You and your friend argue about whom the faster runner is. You both decide to settle the argument; you agree to a race. Great. To make it more interesting, you both choose to place a bet while at it; the winner takes all. It sounds good until you realise some plot holes.
There is no guarantee that your friend will pay up if they lose. Okay, you decide to use a neutral party. But who would you both trust to hold your stakes and give back to the winner? What happens if one of you stops running while the other is ahead, which ensures there is no winner? A lot can happen before, during, and after the race. And it can make selecting the winner quite tricky.
The planning and execution of the race can be automated using a smart contract. The next question would now be.
What Is A Smart Contract?
A smart contract is a line of code or lines of code that execute a specific function when predetermined conditions are met. Nick Szabo coined the term in the early ’90, and it is what powers many crypto protocols, with Ethereum being a major one. Smart contracts are developed using Ethereum’s original coding language, called Solidity.
In the context of your race, a smart contract will take the details of the race, the participants, and the stakes. It then executes based on the result of the race.
How A Smart Contract Works
Smart contracts work using “if…then” statements written on the blockchain code. The code is created and stored in the blockchain network. This code is then replicated among the nodes in the blockchain.
Then, the code is run and executed by all computers in the network. If the contract conditions are met, the code is verified by all participants of the blockchain network. And then, the relevant transaction is executed.
Using a smart contract will ensure integrity and transparency. You and your friend put your bets in a wallet and link the smart contract to it. If you win the race, then the smart contract sends the winnings to your wallet; and if your friend wins, then the money goes to them. This is how a smart contract works.
Smart contracts make transactions trustless (you don’t need to trust your friend to pay up, nor do they need to trust you). Although this is a simple use case of a smart contract, the premise remains the same; if the predetermined conditions are met, the smart contract will run.
Smart Contracts Use Cases
Here are some of the ways smart contracts can be deployed:
- Escrow: As with the race analogy above, a smart contract automates and authenticates escrow payments.
- Trading Activity: Automates trading without the need for intermediaries
- Governance: It can help a government set policies and rewards for the procedures to improve efficiency and transparency. It can also be used for voting.
- Digital Identity: Makes KYC frictionless and eliminates counterfeit potential.
- Insurance: Automates insurance claims and disputes with proof
- DAO Establishment: DAOs [Decentralised Autonomous Organisations] use smart contracts to decide corporate structures. DAOs enable sophistication and automatically enforce incentive structures within the said corporate framework.
Merits of Smart Contracts
- Trustless: Smart contracts let you transact with another person peacefully. The elimination of trust means you don’t have to worry if the other person will deliver on the agreement, hence the term trustless.
- Clarity: There is no room for miscommunication or misinterpretation with a smart contract. The parties agree on the details before execution.
- Efficiency: In continuation of the above point, smart contracts drastically cut down on efficiency lost to gaps in communication
- Safety: Smart contracts are encrypted, and cryptography keeps all the documents safe from infiltration.
- Speed: Smart contracts automate tasks using computer protocols, saving hours of various business processes.
Limitations of Smart Contracts
- Immutability: Once a smart contract is deployed, it cannot be changed. This eliminates nuance and unforeseen circumstances. Using the example above, you could sustain an injury during the race and be forced to resign. The smart contract would still send the winnings to your friend’s wallet.
- Real Live Data: Since smart contracts live on the blockchain, they sometimes need information from the real world, the information they can’t reach. This information needs to be fed to the smart contract, which opens a can of trust and transparency worms. (Oracles and chainlinks help to solve this issue).
- Technicality: They have a high dependence on programmers as they, the programmers, are the only ones who can create a smart contract.
The Top 3 Smart Contracts
Here are three of the top smart contracts in crypto. This list is entirely based on my preference, belief in their network and the coins that I HODL:
Ethereum is the second biggest cryptocurrency. It is a global computer that lets you deploy smart contracts on it. It is a technology home to digital money, international payments, and applications.
Ethereum was the first cryptocurrency to launch smart contract functionality. As a result, it powers the lion’s share of applications. According to State of the dApps, about 80% of DeFi applications run on Ethereum’s network. Ether [$ETH] is the network’s currency, and it is used to buy gas. Gas is the charge for every computation in a smart contract.
Cardano is designed to be a next-gen evolution of the Ethereum idea — a blockchain that’s a flexible, sustainable, and scalable platform.
Cardano is the brainchild of the IOHK (Input Output Hong Kong) company. It is a Proof-of-Stake powered cryptocurrency that uses KMZ sidechain protocol to aid interoperability. Its token is ADA [$ADA] and is deflationary. There are 45 billion ADA tokens in total.
Cardano takes a slow-and-steady approach to development. Each step is peer-reviewed and carefully tested, which means it has taken a long time to introduce functionality that others have been running for years.
Solana is an exciting cryptocurrency that uses Proof-of-History consensus (i.e., Proof-of-Stake + Time). It has a block time of 400 milliseconds; for context, Ethereum has 10 seconds, and Bitcoin has 10 minutes.
Block time is the time it takes the miners or validators within a network to verify transactions within one block and produce a new block in that blockchain.
It boasts of handling 710,000 transactions per second; Visa processes 23,666 transactions per second. Its coin is Sol [$SOL], and it is both inflationary and deflationary.
The Smartest Contract In Crypto
Now that we know what smart contracts are, how they work, their benefits and some networks that use them well. Now it’s time to find out what the smartest contract is, or if there is any like that.
The smartest contract must have the following:
- All the present qualities of a smart contract
- Ability to transmit accurate live data by itself without depending on Oracles and chainlinks
- Be open to more nuance after the execution of the contract
Logically, there would be a crypto protocol that offers this perfect smart contract, but that would go against the very tenets on which smart contracts were created. But no one said anything about not making ours. So…
The smartest contract will mix Ethereum, Cardano, and Solana’s perks. It will have the novelty and node and user base of Ethereum, the speed and computational power, and Cardano’s sense of community.
The smartest contract in crypto will be CarSolEth (Cardano + Solana + Ethereum). Its coin will be [$CSE].