There is no doubt that Blockchain has changed the economy as a whole. With its immutability, transparency, anonymity, decentralization, and security, technology has made many changes to the way business is done.
But the fact that there are no third-party intermediaries has made blockchain even more popular. In the form of smart contracts, especially Ethereum smart contracts, the technology reduces the chance of process conflicts, saves time, and makes the process cheaper, faster, and more efficient.
How do smart contracts platforms work and which platforms should you know about? We will give you a detailed view of these soon.
Let’s get deep down into it.
What is a Smart contract?
A smart contract is like a real-world contract, but it’s made of code. It is shown by a small piece of computer code that is kept in a blockchain.
More specifically, a smart contract is a piece of software that stores the rules for negotiating the terms of an agreement checks that the agreement has been met automatically, and then carries out the terms that were agreed upon.
Since a smart contract takes away the need for a third party in business, the people agreeing can do business with each other directly.
What are Smart contract platforms?
Smart contract platforms make, verify, and enforce smart contracts. They build smart contracts on top of the blockchain, offer services for programming and testing smart contracts, and host the deployment and execution of smart contracts.
Now, What are the best Smart contract platforms?
There are a lot of smart contract platform players on the market. The first smart contract platform is Ethereum. So, you need to learn about each and figure out which are the best smart contract platforms for your cause.
Ethereum was the first platform for smart contracts, and it is still the most popular choice for developers. The platform went live in 2015 and now makes it easy to use applications like ICOs and insurance based on smart contracts.
Because it was one of the first smart contract platforms, Ethereum is one of the best in 2023. It has gotten a lot of money and attention from big companies like Intel and Samsung. To add to that, Ethereum has a very large group of developers.
By far, this is the best platform for smart contracts. In the past, the network has been overloaded, and it usually works at full capacity. Because of this, transaction speeds are still slow, and the costs of processing transactions are very high.
- Setting up is free. Gas is used to pay for contract transactions.
- ERC-20 is the standard for all tokens on Ethereum.
- Solidity has its programming language for smart contracts.
- A set of clear rules for developers to follow.
- Most smart contract developers have already worked with Ethereum.
- Ethereum has been the go-to platform for most decentralized apps because it was the first smart contract platform. Because of this network, the platform is only second to Bitcoin in terms of popularity.
- There were problems on the way to prosperity, from the 2016 DAO hack to the most well-known problems that keep coming up. But these problems helped the platform grow and become more stable.
- A group of hardworking developers has made a reliable platform that can be used by anyone who wants to build a smart contract or a distributed app. Solidity was made just for Ethereum, and it has clear standard instructions for how to set up smart contracts. This makes it easy for developers to use and build on.
Solana aims to solve scaling problems in the same way that other new-generation smart contract platforms do. Solana has done a record-breaking 65,000 transactions per second.
Solana uses an innovative mix of Proof of History (PoH) and Proof of Stake (PoS) consensus mechanisms. This is the main reason why it has such a high throughput. In other words, transactions are not put together in blocks. Instead, each transaction has its block and is used as input for the next transaction.
- Solana enables smart contracts, which let apps have a better user interface and user experience.
- This is without a doubt the best thing about Solana. Its job is to handle transactions very quickly, and it does just that.
- The cherry on top is that it can reach that speed for a fraction of what it would cost to do it the old way. Compared to Ethereum, the cost of a transaction on Solana would be 99% less.
Even though it has a bad reputation for being too centralized, the blockchain network is still in a race to be the best smart contract ecosystem. Even though EOS isn’t the most popular in this field, it’s still a good option that any real crypto fan should know about.
EOS has its consensus model called Delegated Proof-of-Stake. The team says that through staking alone, their platform can handle millions of transactions per second.
- Simple to use.
- Not having any platform-specific programming language.
- EOS uses the virtual machine WebAssembly (WASM) to run smart contracts, and C++ is used to write them. This makes it much easier for EOS to bring on new developers since they will be working in a software environment they already know.
- The system makes blocks faster and for less money.
How to choose a Smart contract platform for your project?
How you decide on the right smart contract platform depends on what you want to do with it.
Let’s look at some of the things you should think about as you search.
When it comes to smart contracts, the speed of transactions is important. For example, Ethereum is known for having transactions that take a long time. Popularity can weigh it down and slow it down.
Cost and speed are usually linked when it comes to smart contract platforms. Ethereum is still one of these types of bad actors. When a lot of people are using the network, Ethereum gas fees can get quite high.
Scalability is more than just speed, even though people often talk about them together. It means that a blockchain platform can keep being useful and fast even as it gets more users and more people use it.
Even though most hacks happen because dApp developers don’t pay enough attention to security, the security of the network itself is still very important. Even though Algorand is new and hasn’t gotten much attention yet, it has made a name for itself by having some of the safest smart contracts out there. It uses a method called “proof of stake” to reach a decision.
One common story about cryptocurrencies is that they are bad for the environment and use a lot of energy. The proof of work consensus mechanism is what it all comes down to.
Some report says that Bitcoin uses more electricity than some European countries.
Using consensus algorithms that don’t need as much computing power gives competing platforms a marketing edge, and even more.
How do smart contracts work?
A smart contract is a type of program that uses a dedicated virtual machine embedded in a blockchain or other distributed ledger to run business logic.
How does a smart contract work? Here are some steps:
First, the parties to the contract should agree on the terms of the deal. After the terms of the contract have been agreed upon, they are turned into programming code. The code is a bunch of “if-then” statements that describe the different ways a future transaction could go.
When the code is made, it is saved in the blockchain network and sent to all of the blockchain participants.
Then, all of the computers in the network run the code and do what it says. If a contract term is met and it is confirmed by everyone in the blockchain network, the transaction in question is carried out.
What are the types of Smart Contracts?
Based on how they are used, there are three types of smart contracts:
Smart Legal Contracts:
A smart legal contract is the most common type of smart contract. It has the same legal requirements as a traditional contract and is used to make sure that both parties keep their end of an agreement.
When set up correctly, a smart contract is legally binding and requires both parties to meet their obligations. If one party doesn’t meet its obligations, the smart contract can automatically take legal action against that party.
Decentralized Autonomous Organizations (DAO):
These are blockchain communities that follow rules that are written into contracts on the blockchain and are governed by other systems. So, anything the people in the community does is replaced by a code that enforces itself.
Application Logic Contracts (ALC):
Application Logic Contracts (ALCs) are another type of smart contract in Blockchain. They let devices work safely and on their own. Plus, ALCs make sure that there is more automation, transactions are cheaper, and the system can grow.
These contracts have application-based code that usually stays in sync with other contracts on the blockchain. It lets devices talk to each other, like when the Internet of Things (IoT) and blockchain technology come together.
What are the benefits of smart contracts?
Fast and accurate:
As soon as one of the conditions is met, the contract is put into action. Because smart contracts are digital and run by software, there is no paperwork to deal with and no time wasted trying to fix the mistakes that often happen when people fill out documents by hand.
The fact that smart contracts built on blockchain are decentralized is their main benefit. There is no need for a third party to be involved in the process. This means that independence is kept.
Because the records of transactions on a blockchain are encrypted, they are very hard to hack. Also, each entry on a distributed ledger is linked to the entries before and after it, so hackers would have to change the whole chain to change just one record.
Smart contracts help the environment by cutting down on paperwork. They do all of their processing in the virtual world, which means they don’t use any paper at all. It makes a big difference for the environment and the world as a whole. Both the real world and the business world are getting better because of them.
Here are some applications of smart contracts:
Smart contracts can be used everywhere that traditional contracts are used.
Most business activities depend on getting their funding approved, which takes time and uses a lot of resources. This time can be cut down by a lot with the help of smart contracts.
Smart contracts will make it easier to keep records and store them. For instance, millions of private patient records need to be stored and updated safely.
Smart contracts will make it cheaper, faster, and safer to buy a house. This will let buyers get into the house earlier and automatically update the records.
Each year, insurance companies spend a lot of money on processing and handling claims. Smart contracts will make it possible to automatically set payment amounts based on the type of policy.
When it comes to how patents are used in project development, many companies end up in court for years. Smart contracts can keep track of which company owns what part.
Using smart contracts that keep track of a person’s degrees, certificates, and work experience can stop CV fraud and make it easier to hire both people and companies that provide a service.
Choosing the right smart contract platform is one of the most important things that will affect how quickly, safely, and well your blockchain solution works as a whole. There are many different platforms, but Ethereum, Solana, and Avalanche are the most popular.
Each smart contract platform has its pros and cons, which you should talk about in terms of your blockchain project and its needs. The most important things to look out for are security, transaction speed, and cost.