What is a smart contract?
Smart contracts are a ground-breaking layer of blockchain technology that allows users to communicate and transact with one another via a “robotic middleman.” A smart contract can be considered a self-executing pile of code that can accomplish certain activities that would otherwise have to be done manually.
So, what is the significance of smart contracts? They give the element of trustlessness that blockchains require. Can you rely on an unknown person to follow up on an online transaction? Obviously not.
Moreover, smart contracts are capable of automating tasks and hosting decentralized apps (DApps) and offering confidence. As a result, DeFi developers frequently use them to automate flash loans, standard loans, staking and other unique features.
Developers can create smart contract applications using simple interfaces on blockchain-based platforms. Many of the existing blockchain platforms are capable of supporting smart contracts. This article will introduce and analyze the five most prominent smart contract platforms: Ethereum, Hyperledger Fabric, Corda, Stellar and Rootstock as well as consider their popularity and technical maturity in the growing community.
Smart contract development platforms
The five most popular smart contract platforms, Ethereum, Hyperledger Fabric, Corda, Stellar, and Rootstock, are discussed in this section.
What is Ethereum?
Ethereum is a decentralized platform that allows smart contracts to be executed. In contrast to Bitcoin’s Turing complete script system, Ethereum has created Turing complete languages like Serpent, Solidity, Low-level Lisp-like Language (LLL) and Mutan to serve non-cryptocurrency users’ applications.
Ethereum converts Solidity, Serpent, LLL and Mutan smart contracts into machine code, which is then loaded into Ethereum virtual machine (EVM) and executed. Ethereum smart contracts, on the other hand, have an account-based data format in which each participant is recognized by their digital wallet.
Ethereum, like Bitcoin, uses the proof-of-work (PoW) consensus mechanism, which is computationally expensive. However, Ethereum will soon switch from PoW to proof-of-stake (PoS). This was always the intention, as it’s an essential component of the community’s plan to grow Ethereum through Eth2 upgrades. To reward miners for the cost of solving problems, Ether (ETH) is utilized instead of Bitcoin (BTC). To put it another way, the gas acts as an internal charge for completing a transaction to compensate for the volatile value of ETH.
Informally, the total cost of a transaction can be estimated using the formula gas limit*gas price, where gas limit refers to the maximum quantity of gas that can be utilized to construct a block and gas price refers to the cost of a unit of gas (in ETH).
Users can spend varying quantities of gas to get their transactions confirmed sooner or later (i.e., a large amount of gas resulting in the fast confirmation). Because PoW is computationally demanding, it can squander a lot of power on pointless block mining jobs. It is expected if the mining process is employed for valuable activities, such as assisting with mathematical puzzles and performing machine learning tasks.
What is Hyperledger Fabric?
Hyperledger Fabric is a distributed ledger technology that can also be used to run smart contracts. Unlike Ethereum, which uses virtual machines (VMs) to run smart contracts (i.e., EVM), Hyperledger Fabric smart contract uses a Docker container to run the code. Unlike VMs, containers can allow smart contract applications at a reduced cost without compromising isolation (i.e., applications in one container are running on top of one operating system).
The Linux Foundation oversees the Hyperledger Fabric project. They did, however, receive a significant investment from IBM. In any case, some of you may be familiar with it as the IBM blockchain. Fabric enables traditional high-level programming languages such as Java and Go instead of building Ethereum smart contract languages (aka Golang).
Additionally, Fabric is Turing complete, and the data model used by Fabric is key-value pair (description of the value and the value). An example for key-value pairs is as follows: “car”: “Mercedes.” Here, the car is the key, and Mercedes is the value.
Fabric’s blockchain network is permissioned (private or consortium) because it accommodates broad enterprise applications. Certificate authorities (CAs) must approve users before joining the network. Multiple types of CAs coexist in the network because diverse responsibilities are played. The enrollment certificate authority, for example, allows users to register with blockchains. In addition, the user must seek transaction certificates from the transaction certificate authority following registration. Within the permissioned blockchain network, consensus can be quickly obtained.
What is Corda?
Unlike Ethereum, which has a wide range of uses, Corda is focused on digital-currency applications. It’s a distributed-ledger platform for storing and processing digital-asset data from the past. But, does Corda support smart contracts? Corda smart contracts work on top of the Java Virtual Machine (JVM) and use high-level programming languages like Java and Kotlin. Meanwhile, to enable verifiability, Corda is Turing incomplete. Furthermore, Corda’s data model is a transaction-based approach.
Corda is frequently used to enable private platforms, in which businesses create their network to exchange digital assets securely. Consensus can be reached quickly on private blockchain platforms. The consensus algorithm in Corda is Raft.
Raft is a crash-fault-tolerant (CFT) ordering service that operates on a “leader and follower” basis, with a leader node elected (per channel) and followers replicating its decisions. CFT adds a layer of robustness to the protocol, allowing the algorithm to continue the process and establish agreement even if individual components fail.
Selecting a leader, log replication, and safety assurance are all ways to create consensus in Raft. Corda employs a point-to-point messaging system instead of worldwide broadcasting in blockchains. The message receivers and the particular information to be transmitted must be specified by the users.
What is Stellar?
Yes, Stellar supports smart contracts, but Stellar contracts are not Turing complete so how is a Stellar smart contract created? A Stellar smart contract is a collection of connected and executed transactions using various constraints and is designed to send, store and trade value.
Multisignature — a notion that requires the signatures of multiple parties to sign transactions originating from an account — and Batching / Atomicity — the concept of combining many operations in one transaction — are two examples of restrictions for Stellar smart contracts. Atomicity is the promise that if one operation in a series fails, the rest of the transaction will still work.
Stellar, like Fabric, executes program codes on top of Docker containers, resulting in lower overhead. The execution cost of a single transaction at Stellar, for example, is only $0.0000002, which is almost insignificant. Furthermore, one transaction in Stellar takes roughly 5 seconds on average to complete, compared to 3.5 minutes in Ethereum.
Stellar is thus an excellent platform for digital money applications. Stellar, like Ethereum, uses the account-based approach as its data model. Stellar Consensus Protocol (SCP) is the company’s consensus algorithm. SCP allows parties to agree without relying on a closed system to keep track of financial transactions. Because Stellar is permissioned, reaching a consensus is simple.
What is Rootstock or RSK?
RSK works on top of Bitcoin and allows for faster transaction processing. RSK, for example, may confirm a transaction in less than 20 seconds. Meanwhile, RSK is Ethereum-compatible (e.g., adopting Solidity to implement contracts). Rootstock smart contracts are Turing complete as well. RSK also created its virtual computers for running smart contracts. RSK’s data model is also account-based, even though RSK is a public blockchain system.
RSK created a consensus mechanism based on PoW and implemented it in a lightweight manner, lowering the overhead. RSK, like Corda and Stellar, was designed to enable primarily digital-currency applications.
RSK has validity in that it is significantly safer than systems that are not based on blockchains because it is built on top of Bitcoin. However, it may place additional strain on the Bitcoin blockchain. RSK needs to figure out how to remedy this situation.
Smart contract platforms compared
The main aspects of the above-mentioned smart contract platforms are explained in this section.
EVM is used to execute Ethereum contracts. JVM and RSK virtual machines are used by Corda and Rootstock, respectively. On the other hand, Fabric and Stellar execute smart contracts on top of Docker containers, lowering overhead while compromising application separation.
Ethereum, Fabric and RSK all have Turing complete smart contracts; however, Corda and Stellar have Turing incomplete smart contracts. Contracts that are Turing-complete are usually more expressive than contracts that are Turing-incomplete. However, Turing completeness raises the possibility of software defects becoming vulnerable to malicious assaults.
Applications of smart contracts
Unlike Corda, Stellar and RSK exclusively support digital money, whereas Ethereum and Fabric offer a broader range of applications, including digital currency, digital asset management, capital investment, government and the sharing economy. Corda, Stellar, RSK and their descendants may support more generic uses in the future.
Ethereum and RSK are public (i.e., permissionless) smart contract platforms, meaning that anybody can join the network at any time. In contrast, Corda and Hyperledger are private platforms that only authenticated users can access. Stellar is a consortium blockchain that spans multiple corporate sectors and sits between public and private blockchains (or organizations).
PoW is used by Ethereum and RSK so that the validation of a block’s trustworthiness is analogous to the solution of a computationally challenging problem (i.e., a puzzle). The majority of PoW consensus algorithms are computationally demanding.
Fabric opts for the Practical Byzantine Fault Tolerance (PBFT) consensus mechanism, which involves numerous rounds of voting among authenticated nodes to achieve a decision. As a result, PBFT is network-intensive. Instead of a global system, Corda uses a basic consensus mechanism called Raft to achieve consensus amongst different sectors at the level of individual deals. On the other hand, Stellar implements a simple consensus technique called SCP to arrive at a consensus.
Similar to Bitcoin, Corda uses the unspent transaction output (UTXO) mechanism. Each payment in the UTXO model must mention the prior unspent transaction as the input. The stated transaction is then completed. On new unspent transactions, the adjustments will be made.
In contrast, account-based models are used by Ethereum, Stellar and RSK. In account-based models, the balance of an address is recorded directly rather than computing all the unspent transaction amounts. Fabric makes use of the key-value concept in which data is stored in blockchains as key-value pairs.
The characteristics of the above-mentioned smart contract platforms are summarized in the table below.
Why is smart contracts development important for companies?
One of the most significant issues companies face is a lack of trust when dealing with third parties. Organizations act cautiously and spend substantial time and money on intermediaries while settling agreements due to a lack of trust and transparency.
When contract conditions can be seen publicly, smart contracts can help by removing the intermediaries. Using blockchain technology, these contracts increase trust and transparency between two parties. In addition, they make it possible to create immutable and accessible contracts.
Smart contracts are a new technology that can boost efficiency in a variety of industries. As the technology improves, more businesses will use it to cut expenses and facilitate quick and safe transactions. When agreement details can be seen publicly and digitally, smart contracts can take the position of agents who mediate agreements. Smart contracts, for example, can replace lawyers in legal processes that rely on traditional torts, property, civil procedure, evidence or contract analysis by automating laborious operations.
Finalizing a contract because of the intermediaries and paperwork involved in typical contracts is time-consuming. However, smart contracts can be concluded more quickly since they do not require intermediaries. Also, because smart contracts are written in computer code, fewer parties will make manual mistakes throughout the contract drafting process.
Furthermore, blockchain technology makes transactions safer because of its decentralized structure. For example, if hackers wanted to change the dollar amount in a transaction, they’d need to control at least half of the blockchain’s computational power. Though the technology does not render the system impenetrable, it does make the procedure more difficult.