Coin Rivet is investigating whether Cardano smart contracts – which are still in their infancy – can ever compete with Ethereum`s established dominance. However, despite increased development on Plutus and continued interest in the Cardano ecosystem, Ethereum continues to lead the way in providing smart contracts. AT A GLANCE:· Ethereum is practically synonymous with DeFi, as it powers many cryptocurrencies in the decentralized financial sector. Ether no longer tracks Bitcoin`s price fluctuations as closely as it used to, and it is starting to be driven by its own catalysts. While most smart contracts are based on Ethereum, other blockchains also support smart contracts. These include Solana (SOL), Polkadot (DOT), BNB Chain and more. However, Ethereum remains the most popular smart contract protocol. Information on the number of smart contracts provided on Ethereum remains uneven, but a 2020 study found that there are more than 1 million smart contracts on Ethereum. This number must have increased sharply since then.
According to Yahoo Finance, the number of smart contracts used in Ethereum peaked in June 2021 at 2.5 million. The main problem with the proof-of-work protocol is power consumption, which has led many working groups in blockchain to look for more cost-effective alternatives. That`s how “Proof of Stake” came into play. For starters, this protocol introduces a barrier to entry for minors. You must put a certain number of tokens into play to become miners or validators as they are called in this protocol. In Ethereum 2.0, this number equates to at least 32 tokens, which is a considerable number and something that no one can have. Those who do not meet this requirement can still share chips with betting pools created for this purpose. The betting pool eventually executes the miner or validator.
In terms of implementation, this protocol allows validators to push blocks on the ledger based on a ranking determined by the number of tokens involved and reputation over time. This ranking can be affected by poor decisions or when a node does not commit transactions (for example, when it logs out), resulting in tokens being lost by the validator. Smart contracts are not controlled by a user, but are self-executing programs on the Ethereum blockchain. Users can interact with smart contracts by submitting transactions that trigger an encoded function in the smart contract. Similar to regular contracts, smart contracts can set rules, but unlike normal contracts, contract terms are automatically enforced by code rather than human intervention. A perfect analogy to describe a smart contract would be a vending machine. To get a snack from a vending machine, you need to enter an instruction that automatically triggers a certain output. This is a 24.7% increase over the total smart contracts created in the fourth quarter of 2021, which stood at 1.16 million. While this has obvious benefits, it also means that new smart contracts are less tested and the likelihood of vulnerabilities is higher. Ethereum has already suffered millions of dollars in losses due to vulnerabilities exploited in smart contracts.
With this in mind, smart contracts are the building blocks of decentralized applications and even entire businesses, called decentralized autonomous enterprises, controlled by smart contracts rather than human executives. Anyone can use smart contracts if they have Ethereum`s native symbolic ether that can be purchased on cryptocurrency exchanges. This represents a nearly 1,000-fold increase in the number of smart contracts deployed on Ethereum. Adding blocks to the registry requires coordination between all miners in the network. To make matters worse, remember that minors also compete with each other for fees and rewards. If a miner could add blocks at their discretion, the value of the blockchain would be 0. In real life, each blockchain executes a distributed protocol known as the consensus protocol, which governs and determines how and when they can push blocks onto the ledger. Bitcoin introduced a variant of the protocol called “Proof of Work,” but there are many others.
Ethereum, for example, was launched with the exact implementation, but is moving to “proof of stake” in the short term with a new rollup called Ethereum 2.0. We will discuss these two variants in more detail in the following sections.