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If you’ve analyzed cryptocurrencies in the past, chances are you’ve come across the term “smart contracts”. Several blockchain networks have smart contract functionality, which is basically self-executing agreements.
These agreements are written and deployed on a blockchain network and executed when the conditions are met. Developers use code to enforce contracts and replace the need for a middleman, dramatically reducing associated costs.
The smart contract exists on a blockchain, which is a public ledger that records transactions. While cryptocurrencies such as Bitcoin were originally used to facilitate the transfer of funds, smart contracts enhance the functionality of the underlying network. Additionally, blockchains that can execute smart contracts can be used to create multiple DeFi (decentralized finance) protocols and expand their ecosystem aggressively.
Here we take a look at the top five blockchain networks that support smart contracts.
The first blockchain network to support smart contracts was Ethereum. Data from The State of dApps indicates that approximately 80% of DeFi applications run on the Ethereum blockchain. However, transactions on Ethereum are validated through an expensive and hard-to-scale proof-of-work mechanism.
The upcoming upgrade to Ethereum 2.0 will resolve many of these issues and increase demand for the ETH token.
One of the fastest blockchain networks in the world, Solana executes 50,000 transactions per second. Comparatively, Ethereum can execute between 15 and 45 transactions per second. Moreover, the average fee on Solana is only $0.008 per transaction.
There are approximately 400 active projects on the Solana network allowing the SOL token to increase by more than 10,000% in 2021.
While Solana is known for her speed, Peas gained ground thanks to its interoperability. Polkadot uses parachains parallel to the main blockchain, dramatically increasing the speed of transactions. These contracts are executed on the parachains and not on the primary blockchain.
Similar to newer platforms that support smart contracts, Algorand focuses on low cost, speed, and scalability while maintaining required network security. Here, developers can use a wide range of programming languages to implement smart contracts.
gimbal launched smart contract features last September, seeing the ADA token gain nearly 2,000% over the past three years. Cardano is currently the eighth largest cryptocurrency valued at a market capitalization of US$36.6 billion.
The insane takeaway
Smart contracts are extremely disruptive and could allow blockchain networks to replace legacy financial systems. It is difficult to analyze the evolution of this nascent vertical, but it is likely that digital currencies will stand the test of time due to their growing ecosystem.
Most of the cryptocurrencies mentioned above are available to trade on popular exchanges. But you need to analyze the usefulness of their underlying networks and invest money that you can afford to lose due to the risks and volatility associated with the asset class.
Two of the biggest risks surrounding cryptocurrency are regulation and the pace of technological advancement. An increase in regulation will impact the DeFi market in the long run while there are still security limitations associated with blockchain networks.