantage: Strong moat with extensive smart contract use. |
Polkadot
| Pros | Cons |
|---|---|
| Scalability: Superior efficiency and reduced dApp costs compared to Ethereum. | Smaller dApp Ecosystem: Significantly fewer dApps than Ethereum. |
| Technical Innovation: Features like Substrate architecture and on-chain governance. | Significant Competition: Faces challenges from many blockchain rivals. |
| Parachain Efficiency: Customisable for dApps, but real-world adoption is key. | Complexity: Technical intricacies may deter new users. |
| Accessible Staking: Easier for new investors compared to Ethereum. | Limited Protocol Revenue: DOT's utility may hinder value capture. |
| Interoperability: High composability and customisable blockchain subsystems. | Inflationary: Compared to ETH, DOT does not have an active burn mechanism in place. |
At the end of the day, each protocol has pros and cons from an investor’s perspective. Just remember that you should always carry out your own research when making investment decisions.
Nothing we say in this blog is financial advice.
We’ve provided an overview of market data to help you below 👇
Market Data Comparison between Ethereum and Polkadot
This market data was updated on 8th December 2023.
| Ethereum | Polkadot | Creditcoin 3.0 | |
|---|---|---|---|
| Market Cap | $269,725,851,167 | $7,523,797,210 | $61,595,908 |
| Market Cap Rank | #2 | #15 | #429 |
| Circulating Supply | 120.22M ETH | 1,253,443,786 DOT | 310,712,767 CTC |
| Max Supply | ∞ | 1,385,704,287 DOT | 599,999,997 CTC |
| Active dApps | 2,800+ | 200+ dApps, across 48 parachains |
0 |
| dApp TVL | $29.7b | $200m | $0 |
| Github Commits (YTD) | 17,785 | 16,317 | 1,189 |
| 7D Average Fees Generated |
$12m+ | $1,300+ (See tokenomics section for more context) |
<$1,000 |
| Transactions Processed p/d | 1.16M | 12.5k+ (Most transactions occur on parachains) |
6,100 |
| Daily Active Addresses | 447k | 8.9k (Most active addresses are on parachains e.g. Moonbeam has 20-50k on average) |
374 |
| Wallets with 0< balance | 100M+ | 1,177,369 | 541,365 |
| Average Transaction Fee ($) |
$5-15 | <$1 | <$1 |
| Transactions per Second (TPS) |
~12 TPS | ~1,000 TPS (per parachain) | ~1,000 TPS |
| Project Age | 2015 | 2017 | 2019 |
| Twitter Following | 3.1M | 1.4M | 73.9k |
| Coingecko Profiles | ETH | DOT | CTC |
Top 5 dApps And Protocols on Ethereum:
#1: Uniswap
Uniswap, launched in 2018, is the largest decentralized exchange on Ethereum, facilitating cryptocurrency token swaps. It uses an automated market maker (AMM) system instead of a traditional order book, allowing users to trade tokens directly from their wallets without intermediaries.
Uniswap also enables liquidity provision, where users can deposit tokens into pools to facilitate trading and earn fees.
Website: https://uniswap.org/
#2: Compound
Compound is an autonomous interest rate protocol on the Ethereum blockchain, primarily built for developers. It enables the creation of financial markets where users can lend and borrow various cryptocurrencies.
Compound's algorithmic system dynamically adjusts interest rates based on the supply and demand of each crypto asset.
Website: https://compound.finance
#3: Aave
Aave is an open-source, non-custodial liquidity protocol on the Ethereum blockchain, enabling users to earn interest on deposits and borrow assets with a variable or stable interest rate.
It allows for the creation of money markets, where users can lend and borrow cryptocurrencies.
Website: https://aave.com/
#4: MakerDAO
MakerDAO is a decentralized organization focused on enabling the creation of Dai, the world's first unbiased currency and a leading decentralized stablecoin. It operates on the Ethereum blockchain, utilizing a dual-token system involving Dai and MKR tokens.
Dai is a stablecoin pegged to the US dollar, backed by collateral, while MKR tokens are used for governance of the Maker Protocol. MakerDAO's aim is to bring stability to the cryptocurrency economy and develop an unbiased global financial system.
Website: https://makerdao.com/
#5: OpenSea
OpenSea, launched in 2017, is the world's first and largest marketplace for non-fungible tokens (NFTs) and crypto collectibles. It allows users to buy, sell, and discover unique digital items on various blockchains.
OpenSea supports a wide range of categories and offers tools for creators to launch new digital works and for developers to build integrated marketplaces for their digital items.
Website: https://opensea.io/
Top 5 dApps And Protocols on Polkadot:
#1: Astar Network
Astar Network is a prominent blockchain platform in Japan, known for supporting various smart contract environments including EVM, Substrate, WebAssembly (Wasm), and ink.
This multi-chain approach enables scalable, cross-layer, and cross-machine protocols. Astar stands out with its innovative Build2Earn mechanism.
Website: https://astar.network/
#2: Moonbeam
Moonbeam is a smart contract platform that facilitates cross-chain connected applications, combining full Ethereum compatibility with the features of Polkadot. Designed for developers, it simplifies the deployment of Solidity smart contracts without requiring significant changes.
Moonbeam also provides broad tool compatibility and built-in integrations for assets and services. This unique environment allows developers to easily port projects to the Polkadot ecosystem, leveraging both Ethereum's tools and Polkadot's scalability and cross-chain integrations.
Website: https://moonbeam.network
#3: Acala Network
Acala Network is a decentralized finance (DeFi) hub on the Polkadot blockchain. It operates as a parachain, meaning it is connected to and secured by the Polkadot Relay Chain. Acala's primary focus is on financial applications, and it provides a range of DeFi services.
This includes a decentralized exchange (DEX), liquid staking of the DOT token, and a multichain asset bridge.
Website: https://acala.network/
#4: Clover Finance
Clover Finance, now rebranded as CLV, is an Operating System parachain in the Polkadot ecosystem. It's a specialized Layer-1 chain based on Substrate, offering Ethereum Virtual Machine (EVM) compatibility and cross-chain interoperability.
CLV aims to provide a one-stop infrastructure platform for decentralized applications across chains, including a multi-chain wallet for everyday use, DeFi, the Metaverse, and gaming.
CLV also recently launched their own mobile app wallet that works like any other EVM-compatible wallets.
Website: https://clv.org/
#5: Kusama Blockchain
Kusama is a scalable network of specialized blockchains built using Substrate, sharing a codebase similar to Polkadot. Launched in 2019 by Gavin Wood, it serves as an experimental development environment where teams can innovate rapidly or prepare for deployment on Polkadot.
In case you missed it, Gavin is also the co-founder of Polkadot.
Known as a 'canary in the coal mine' for Polkadot, Kusama emphasizes risk-taking and fast-paced innovation. It features low economic barriers for launching custom blockchains and offers advanced technology, open governance, and a vibrant community.
Website: https://kusama.network/
It is important to note that this is just a tiny snapshot of the hundreds of dApp and protocols on both Ethereum and Polkadot.
Disclaimer: The Creditcoin team does not endorse the safety or security of using any of the above listed websites. The Creditcoin team is in not associated with or sponsored by any of the below listed websites. The listed results are for educational purposes only, drawn from search engine results and everyone must always do their own research.
There are many other promising projects in development and the space is constantly evolving. Always do your own research before investing in any dApp or protocol.