What is so smart about smart contract platforms?

Ether or ETH is the native cryptocurrency of the Ethereum blockchain and is also the second largest cryptocurrency in the world if one goes by market capitalization. Similar to Bitcoin, ETH can also be used for payments to another party without involving any intermediary. In the long-term, the idea is that Ethereum will be able to go beyond financial transactions. Software developers could use the blockchain network to build applications that range from decentralized money lending platforms to content-oriented social media networks. ETH has this unique quality of being able to be a capital asset that is transferable and is also a store of value. It has played an important role in spearheading the creation of the smart contract platform (SCP) field. 

Smart contracts explained

Smart contracts allow trusted transactions as well as agreements to be processed among anonymous parties without involving any intermediary, legal system, or any external enforcement system. Though blockchain technology is synonymous with Bitcoin and crypto has its foundations in it, the technology has come a long way since then.

Read more what crypto to buy now

A smart contract is an agreement between two parties that executes itself when the terms and conditions are met. This agreement which typically takes place between a buyer and a seller is written into the lines of code and they exist all over the distributed blockchain network. The code is in control of the contract’s execution and is trackable as well as irreversible at the same time. 

Smart contract platform (SCP) sector

Smart contracts execute the terms of the contract since they’re basically computerized blockchain protocols. They are representations of nodes that make sure the contract executes as soon as the two parties meet the terms. This facilitates trustless, peer-to-peer transactions. 

In order to be assigned to an industry within the SCP sector, the digital asset needs to be transparent, self-executing, and trustless. These platforms often have their own blockchains and consensus mechanisms but the jury is still out on how these tokens can be classified. The parameters can be their smart contract capabilities and their specific applications. There is still not enough clarity on whether smart contracts have to be decentralized or if the permissioned blockchain can be identified as a smart contract platform. 

Broadly, there are two major single-industry groups: Multi-Chain/Parachain and Single Chain

The Multi-Chain/Parachain industry is inclusive of smart contract platform assets that allow several parallel blockchains and cross-chain interoperability. The platform can be designed with a relay chain that has windows for external parallel chains.

The single chain industry would have layer 1, also known as base blockchain in which every transaction is recorded on the main distributed ledger. The single chain lets layer 2 or the companion scaling systems that are linked to the primary blockchain.

Here are some leading smart contract platforms and their advantages as well as disadvantages: 

Ethereum 

Ethereum is the first smart contract platform in the world which is also the most popular pick among developers. It became live in 2015 and at present, it supports the deployment of numerous applications from ICOs to smart-contract-based insurance. 

The obvious plus points of Ethereum’s smart contract platform are:

  • Standardization
  • Security
  • Support

Ethereum has its own set of development guidelines written in its unique coding language which has made deploying smart contracts and Dapps on the platform relatively simpler. Given the massive number of developers on Ethereum, it is not feasible to audit every single smart contract manually. In certain cases, organizations may hire smart contract consultants who make sure the safety of the blockchain is upheld and its performance is optimized. 

Ironically, Ethereum’s popularity is both a boon and bane. Its founders did not assess its growth potential right which made scalability hard. The platform has been dealing with overloaded platforms and is often operating at 100% capacity. This results in slow transaction speed and high processing fees called gas fees. 

Polkadot

Polkadot is like a blockchain ecosystem that allows different platforms to work with one another. This is not common in typical blockchains. An important part of this system is the relay chain that ensures that parachains and parathreads are interoperable. Parachains make Polkadot a great option as they let developers make their own blockchains and have their own models of governance as well as tokens. A key aspect of Polkadot is the fact that it uses parachains like shards which boosts scalability drastically. The Polkadot network also has bridge chains that connect parachains with external blockchains. Polkadot could give Ethereum a run for its money as it already has a large development community backing it. 

Hyperledger Fabric

Hyperledger Fabric is another permissioned blockchain. This means that authentication is needed and participants’ identity is not secret. This makes Hyperledger particularly tempting for firms that have to work with highly sensitive data and should be in compliance with data protection laws. One should note that Hyperledger Fabric was first created to be used by enterprises with confidentiality, trust, and security at the center of it. The platform allows the creation of private channels for specific members of the community which means that transaction data is available only to select people.

Best smart contract platform

We know that blockchain, as well as smart contract application development, are considerably new fields, and there continues to be a great degree of uncertainty around them. The lack of clarity is the reason why a majority of the organizations prefer to stick to well-known smart contract platforms that are backed by a rather mature community of developers. 

Ethereum has the first mover’s advantage here as it checks all of these boxes which has undoubtedly contributed to its popularity. It is no surprise that Ethereum has a number of plus points and advantages over its counterparts but you should know that you’re always going to find a better choice for enterprise app development. This is a field that is constantly evolving. 

How you select a platform depends on the use case. If you try to build an intrinsic IoT-linked insurance Dapp on a platform like Stellar or put out a public cryptocurrency exchange on Hyperledger Fabric, you’re signing up for disappointment. 

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