Is Cardano Independent from Bitcoin?

Handy Tips / 28.06.2021

Termed as Ethereum killer, Cardano is a proof-of-stake (PoS) blockchain platform that integrates pioneering technologies to offer uncompromised security and sustainability to decentralized applications, systems, and communities. 

Cardano claims that it’s the only blockchain project to be founded on the grounds of scientific peer-reviewed research and developed via evidence-based methods. The Cardano network is powered by ADA cryptocurrency, dubbed the only crypto employing a scientific philosophy and research-driven approach. 

Cardano’s founder Charles Hoskinson claims that cryptocurrencies, including Cardano, are becoming more independent of Bitcoin-the most popular and most prominent crypto by market cap. But is this really true or just a fallacy made by the founder and the community at large. Here’s an analysis. 

What is Cardano? 

Cardano describes itself as the most environmentally friendly and sustainable cryptocurrency owing to its proof-of-stake consensus mechanism, i.e., Ouroboros. The platform was founded in 2015 and launched in 2017 by Ethereum co-founder Charles Hoskinson. Cardano is currently the largest PoS blockchain network- key to its value proposition. 

Cardano has various similarities with Ethereum. After all, Cardano’s founder Charles Hoskinson was a co-founder of Ethereum until he fell out with Ethereum’s founder, Vitalik Buterin. Cardano is an improvement of Ethereum, providing the platform’s most attractive capability, i.e., smart contracts. Cardano is fully decentralized, energy-efficient, scalable, and facilitates fast transactions with relatively low transaction fees.   

Since its launch in 2017, Cardano’s has gained massive successes becoming the fifth-largest cryptocurrency by market capitalization as of 2021. The platform has gained widespread adoption in the crypto space as the discussions concerning the environmental impact of cryptocurrency and related technology take center stage.   

How is Cardano Different from Bitcoin and Ethereum? 

Cardano is quite different from Bitcoin and Ethereum. To begin with, ADA describes itself as a third-generation cryptocurrency. Unlike bitcoin, ADA is a first-generation cryptocurrency and Ethereum-a second-generation currency with smart contract functionality. 

Unlike Bitcoin and the current Ethereum, which are based on Proof of Work (PoW) technology, Cardano is passed on a Proof-of-Stake consensus referred to as Ouroboros. However, please note that Ethereum is set to transit from a PoW to PoS-a. The process is likely to roll out fully in late 2021 or early 2022.

Cardano’s Distinct Features 

Ouroboros enables Cardano’s blockchain to process transactions faster and save on energy by streamlining the number of nodes on the network by appointing a leader responsible for verifying and validating transactions from a collection of nodes. Instead of all nodes participating invalidating the transaction, a leader node is selected to verify transactions on the network.

In addition to Ouroboros, Cardano also adopts RINA (Recursive Internetworked Architecture) to enhance network scalability. Unlike Ethereum and Bitcoin, Cardano supports cross-chain transfers via side chains. This means it’s possible to conduct cross-chain transactions via Cardano.

Cardano uses a fraction of the energy used by both Bitcoin and Ethereum. While Ethereum uses energy equivalent to Bitcoin’s half energy consumption, it is still an enormous amount of energy equal to the total energy consumed by a small country such as Portugal. Cardano’s founder estimated that the blockchain network uses 6GWh annually, less than 0.01% of the 110.53 TWh used by the Bitcoin network. What’s more, Cardano is more scalable and faster than Bitcoin. 

Could Cardano be Independent of Bitcoin? 

There have been several claims that Cardano (ADA) is independent of bitcoin (BTC). In May 2021, Cardano’s founder Charles Hoskinson claimed that the crypto industry has decoupled from Bitcoin and was no longer dependent on the most prominent cryptocurrency by market value and cap.

Speaking on YouTube, Hoskinson acknowledges that the crypto market is usually primarily influenced by the bitcoin trend. However, this is no longer noticeable, especially when the crypto market witnessed a substantial counter-cyclic movement. 

According to Hoskinson, bitcoin dominance has dwindled by a whopping 43% following increased environmental concerns associated with Bitcoin’s energy-intensive Proof of Work consensus. Cryptocurrencies such as Cardano (ADA), Algorand (ALGO), Omega, and ETH2 are no longer dependent on bitcoin and will grow substantially in the coming years. 

Social Media Communities’ Stance

A recent statistical analysis published on the Cardano Reddit page(R/Cardano) also claimed that the Cardano (ADA) is the most independent Altcoins. The statistical analysis done on Microsoft Excel correlated BTC and ADA prices from January to June 2021 and found no definite statistical correlation. 

Each day had a different correlation, with some months ADA being independent of BTC. Nonetheless, the statistical analysis established an average of 0.49 correlation which is still described as an average dependency. 

Statistical Correlation Value States Otherwise 

According to a statistical analysis combining correlation value and statistical significance value, Cardano (ADA) is dependent on bitcoin (BTC). Significance value, commonly referred to as p-value, establishes whether a correlation between data sets occurs by chance or it’s attributed to a specific factor or cause. P-values less than 0.05 are usually considered “statistically significant,” meaning that the given effect has less than a 5% chance of occurring-can only occur under a particular phenomenon. 

Cardano (ADA) is dependent on bitcoin (BTC) price movements to put this in context. Cardano (ADA) is dependent on bitcoin (BTC) price movements to put this in context. In the said statistical analysis, it found the p-value to be p = 0.0000000013, meaning that the correlation between BTC and ADA is statistically significant, i.e., the values are dependent on one another. In summary, BTC and ADA were established to have a statistically considerable correlation value meaning that their relationship is dependent on each other.

Wrapping Up

Cardano is quite different from Bitcoin regarding consensus mechanism, energy consumption, scalability, and transaction processing time. In recent times, there has been increased speculation by the Cardano community and founder claiming that ADA is independent of BTC. But statistical analysis using p-value and the correlation value indicates that Cardano is dependent on BTC price movements, just like all other altcoins, including Ethereum.

Adam is an outgoing young lad who likes adventures and discovering new things. Despite his boring life, he loves writing about cryptocurrencies and exploring what blockchain technology can do for the coming digital world where all adventures will be virtual.