While most of the tech world’s attention has been on the price of various cryptocurrencies, smart contracts are a foundational part of the blockchain revolution that will likely change businesses and the way they operate sooner than ever.
With a market capitalization of $579 billion, smart contract platforms could soon dominate the blockchain industry and further affect how we run businesses and other sectors. If you don’t already know, you might be asking yourself what they are! Well, don’t worry, we’ve got you covered.
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So, what are smart contracts?
A smart contract is a self-executing contract or program in which the conditions of the buyer-seller agreement are directly encoded into a few lines of code. The code and the agreements contained within it are dispersed and decentralized over a blockchain network, in this case, smart contract platforms.
One great example of a platform is Ethereum. The code within the smart contract interprets, compiles, and executes the agreements, which then are trackable and irreversible.
What’s special about them is that they allow transactions and agreements to be carried out between disparate, anonymous individuals without the requirement for a centralized authority, legal system, or external enforcement mechanism.
According to a study, about 2.2 billion people in the world are unbanked. They’re unbanked because the respective authorities deemed them as unworthy of gaining something as little as a bank account or a loan.
With smart contracts and the blockchain technology powering them, these people can now open something as simple as a bank account and access a plethora of other financial products and services that were once inaccessible to them. Their identity, financial state, work history, or any other factor doesn’t interfere in the process of them accessing these services. This is why they’re so revolutionary!
While blockchain has come to be known primarily as the foundation for bitcoin, it has expanded far beyond its role in supporting virtual currency.
How do smart contracts work?
Put simply, they operate on a blockchain by executing basic “if/else/when” expressions written in code.
When preset circumstances are met and validated, a network of computers executes the actions. These activities could include transferring payments to the proper parties, registering a vehicle, providing alerts, or issuing a ticket.
When the transaction is completed, the blockchain is updated. This means that the transaction cannot be modified, and the results are only visible to parties who have been granted permission.
Popular cryptocurrencies using smart contracts
Here is a list of cryptocurrencies or smart contract platforms that are at the forefront of the revolution:
Ethereum is the world’s first smart contract platform, and it is still the most popular option among developers today. The platform went live in 2015 and now enables the development of applications ranging from initial coin offerings (ICOs) to insurance, NFTS and Decentralized Finance. Smart contracts on the Ethereum blockchain are written in the platform’s programming language, Solidity.
Ethereum aims to establish a decentralized financial product suite that anybody may use, regardless of nationality, ethnicity, or beliefs. Moreover, Ethereum’s applications are run on Ether, the platform’s cryptographic token. Ether is used to move across the Ethereum platform and is sought after by developers and investors alike.
Launched in 2015, Ether is the second-largest digital currency by market capitalization. Although it lags well behind Bitcoin, Ether’s market cap is nearly half that of Bitcoin as of September 2021, as it trades around $3600 per ETH at the time of writing.
It can be purchased from almost every cryptocurrency exchange, and even earned from free Ethereum faucets.
Cardano is an “Ouroboros proof-of-stake” cryptocurrency developed by engineers, mathematicians, and cryptography professionals using a research-based approach.
It promises to be the world’s financial operating system by creating decentralized financial products akin to Ethereum and provide solutions for chain interoperability, voter fraud, and legal contract tracing, among other things. At the time of writing, Cardano has the fourth-largest market capitalization worth $71 billion.
Unlike Ethereum, Cardano’s contracts are divided into two categories: financial contracts and application-driven smart contracts.
Financial contracts are used to represent transactions and financial agreements only using the platform’s Marlowe Language.
On the other hand, application-driven contracts are used to develop decentralized applications (dApps), NFTs, and more using the platform’s Plutus language, a combination of Haskell and Solidity.
Avalanche is the blockchain industry’s fastest smart contracts platform in terms of time-to-finality, and it has the most validators securing its activity of any proof-of-stake protocol. Avalanche is a new blockchain that prioritizes speed and minimal transaction fees. Like Solana and other newer blockchains, Avalanche aims to address the scalability difficulties that plague older blockchains.
The Avalanche Foundation promotes its blockchain as a viable Ethereum substitute. DApps and contracts can be executed for a fraction of the cost and with a much shorter time to completion on the Avalanche Platform.
Avalanche’s smart contract chain executes Ethereum Virtual Machine contracts, so if you’re already active on the Ethereum blockchain, you can reuse some of your code. With a market cap of over $14 billion, Avalanche and its underlying token AVAX are presently the 13th most valuable cryptocurrency by total market capitalization.
Chainlink is one of the most impressive platforms on our list. Developed by Sergey Nazarov along with Steve Ellis, it’s now worth $12 billion and is ranked 15th in the market in terms of market capitalization.
Chainlink is a decentralized oracle network that connects smart contracts, similar to the ones on Ethereum, to data outside of the blockchain. Blockchains do not have the ability to link to external apps in a secure manner; therefore, Chainlink’s decentralized oracles enable contracts to interface with external data, allowing contracts to be executed based on data that Ethereum cannot access.
Chainlink significantly enhances contract capabilities by allowing access to real-world data and off-chain computing while keeping the security and reliability assurances inherent in blockchain technology.
Turing award winner Silvio Micali founded Algorand to reinvent blockchain. The company created the world’s first truly public, permissionless, scalable, and pure proof-of-stake protocol.
Algorand is the first to enable immediate transaction finality, allowing for interesting new use-cases and applications and providing the speed and ubiquitous infrastructure that financial institutions require to maintain control and oversight over their operations.
Algorand’s smart contracts are extremely reliable since they are implemented on a tamper-proof (trustless), secure, and decentralized network with no forking, and they provide financial institutions with speedier, error-free, immutable applications that are cost-effective.
On Algorand, smart contracts are written in a higher-level language and compiled to bytecode before being executed by the platform’s Virtual Machine, the Algorand Virtual Machine (AVM).
Algorand smart contracts are incorporated directly into Layer-1, unlike other blockchain technologies that offer smart contract capability.
This allows developers to take advantage of the network’s basic features and have access to simplified tools and examples of custom, complicated DApps that can be used to create a wide range of low-cost applications without sacrificing the platform’s speed, scale, or simplicity.
This builds the foundation for complex applications while addressing the technical roadblocks to blockchain adoption.
Solana has been making headlines for its low-cost and extremely fast smart contracts utilization. Similarly, Vechain, Stellar, Tezos, and Ethereum Classic have also been revolutionizing the industry as they power a slew of powerful and immersive decentralized applications run by smart contracts.
Uses beyond cryptocurrencies
Interestingly, smart contracts aren’t limited to cryptocurrencies. A notable example can be taken from smart contracts’ use in safeguarding the efficacy of medications. Supply chains are striving to mitigate the hassles in the transport of lifesaving medication and increasing supply chain transparency.
Smart contracts are also actively being used to increase trust in retailer-supplier relations and make international trade faster and more efficient. There are plenty of alternative blockchain technology use cases out there, and more are being developed all the time.