Does Investing in Stocks Affect Your Credit Score?

Does Investing in Stocks Affect Your Credit Score?

While there are many things that determine your credit score — including your payment history, credit utilization, and the average age of your credit accounts — investing in stocks is not one of them.

That being said, while investing or opening an investment account does not directly affect your credit score, it’s possible for it to have an indirect effect. For instance, if you open a margin investment account that comes with a loan or line of credit, that debt may show up on your credit score. Additionally, your investment performance may have an impact on your overall financial picture, which can affect your ability to pay off your debts.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

How Does Trading Stocks Affect Your Credit Score?

There are many factors to consider before investing in stocks, like how to choose good investments or making sure that your overall finances are sound. The good news is that in most cases, you won’t need to worry about how trading stocks affects your credit score.

That’s because the amount of money you have in investment accounts (and how well you do at investing in stocks) does not usually show up on your credit report or impact your credit score. As such, investing isn’t a path toward establishing credit.

Cash in on up to $250–and 3% cash back for 365 days.¹

Apply and get approved for the SoFi Credit Card. Then open a bank account with qualifying direct deposits. Some things are just better together.


Recommended: Tips for Using a Credit Card Responsibly

What Happens to Your Credit Score if You Open a Brokerage Account?

If you’re looking to get started with investing in stocks by working with a broker, know that brokerage accounts are not typically reported to the major credit bureaus. This means that opening a brokerage account generally should not have any overall impact on your credit score.

One possible exception is if you open a margin account. Margin accounts allow you to borrow money and buy stocks for more than the actual cash you have in your account. Because some brokerages consider margin accounts as loans, there may be a credit check involved. This could have a small impact on your credit score, but it usually goes away after a few months.

How Does Opening an Investment Account Affect Your Credit Score?

Most investment accounts do not show up on your credit report. So, opening an investment account will generally not affect your credit score. Whether you are buying stocks with a credit card or investing by depositing cash into your account, your balance and investment performance will not impact your credit score.

That being said, opening an investment account and actively investing in stocks or other investments can indirectly affect your credit score. If you end up losing money in the stock market, it might negatively impact your ability to meet your other debt obligations. Should you have money tied up in your investment account and end up leaning more on your credit cards to cover costs or missing payments, that can have a negative impact on your credit score and hamper your efforts at building credit.

Recommended: When Are Credit Card Payments Due?

How Making Investments May Affect Your Credit Score

There are many different ways to invest your money, and many different types of investments. But nearly all investment accounts do not show up in your credit score. So regardless of what type of investing you prefer — whether stocks, bonds, mutual funds, precious metals, or something else — your investing activity should not impact your credit score.

The Takeaway

Investing in stocks is one popular way that some people build wealth. While there are pros and cons to investing in stocks, it’s important to realize that investing in stocks — or most types of investments, for that matter — does not show up on your credit report and does not affect your score.

If you’re looking to build credit, one option might be applying for a cash-back rewards credit card like the SoFi credit card. If you’re approved for the SoFi credit card, you can earn unlimited cash-back rewards. You can use those rewards as a statement credit, invest them in fractional shares, or put them toward other financial goals you might have, like paying down eligible SoFi debt.

For a limited time, new credit card holders† who also sign up for a SoFi Checking and Savings with direct deposit can start earning 3% cash back rewards on all eligible credit card purchases for 365 days*. Offer ends 12/31/23.

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

Can I open a brokerage account with a bad credit score?

Yes, you can open a brokerage account with a bad credit score. Generally speaking, your broker will not issue a credit check to open a brokerage account. Additionally, in most cases, your brokerage account will not show up on your credit report. One exception may be if you apply for a margin account. Margin accounts can be considered loans, so your broker may not approve you for one if you have bad credit.

Can I open an investment account with a bad credit score?

There generally is not a credit check to open an investment account, so it is usually possible to open an investment account even if you have a bad credit score. Further, most investment accounts will not show up on your credit report, help you build credit, or impact your credit score.

Do stocks show up on your credit report?

In most cases, stocks (as well as bonds, mutual funds, and other investments) do not show up on your credit report. Your account information, balance, and investment performance do not usually impact your credit score.


Photo credit: iStock/tdub303

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
The SoFi Credit Card is issued by The Bank of Missouri (TBOM) (“Issuer”) pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
1See Rewards Details at SoFi.com/card/rewards.
SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back rewards when redeemed for a statement credit.1
Members earn 2 rewards points for every dollar spent on eligible purchases. If you elect to redeem points for cash deposited into your SoFi Checking or Savings account, SoFi Money® account, fractional shares or cryptocurrency in your SoFi Active Invest account, or as a payment to your SoFi Personal, Private Student, or Student Loan Refinance, your points will redeem at a rate of 1 cent per every point. If you elect to redeem points as a statement credit to your SoFi Credit Card account, your points will redeem at a rate of 0.5 cents per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

†SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS PROSPECTIVELY BASED ON MARKET CONDITIONS AND BORROWER ELIGIBILITY. Your eligibility for a SoFi Credit Card Account or a subsequently offered product or service is subject to the final determination by The Bank of Missouri (“TBOM”) (“Issuer”), as issuer, pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated. Please allow up to 30 days from the date of submission to process your application. The card offer referenced in this communication is only available to individuals who are at least 18 years of age (or of legal age in your state of residence), and who reside in the United States.

*You will need to maintain a qualifying Direct Deposit every month with SoFi Checking and Savings in order to continue to receive this promotional cash back rate. Qualifying Direct Deposits are defined as deposits from enrolled member’s employer, payroll, or benefits provider via ACH deposit. Deposits that are not from an employer (such as check deposits; P2P transfers such as from PayPal or Venmo, etc.; merchant transactions such as from PayPal, Stripe, Square, etc.; and bank ACH transfers not from employers) do not qualify for this promotion. A maximum of 36,000 rewards points can be earned from this limited-time offer. After the promotional period ends or once you have earned the maximum points offered by this promotion, your cash back earning rate will revert back to 2%. 36,000 rewards points are worth $360 when redeemed into SoFi Checking and Savings, SoFi Money, SoFi Invest, Crypto, SoFi Personal Loan, SoFi Private Student Loan or Student Loan Refinance and are worth $180 when redeemed as a SoFi Credit Card statement credit.

Promotion Period: The Program will be available from 10/1/22 12:01 AM ET to 12/31/23 11:59PM ET

Eligible Participants: All new members who apply and get approved for the SoFi Credit Card, open a SoFi Checking and Savings account, and set up Direct Deposit transactions (“Direct Deposit”) into their SoFi Checking and Savings account during the promotion period are eligible. All existing SoFi Credit Card members who set up Direct Deposit into a SoFi Checking & Savings account during the promotion period are eligible. All existing SoFi members who have already enrolled in Direct Deposit into a SoFi Checking & Savings account prior to the promotion period, and who apply and get approved for a SoFi Credit Card during the promotion period are eligible. Existing SoFi members who already have the SoFi Credit Card and previously set up Direct Deposit through SoFi Money or SoFi Checking & Savings are not eligible for this promotion.

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Everything You Need to Know About Taxes on Investment Income

Everything You Need to Know About Taxes on Investment Income

There are several ways investment income is taxed: You may be familiar with capital gains taxes — the taxes imposed when one sells an asset that has gained value — but it’s important to also understand the tax implications of dividends, interest, retirement account withdrawals, and more.

In some cases, for certain types of accounts, taxes are deferred until the money is withdrawn, but in general tax rules apply to most investments in one way or another.

Being well aware of all the tax liabilities your investments hold can minimize headaches and help you avoid a surprise bill from the IRS. Being tax savvy can also help you plan ahead for different income streams in retirement, or for your estate.

Types of Investment Income Tax

There are several types of investment income that can be taxed. These include:

•   Dividends

•   Capital Gains

•   Interest Income

•   Net Investment Income Tax (NIIT)

Taking a deeper look at each category can help you assess whether — and what — you may owe.

Tax on Dividends

Dividends are distributions that are sometimes paid to investors who hold a certain type of dividend-paying stock. Dividends are generally paid in cash, out of profits and earnings from a corporation.

•   Most dividends are considered ordinary (or non-qualified) dividends by default, and these payouts are taxed at the investor’s income tax rate.

•   Others, called qualified dividends because they meet certain IRS criteria, are typically taxed at a lower capital gains rate (more on that in the next section).

Generally, an investor should expect to receive form 1099-DIV from the corporation that paid them dividends, if the dividends amounted to more than $10 in a given tax year.

More About Capital Gains Tax

Capital gains are the profit an investor sees when an investment they hold gains value when they sell it. Capital gains taxes are the taxes levied on the net gain between purchase price and sell price.

For example, if you buy 100 shares of stock at $10 ($1,000 total) and the stock increases to $12 ($1,200), if you sell the stock and realize the $200 gain, you would owe taxes on that stock’s gain.

There are two types of capital gains taxes: Long-term capital gains and short-term capital gains. Short-term capital gains apply to investments held less than a year, and are taxed as ordinary income; long-term capital gains are held for longer than a year and are taxed at the capital-gains rate.

For 2022 and 2023, the capital gains tax rates are typically no higher than 15% for most individuals. Some individuals may qualify for a 0% tax rate on capital gain — but only if their taxable income is $83,350 or less (married filing jointly), or $41,675 or less for single filers and those who are married filing separately.

The opposite of capital gains are capital losses — when an asset loses value between purchase and sale. Sometimes, investors use losses as a way to offset tax on capital gains, a strategy known as tax-loss harvesting.

Recommended: Is Automated Tax-Loss Harvesting a Good Idea?

Capital losses can also be carried forward to future years, which is another strategy that can help lower an overall capital gains tax.

Capital gains and capital losses only become taxable once an investor has actually sold an asset. Until you actually trigger a sale, any movement in your portfolio is called unrealized gains and losses. Seeing unrealized gains in your portfolio may lead you to question when the right time is to sell, and what tax implications that sale might have. Talking through scenarios with a tax advisor may help spotlight potential avenues to mitigate tax burdens.

Taxable Interest Income

Interest income on investments is taxable at an investor’s ordinary income level. This may be money generated as interest in brokerage accounts, or interest from assets such as CDs, bonds, Treasuries, savings accounts.

One exception are investments in municipal (muni) bonds, which are exempted from federal taxes and may be exempt from state taxes if they are issued within the state you reside.

Interest income (including interest from your bank accounts) is reported on form 1099-INT from the IRS.

Tax-exempt accounts, such as a Roth IRA or 529 plan, and tax-deferred accounts, such as a 401(k) or traditional IRA, are not subject to interest taxes.

Net Investment Income Tax (NIIT)

The Net Investment Income Tax (NIIT), now more commonly known as the Medicare tax, is a 3.8% flat tax rate on investment income for taxpayers whose adjusted gross income (AGI) is above a certain level — $200,000 for single filers; $250,000 for filers filing jointly. Per the IRS, this tax applies to investment income including, but not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, and income from businesses involved in trading of financial instruments or commodities.

For taxpayers with an AGI above the required thresholds, the tax is paid on the lesser of the taxpayer’s net investment income or the amount the taxpayer’s AGI exceeds the AGI threshold.

For example, if a taxpayer makes $150,000 in wages and earns $100,000 in investment income, including income from rental properties, their AGI would be $250,000. This is $50,000 above the threshold, which means they would owe NIIT on $50,000. To calculate the exact amount the taxpayer would owe, one would take 3.8% of $50,000, or $1,900.

Tax-Efficient Investing

One way to mitigate the effects of investment income is to create a set of tax efficient investing strategies. These are strategies that can minimize the tax hit that you may experience from investments and allow you to grow your wealth. These strategies can include:

•   Diversifying investments to include investments in both tax-deferred and tax-exempt accounts. An example of a tax-deferred account is a 401(k); an example of a tax-exempt account is a Roth IRA. Investing in both these vehicles may be a strategy for long-term growth as well as a way to ensure that you have taxable and non-taxable income in retirement.

   Remember that accounts like traditional, SEP, SIMPLE IRAs, as well as 401(k) plans and some other employer-sponsored accounts, are tax-deferred — meaning that you don’t pay taxes on your contributions the year you make them, but you almost always owe taxes whenever you withdraw these funds.

•   Exploring tax-efficient investments. Some examples are municipal bonds, exchange-traded funds (ETFs), Treasury bonds, and stocks that don’t pay dividends.

•   Considering tax implications of investment decisions. When selling assets, it can be helpful to keep tax in mind. Some investors may choose to work with a tax professional to help offset taxes in the case of major capital gains or to assess different strategies that may have a lower tax hit.

The Takeaway

Investment gains, interest, dividends — basically any money you make from securities you sell — can be subject to tax. But the tax rules for different types of investment income vary, and you also need to consider the type of account the investments are in.

Underreporting or ignoring investment income can lead to tax headaches and may result in you underpaying your tax bill. That’s why it’s a good idea to keep track of your investment income, and be mindful of any profits, dividends, and interest that may need to be reported even if you didn’t sell any assets over the course of the year.

Some investors may find it helpful to work with a tax professional, who can help them see the full scope of their liabilities and help them become aware of potential investment strategies that could help them minimize their tax burden, especially in retirement. A tax advisor will also be aware of any specific state tax rules regarding investment taxes.

If you’re ready to set up your own portfolio, opening an Active Invest account with SoFi Invest makes the process secure and hassle free. You can buy and sell stocks, exchange-traded funds (ETFs), IPO shares, and more. Even better, SoFi members have access to complimentary financial advice from professionals who can help answer their questions.

Invest with as little as $5 with a SoFi Active Investing account.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Promotional Certificate of Deposit (CD): How It Works

Understanding Promotional Certificate of Deposit (CD) Rates

There’s a good chance that you’re familiar with certificates of deposit, or CDs, a financial product that typically pays a fixed interest rate if you keep your funds on deposit for a specific period of time. Sometimes, though, you may encounter an offer for a promotional CD, or bonus CD. This is a type of savings account offered by a bank or credit union for a short time, usually with a higher interest rate, to entice new deposits.

As with standard certificates of deposit, interest is earned on the funds that the account holder agrees to invest. This interest accrues until the CD matures, or reaches its maturity date, which is usually in several months or a few years. Because CDs are insured up to $250,000, they can offer a secure way to grow one’s money.

Promotional CDs can sweeten the deal by offering a higher-than-normal interest rate. That said, they may also require a higher initial deposit or a longer term in order to snag that loftier return.

Is a promotional or bonus CD right for you? Read on to learn:

•   What is a promotional certificate of deposit?

•   What are the pros and cons of a promotional CD?

•   When do promotional CDs make sense?

•   Are bonus CDs worth it?

What Is a Promotional CD?

A promotional CD is a timed deposit account, similar to a regular CD, but offered with more advantageous terms, such a higher rate. However, there’s usually a requirement or condition to nab that rate, such as making a larger deposit, keeping the funds on deposit longer, or already being a client of the bank.

Banks and credit unions offer these accounts to attract new investors and build capital, which they can then invest at a higher rate elsewhere. Just like regular CDs, promotional CDs usually earn interest on the deposited amount at a set rate until maturity. Most CD accounts are insured by the FDIC or NCUA (Federal Deposit Insurance Corporation or the National Credit Union Administration), depending on whether the money is on deposit at a bank or credit union.

Because there are a wide variety of CDs — including jumbo CDs and brokered CDs, and more — it’s wise to explore the exact terms of the CD you’re interested in, including interest rates, fees, and other stipulations.

How Does a Promotional CD Rate Work?

As noted above, CD promotional rates can be used to attract new investors and to build capital that they can then invest elsewhere at a higher interest rate. Promotional CDs will probably have better rates than a regular savings or CD account, but they may also require a higher initial deposit (perhaps closer to that of a jumbo CD) or longer term.

Like any CD these are low-risk investments, so generally the returns will be lower than other investments, like stocks. While bonds are also generally lower-risk vehicles, and bonds can seem similar to CDs in that they pay a fixed rate, the typical rate on a CD is often lower than a bond.

At maturity, promotional CDs are often rolled over into another CD that pays a lower interest rate, or they can be cashed out. Some banks might offer a higher rollover rate to retain the investment. The financial institution will generally charge a fee if an account holder withdraws the funds before the maturity date (there are no-penalty CDs, but they tend to pay a lower interest rate).

Recommended: What Is a Variable Rate CD?

Example of a Promotional CD Rate

Let’s say an investor wants to set up a certificate of deposit investment plan. They invest $5,000 in a CD for five years. A bank that offers a five-year promotional CD with a competitive 4% annual percentage yield (APY) would provide earnings of around $1,083. A regular savings account with a lower rate of 3.5% would earn about $938 with the same $5,000 deposit, or almost $150 less.

Ready for a Better Banking Experience?

Open a SoFi Checking and Savings Account and start earning up to 3.75% APY on your cash!


When to Consider Opening a Promotional CD?

A promotional CD makes sense when a bank or credit union is offering a better interest rate than a regular CD or savings account, you have the required amount to invest, and you don’t need the funds for the length of the CD term. While it’s impossible to say for sure which investments are the safest, if you’re worried about the higher risk associated with investing in assets like stocks or bonds, a promotional CD is a reasonably safe investment.

For example, CDs are sometimes used as college savings accounts or when parents are thinking about how to create an investment plan for a child.

How to Get a Promotional (Bonus) Rate CD

If you’re in the market for a promotional or bonus rate CD, follow these steps:

•   Do a bit of research to see what may be offered. Often, the best or only deal is what your bank may offer you.

•   Read the fine print. Make sure you qualify for the account and fully understand the term, the rate, and penalties for early withdrawal, among other features.

•   Apply for the CD when you are ready to invest, and set up funding to transfer money into your new CD account.

When a Promotional CD Does Not Make Sense

Now that you know how certificate of deposit promotions work, consider whether it’s really the right move for you. A promotional CD does not make sense if you may need the funds before the maturity date of the CD. The bank or credit union will likely charge a fee if you withdraw your funds early. In some cases, you might want to consider a no-penalty certificate of deposit.

Also, CDs do not keep up with inflation, so once taxes are paid on the interest earned, there may not be much of a return on the investment. If you want to explore other ways to earn interest, you might consider high-yield savings or fixed-income investment.

The Pros of Promotional CD Rates

The main advantages of promotional CDs are that they are safe and predictable.

•   Promotional CDs, like regular CDs, are likely a safe investment with a guaranteed rate of return.

•   Funds are typically insured by the FDIC up to $250,000.

•   The interest rate is usually fixed for the life of the CD, which helps to predict income.

The Cons of Promotional CD Rates

The main disadvantages of promotional CDs are that they do not offer high returns because they are low-risk.

•   The promotional rate is generally only offered for shorter maturity terms, and the rollover option is often to a standard CD at a lower rate (not the promotional rate).

•   Promotional CDs often require a larger initial deposit.

•   Promotional CDs may demand a longer term.

•   These financial products may only be available to current clients of a specific financial institution.

Promotional CD Rates vs Regular CD Rates

Promotional CD rates pay depositors a premium for parking their funds into a particular financial institution. The exact APY offered will depend on the bank, the length of the term, and the amount deposited. Most promotional CDs are shorter-term: e.g. about a year or less. Rates as of January 27, 2023 might be as high as 5.5% (the higher rates are likely to be offered by an online bank vs. a traditional bank or at a credit union).

Rates ranged from about 4.25% at CapitalOne, 0.02% at Chase, and 0.03% at Bank of America for CDs of a year or two in length with a deposit of less than $10,000.

Are Promotional CD Rates Worth It?

Do your research and think seriously about financial security as you consider a certificate of deposit promotion. A couple of points to recognize:

•   When interest rates are down, investing in the stock market using an IRA or 401(k) may make more sense than a CD in terms of helping your money grow, though investing carries risk.

•   Promotional CDs are often offered by banks with low interest rates overall, and what one bank considers a competitive rate might be much lower than other banks’ standard rates. In other words, if a financial institution is offering an additional 0.05% for opening a new CD, but their base APY is very low, it’s likely not the best deal for you.

The Takeaway

For risk-averse investors who want to invest a sum of money safely and know exactly what return they can expect, a promotional CD can be a good option. It’s a way to take advantage of temporary favorable interest rates offered by a bank or credit union that can yield a higher return than a simple savings account.

That said, there are also some savings accounts that offer higher rates and could be the right place to stash your cash. When you open an online bank account with SoFi, you can qualify for a competitive APY when you set up direct deposit. In addition, these innovative, all-in-one accounts offer all the convenience of spending and saving in one place with no minimum balance requirement or account fees.

Better banking is here with up to 3.75% APY on SoFi Checking and Savings.

FAQ

Can a certificate of deposit be discounted?

CDs are not sold at a discount, unlike other short-term money market instruments. CDs pay interest on the money deposited usually on an annual basis. For CDs with a maturity of less than one year, interest is paid at maturity, and taxes are due on the earnings each year. However, for investors who don’t need to receive interest payments each year, a zero-coupon CD provides a return by being sold for their face value at maturity, which is higher than the initial investment.

What is the typical interest rate for a certificate of deposit?

A typical interest rate for a CD could range from 0.03% to 5+% for CDs with a one-to-five-year term and deposit of less than $10,000. It depends on the bank and the terms. CD rate promotions typically add to these rates.

What is the typical minimum balance for a certificate of deposit?

A typical minimum balance for a CD ranges from $500 to $5,000 or more, depending on the CD and the bank. Jumbo CDs typically require a $50,000 or higher deposit. Some banks offer CDs with no minimum balance requirement.


Photo credit: iStock/Ridofranz

SoFi members with direct deposit can earn up to 3.75% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 2.50% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 12/16/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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Is Mining Cryptocurrency Worth It in 2021?

Is Crypto Mining Still Profitable in 2023?

Crypto mining is still profitable, but it’s potentially not as profitable as it was in years past. That’s true for a number of reasons, including the fact that for most of 2022 and into early 2023, crypto values were down way off their peaks.

Cryptocurrencies generally still have value, but calculating miner profitability can be a bit trickier than before, given the expense of computer hardware and software, as well as the energy it takes to keep that mining equipment running.

As the oldest and largest crypto, Bitcoin uses a proof-of-work consensus mechanism, and as such it is one of the main sources of crypto mining. Before deciding whether Bitcoin mining is worth it, and crypto mining in general, it’s important to know how it works and what the pros and cons are.

Why Bitcoin Mining Exists

Mining Bitcoin isn’t just the creation of Bitcoin (BTC). It’s also the decentralized global system by which miners validate and secure all Bitcoin transactions — and earn Bitcoin themselves.

It goes back to the blockchain technology that Bitcoin and other cryptocurrencies are built on. To run these networks, miners rely on powerful computer systems — or in some cases cloud-based technology — to solve complex mathematical puzzles and validate blocks of digital transactions.

This system is known as proof-of-work (PoW). With Bitcoin and other PoW systems, every transaction gets recorded in a transparent, immutable, public ledger known as the blockchain. The miner/s who solved it get rewarded with new Bitcoin.

What Is Bitcoin Halving?

It takes about 10 minutes for miners to confirm a 1MB block of transactions and earn new Bitcoin. But remember mining is intensely competitive, especially because the reward is halved every 210,000 blocks and now stands at 6.25 BTC.

As more Bitcoins are mined and the supply of new Bitcoins drops, the amount of Bitcoins released with every new block diminishes over time. This is known as Bitcoin halving, and generally, the value of Bitcoin increases after periodic Bitcoin halving.

So, to sum it all up, mining serves the purpose of validating a crypto network, and generating rewards for network participants, sometimes called validators or miners.

How Much Does a Miner Earn?

As of January 2023, a Bitcoin miner that successfully validates a new block on Bitcoin’s blockchain will earn 6.25 BTC. That reward will be reduced, however, during the next halvening.

And remember, Bitcoin is a deflationary cryptocurrency — so fewer BTC are produced every year, until the total amount of 21 million BTC is mined. If miners are working in teams or in pools, however, that reward is split up between them, too.

Hurdles to Mining BTC

While Bitcoin mining may seem lucrative, there are some caveats. For instance, to mine crypto effectively and efficiently, specialized machines built and tuned specifically to mine cryptocurrencies are often required. It also requires space — and a great deal of energy — to house and cool these powerful machines that operate around the clock.

There’s also competition to consider: The mining market is dominated by large companies who secure large warehouse facilities to house their army of ASIC mining rigs. Some of these companies might run mining pools that smaller miners can contribute to in order to get a piece of some block rewards in exchange for a small fee.

This is all to say that today, mining Bitcoin as an individual is rarely profitable unless someone has access to extra low-cost electricity and affordable equipment.

Bitcoin Mining Advantages and Disadvantages

Here are some positive and negative aspects of mining crypto.

Advantages

•   Proven track-record. Proof-of-work (PoW) consensus algorithms, which are the basis for crypto mining, have been around for many years. During that time, the Bitcoin network hasn’t seen a significant security problem.

   Many in the industry believe this is a result of Bitcoin’s significant hash rate, which refers to the amount of computing and process power being contributed to the network through mining.

   In the past, hackers have been able to destabilize smaller PoW networks, although the same can be said for smaller proof-of-stake (PoS) networks.

•   Cryptographic security. When trusting a network with large sums of money, PoW might be the best bet. It’s difficult to attack a PoW blockchain, so much so that would-be hackers are often content to become honest miners instead.

Disadvantages

•   Energy usage. Bitcoin mining uses a lot of electricity. Critics point to this as the main flaw of PoW. It’s possible that the Bitcoin network uses as much energy as an entire small country. Although Bitcoin’s overall energy usage is decreasing and much of it now comes from sustainable sources, this is still a primary concern.

•   Barriers to entry. PoW mining becomes more difficult with time, making it harder for the average person to get involved. A major principle of a decentralized PoW network is to distribute tasks as well as profits among many users. But as mining becomes more complex and difficult, a handful of large companies — which can afford to build warehouses full of mining machines — dominate the mining sphere.

Crypto Mining Advantages

Crypto Mining Disadvantages

Proven track record High energy usage
Cryptographic security Greater barrier to entry
Difficult to attack Gets more difficult over time

The Risks of Crypto Mining

While crypto mining can be profitable in some instances, it does have its risks and downsides. Here’s a brief rundown.

Environmental Risks:

As mentioned, crypto mining is resource-intensive. Running mining rigs eats up a lot of electricity, which, in turn, generates environmental pollution.

Security Risks:

Malware and other security risks exist in the mining sphere, too. For instance, it’s possible that bad actors could use techniques (like phishing) to access someone’s computer, and then load mining codes and programs onto it without them knowing. As such, the victim could be sharing their computing resources and electricity mining with a hacker without even realizing it.

Regulatory Risks:

Regulation has yet to make it to the crypto space, but the federal government is working on it, and anyone involved in crypto can probably expect new rules and regulations to be announced within a few years. Those new rules and regulations will likely affect miners, too, so that’s another thing to keep in mind.

Investment Risk:

Crypto mining requires some upfront investment. You’ll need to buy a “rig,” first and foremost, and stocking up on computer power isn’t always cheap. But, as with any investment, there are risks in doing so. Mining may not be as profitable in the future, meaning your investment may not earn you the types of returns you were hoping for.

Or, if new regulations make mining illegal (though there’s no indication that will happen), investing in mining equipment may have all been a sunk cost.

Bitcoin Mining Pools

Due to the high cost and rising difficulty of mining Bitcoin, most miners today use something called a mining pool, as mentioned previously. Participating in mining pools is considered by many to be the only way for smaller miners to make any profit today, and even then it can be difficult to recoup the costs of equipment and electricity.

Within a mining pool, individual miners pool their resources together with other miners, improving their chances of mining a block and earning the Bitcoin rewards. When a block gets mined, the rewards are then split up among the different miners in proportion to the amount of computing power (known as hashing power) they contributed.

Mining pool owners typically charge mining fees for maintaining and participating in the pool. There are several different pools to choose from, each with their own structure.

Further, there are also Bitcoin cloud mining opportunities out there, which effectively allow miners to use computing resources over the internet. Miners using this strategy are renting others’ equipment, which incurs more costs.

Factors to Consider When Choosing a Mining Pool

After securing the Bitcoin mining equipment and electricity required for mining, a small miner will need to find a suitable mining pool. There are a few important factors to consider:

•   Fees: Most, but not all, Bitcoin mining pools charge fees. The fees are taken from the reward payout and can be as high as 4%.

•   Pool size: The larger the pool, the more frequent the potential payout, as more hashing power equals more blocks being found. However, this also means that the payouts are smaller, since rewards are shared between more people. On the flip side, smaller pools pay out less frequently, but in larger amounts.

•   Security and reliability: Miners might want to find a mining pool that they can trust won’t steal users’ funds or get hacked. Joining established pools with long histories may help to reduce these risks.

•   Required equipment investment: You’ll need to bring some power to the pool, too. And it’s becoming increasingly expensive to mine. When Bitcoin was first created, the computer power required for Bitcoin mining was enough for the computer-processing unit (CPU) of an average laptop computer to handle. But over time, the calculations have become more complex. Today, mining can mostly only be accomplished with advanced Application Specific Integrated Circuit (ASIC) machines, created specifically for mining Bitcoin.

And yet the hardware needs of Bitcoin mining is constantly evolving, as older machines become obsolete. An ASIC that was powerful enough to be profitable six months ago might not be able to produce enough coins to match the cost of electricity needed to run that same ASIC today. When this happens, miners must acquire new, more advanced hardware.

If you plan to try Bitcoin mining on your own, here are some things to consider when purchasing equipment:

•   Equipment cost

•   Electricity cost

•   The time it will take to recoup equipment costs

•   How BTC price fluctuations might impact profitability

•   The frequency with which you will need to buy newer, more powerful machines and sell old ones

Up to $100 in bitcoin2 – just for you.

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How Long Does it Take to Mine 1 Bitcoin in 2023?

There’s no correct answer here: The amount of time it takes to mine one whole bitcoin varies, and depends largely on the amount of hashing power a miner contributes.

In general, the more hashing power, the faster a block will be solved, resulting in the miner reaping the block reward in the form of newly minted bitcoins. Mining difficulty is another important variable. The lower the difficulty, the greater the odds of finding a new block.

When prices rise, more people are generally motivated to mine crypto. Then, as the Bitcoin hash rate increases due to more miners coming online, the difficulty adjustment (which happens every two weeks) tends to increase.

When prices fall, the opposite tends to happen, as the costs of Bitcoin mining equipment and electricity rise in relation to the value of the coins being mined. As hashing power comes offline, the difficulty tends to adjust downward.

How Many Bitcoins Will Be Mined in 2023?

There are about 900 new Bitcoins being mined every day. Assuming that rate held up during the entirety of 2022, then about 328,500 Bitcoin would’ve been mined in total. That should hold true during 2023, too. Roughly speaking, the amount of Bitcoin remaining to be mined totals around 2 million.

The interesting thing to note is that more people mining Bitcoin does not lead to an increase in the number of coins being mined. The block reward is currently set at 6.25 (this will remain true until the next Bitcoin halving), and one block gets mined roughly every 10 minutes. Increased competition for blocks leads to a higher hash rate, but the number of new coins being minted remains the same.

Alternatives to Mining Bitcoin

For those who choose to undertake the cumbersome task of mining crypto, the best cryptocurrency to mine might be the one with the lowest difficulty and highest price. But it’s critical to remember that these dynamics are in a constant state of flux, so the best cryptocurrency to mine today might not be the best one to mine tomorrow.

Historically, the only time altcoin miners have made significant profits has been when they were mining lesser-known, cheaper coins in the weeks and months before a large increase in prices, or an “alt season.” This has happened twice so far — once in 2017 and again in late 2020/early 2021.

Is It Worth Mining Ethereum In 2023?

Ethereum is the crypto market’s second-largest player. But unfortunately for miners, mining is no longer possible on the Ethereum network.

That’s because the “Ethereum 2.0” upgrade has gone into effect, which changed the consensus mechanism for Ethereum from proof-of-work to proof-of-stake. As such, the network no longer utilizes mining.

Only those who hold large quantities of ETH will be able to stake their tokens and become “validators.” Validators will have a chance at winning the next block rewards, with the highest odds going to those with the greatest amount of ETH staked. You can do more research about crypto mining vs. staking to learn more.

The Takeaway

Crypto mining is still profitable in 2023, however, it’s not as profitable as it once was, given that crypto prices have fallen from their peaks, and that mining operations have become more expensive to run and maintain. That’s not to say that prospective miners won’t make a profit, but there are more things to consider than in years past.

With that in mind, mining is a complex operation that carries considerable costs and risks. Most people interested in crypto mining may find it more worthwhile to join a mining pool than to try and go it alone.

But Bitcoin mining is not the only way for an investor to grow their crypto holdings. You can also buy and sell crypto using the SoFi app. It’s streamlined and secure and you can view all your holdings on a single dashboard.

Trade crypto and get up to $100 in bitcoin! (Offer is available through 12/31/23; terms apply.)

FAQ

Is Bitcon mining profitable?

Bitcoin mining can be profitable, but there are many things prospective miners need to take into consideration. Given lower crypto prices and increased costs for equipment and resources, it may not be profitable for everyone.

What is the average profit margin for mining crypto?

It’s difficult, if not impossible to say what the average profit margin for mining crypto is without knowing a miner’s costs for electricity, mining equipment, and more. Those taking part in a mining pool, too, would have different costs to consider as well.

What risks are associated with mining crypto?

Some of the main risks associated with crypto mining include environmental concerns, security risks, investment risks, and regulatory risks. These are all things that any and all miners should take into consideration.


Photo credit: iStock/Chris Tamas

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

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Comparing Cardano (ADA) vs Ethereum (ETH)

Comparing Cardano (ADA) vs Ethereum 2.0 (ETH 2.0)

Cardano (ADA) and Ethereum (ETH), or Ethereum 2.0, provide similar functionality, being used to create smart contracts, dApps, and more. But they differ in terms of operating philosophies and monetary policies.

The comparison between the two is an interesting one, in part because Cardano founder Charles Hoskinson was also one of the original developers of Ethereum. And the two projects have long been among the top 10 cryptos by market cap.

For investors, knowing the similarities and differences can be helpful.

Ethereum 2.0 Explained

Ethereum is a blockchain network that can be used for the development of decentralized applications (dApps). Ethereum was also the first platform to launch smart contracts — programmatic agreements that can function like legal contracts and can be executed automatically once specific conditions have been met.

The Ethereum white paper was published in 2013 and the project first launched in 2015.

In late 2022, the Ethereum network completed a series of upgrades collectively known as Ethereum 2.0 or the Ethereum Merge. These upgrades addressed some existing issues with the network (made it faster and more secure, for example), and further changes have continued into 2023.

Perhaps most notably, Ethereum 2.0 introduced a proof-of-stake consensus mechanism to the blockchain, which shifted the network from an energy-intensive proof-of-work (PoW) system and mining to staking.

As such, there are now multiple Ethereum blockchains: Ethereum 2.0 (which continues to use the ETH token), and Ethereum Classic (ETC), which still operates according to older standards.

How Does Ethereum 2.0 Work?

Ethereum 2.0 possesses the same characteristics as many other blockchains, such as being an immutable public ledger of transactions, being censorship-resistant due to a decentralized consensus mechanism, and allowing participants to stake their tokens to earn rewards.

Ethereum 2.0 users can send financial transactions by using the network’s native token, Ether (ETH). They can also participate in any number of dApps built on the network, including various decentralized finance (DeFi) platforms, non-fungible token (NFT) marketplaces, and blockchain-based games.

It was the first network to allow for the use of smart contracts, resulting in the potential for developing dApps. Programmers can code specific conditions into smart contracts, giving them a variety of functionality. For example, a contract for a decentralized marketplace might be programmed to execute trades automatically when a buyer and seller both want to trade at a certain price.

Smart contract operations are facilitated by and paid for by “gas fees.” Ethereum gas is measured in gwei, the smallest unit of ETH. Even though the fee for a single smart contract function can be very small, performing complex actions often involves numerous functions within multiple smart contracts, and the fees a user ends up paying can add up quickly.

Cardano Explained

Cardano aims to make its native ADA token suitable for a number of types of transactions. Academic and scientific research drives the development of Cardano, and it’s possible that the Cardano network will see increasing adoption based on the fact that its code is verified mathematically.

How Does Cardano Work?

As with Ethereum 2.0, Cardano developers can program smart contracts and create decentralized applications (dApps). But one of the key differentiators between the original Ethereum network and Cardano was that Ethereum (1.0, prior to upgrading) tackled problems with its development as they arose, while Cardano tried to plan for contingencies beforehand by performing scientific studies about proposed changes to the Cardano network.

On Cardano, as on most different crypto platforms, users employ the network’s native token to execute financial transactions — in this case ADA is Cardano’s native crypto.

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Key Differences Between Cardano and Ethereum 2.0

Most of the differences between Cardano vs. Ethereum 2.0 have to do with their approach to building a blockchain network, and the philosophies of their creators.

Ethereum 2.0, for example:

•   Was created by Vitalik Buterin in 2015 in an attempt to do things Bitcoin couldn’t, such as implement smart contracts

•   Takes more of a “build first, fix problems later” approach

Cardano, on the other hand:

•   Was created by Charles Hoskinson in 2017 as an improvement over Ethereum

•   Tries to use academic research to bolster its development beforehand

dApps

Another difference between the two networks is the number of dApps currently running on either platform.

The vast majority of blockchain-based video games, NFT marketplaces, and DeFi protocols run on Ethereum 2.0, or a layer-2 Ethereum network, like Polygon.

Conversely, there are dozens of DeFi services running on Cardano, in addition to some other disruptive projects — but still far fewer than on Ethereum 2.0.

Native Tokens

Cardano’s native token is ADA vs. ETH for Ethereum 2.0. Both can be used to send financial transactions, although the fees and confirmation times may vary. ADA fees are typically lower, however.

Market Cap

As of January 19, 2023, Ethereum 2.0’s market cap was about $188 billion, while Cardano’s was about $11.5 billion.

While these numbers are constantly changing, Ethereum 2.0 has held its spot as the second-largest crypto by market cap for a number of years. ADA has held a place among the top 15 or so for the past few years.

Monetary Policy

Another important difference between Cardano vs. Ethereum 2.0 is each network’s monetary policy governing their respective tokens.

The distribution of both ADA tokens on the Cardano network and ETH on the Ethereum 2.0 network are similar: They both utilize a proof-of-stake system to reward participants with more tokens. But when it comes to the supply limit placed on the issuance of new tokens, the two cryptos diverge significantly.

There is an infinite supply of ETH, and the supply of ETH tokens does increase every year. The supply of ADA tokens, on the other hand, is limited. According to Cardano’s code, there will only ever be 45 billion ADA. As of late January 2023, there are around 34 billion ADA in circulation.

Operational Philosophies

Ethereum’s original form took more of a “build first, tackle problems later as they arise” approach. But following the “merge” and the adoption of Ethereum 2.0 upgrades, much of that has changed or is changing. As such, the operational philosophy driving the Ethereum 2.0 network is now more in line with Cardano’s than it was previously.

As mentioned, Cardano’s team always preferred to conduct rigorous scientific research before implementing changes to their protocol. The idea is to make sure all contingencies are planned for ahead of time so there will be fewer problems down the road.

Transaction Details

Cardano can currently process about 250 transactions per second (TPS), and Cardano’s proposed Ouroborus Hydra upgrade could see the network’s possible TPS soar to as high as 2.5 million.

That’s in contrast to 100 TPS for Ethereum’s original incarnation. But the aim of Ethereum’s 2.0 upgrade was to increase it to 100,000 TPS.

Layers

“Layers,” in the crypto space, refer to the structure of a blockchain network, and generally speaking, the more layers a network has, the more sophisticated it is or can be.

Both Cardano and Ethereum 2.0 are “Layer 1” blockchains, but their designs are different. Ethereum 2.0 uses a single-layer to manage on-chain smart contracts and apps, but Cardano has a dual-layer design that allows for more functionality and scalability.

Forking Policies

Crypto forking involves changes to a blockchain network that effectively create a new network, or a “fork” off of the original. Different blockchains have different forking policies, and that holds true for Cardano vs. Ethereum 2.0.

Ethereum network forks can create different types of Ethereum (such as Ethereum Classic), whereas a fork of the Cardano network, the existing protocol ceases to operate and the blockchain restarts from scratch.

Limitless vs Limited Coins

Finally, there’s a difference in the number of overall supply that will exist between Cardano and Ethereum 2.0. Ethereum 2.0’s supply is infinite, and there will be new coins created every year. Cardano does have a limit of 45 billion coins, the majority of which are already in circulation.

Summary of Differences Between Ethereum 2.0 and Cardano

Ethereum 2.0

Cardano

Created to do things Bitcoin couldn’t, specifically smart contracts Created as an improvement over Ethereum (1.0)
Originally took more of a “build first, fix problems later” approach Uses academic research to anticipate developments needed
Thousands of dApps run on the platform More than 100 DeFi services run on Cardano
Native token is ETH Native token is ADA
Market cap approximately $188 billion Market cap approximately $11.5 billion
Unlimited ETH supply ADA capped at 45 billion
Utilizes a single-layer design to process transactions Uses dual-layer design to process transactions
Aims to process 100,000 TPS Aims to process 2.5 million TPS (after upgrades)

Similarities Between Cardano and Ethereum 2.0

There are many similarities between Cardano and Ethereum 2.0. Both networks are trying to achieve the same thing — they just want to go about it differently. Some commonalities between the two cryptocurrencies include:

•   Both platforms provide smart contract functionality

•   Both can be used to develop dApps

•   Both can be used for sending financial transactions via the network’s native token

•   Both are proof-of-stake networks

Smart Contracts

With smart contracts, rules are enforced by code, and terms of agreements can be executed automatically when certain conditions have been met. This has opened up a new world of possibilities in terms of new applications that can be decentralized.

Smart contracts solve a number of problems that have plagued traditional contracts, specifically the potential for fraud, censorship, or third-party interference. These programmatic contracts are what made Ethereum unique and led it to becoming the second-largest cryptocurrency.

Over time, a number of competing networks that hope to improve upon Ethereum’s design have sprung up, including Cardano.

Pros and Cons of ETH2 vs ADA

While both Ethereum 2.0 and Cardano have their differences and similarities, as outlined, depending on an individual investor or user’s perspective, there can be some pros and cons, too.

For example, some investors might like that Ethereum 2.0 is much larger, more liquid, and widely used when compared to Cardano. Likewise, others may be partial to Cardano’s internal decision-making process, and its reliance on case studies and a sort of scientific method when considering changes to the protocol.

At the end of the day, though, both cryptos are fairly similar — and that’s especially true following Ethereum 2.0’s upgrades. Again, each crypto will have its pros and cons, but some of the shortcomings of one may be a highlight in the eyes of others.

The Takeaway

Cardano and Ethereum are both platforms with smart contract functionality that can be used to develop dApps. They have several more similarities, too, including that they (now) both utilize proof-of-stake consensus mechanisms.

But the two have significant differences as well, from their respective market caps (Ethereum 2.0 being the much larger crypto), to their internal philosophies regarding forking and more. There’s also the fact that Ethereum 2.0 lacks an overall cap on its supply, while more than half of all the Cardano that will eventually exist is already on the market.

Ethereum 2.0 and Cardano are but two of many cryptos that investors can buy and trade. Learn more about trading crypto by setting up an Active invest account with SoFi — there are no management fees, and you can use a secure app to build your crypto portfolio with Cardano, Bitcoin, Dogecoin, and many more.

Trade crypto and get up to $100 in bitcoin! (Offer is available through 12/31/23; terms apply.)

FAQ

Does Cardano or Ethereum 2.0 have a higher market cap?

Ethereum 2.0 has a higher market cap than Cardano. As of January 19, 2023, Ethereum’s market cap was about $188 billion, while Cardano’s was about $11.5 billion. Ethereum 2.0 has been the second-largest cryptocurrency by market cap for a number of years.

Is Cardano a threat to Ethereum 2.0?

Cardano is among a group of different projects that have been described as “Ethereum killers,” but that hasn’t proven true. Solana, Binance Smart Chain, Tron, and others fall into the same category.

The outcome will depend upon both how many people begin building on and using these “Ethereum killers,” and how Ethereum manages to solve the issues it currently faces.

How is Cardano’s platform different from Ethereum 2.0’s?

Both networks provide the same essential functionality in terms of financial transactions and development of smart contract-powered dApps. The real difference lies in Cardano’s emphasis on academic research and attempting to enable cheaper and faster transactions, allowing for ADA to be more effectively used as a medium of exchange.

Can Cardano replace ETH 2.0?

Cardano and Ethereum 2.0 are similar, but that doesn’t necessarily mean that one will replace the other. There are some differences between the two, and they have their pros and cons. As such, each will likely maintain its own fanbase or userpool without directly replacing the other.


Photo credit: iStock/JLco – Julia Amaral

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade Amount Bonus Payout
Low High
$50 $99.99 $10
$100 $499.99 $15
$500 $4,999.99 $50
$5,000+ $100

SOIN0123002

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