With decentralized finance growing exponentially, more businesses are turning toward decentralized applications (dApps) and disrupting their respective industries. With that comes the search for a smart contract platform to support those dApps.
Thanks to the permissionless, autonomous, transparent, and decentralized nature of blockchain, it’s becoming a centerpiece of the innovation strategy for many brands. As of mid-March, about $75.5 billion of total value was locked into DeFi, according to DeFi Pulse.
Developing a proprietary system to host and maintain smart contracts and dApps is beyond the scope of most organizations. Only a few dozen smart contract platforms are in operation to handle the work. However, the ground is always shifting in this field. Let's take a look at the terrain and what features one should look for in a smart contract platform.
What is a smart contract platform?
To quickly grasp the role of smart contract platforms, it’s best to compare them to a familiar concept. Modern computers and smartphones require a base layer in the form of an operating system that enables all of the functions and applications to run and work together. In terms of dApps, contract platforms are that base. They are the operating systems that store transactions, incorporate and execute smart contracts, allow access for smart contract developers, process transaction fees, provide security, connect users to smart contracts through dApps, and perform other functions.
In other words, smart contract platforms provide a blockchain, a distributed ledger technology, that smart contracts can be added to and that dApps can manipulate as users desire.
Basic functions of smart contracts platforms
One of the primary functions of a platform is to enable and facilitate smart contract development, deployment, and execution.
Part of the appeal of smart contracts is that they are trustless. The parties involved need no third party to make sure that the contract conditions have been met. The coding takes care of that, and the contracts are self executing. dApps are decentralized applications. No central authority needed; a centralized agency is neither required nor desired.
Instead of having a central bank or government agency in control, contract platforms use a consensus mechanism. As blocks of data are added to the chain, nodes on the blockchain network quickly lock in the data and, in Hedera’s case, give it a consensus timestamp. (Or relatively quickly, depending on the platform.) Once consensus is reached, the data is immutable. It can't be changed. The ledger is fixed and secure.
Smart chain platforms also support the native tokens, or cryptocurrency, used to make secure payments in the network. These digital assets enrich the node operators, or miners, who work to add and verify new data to the chain. Ethereum uses ETHER, or ETH. This also is referred to as gas. The Hedera native currency is HBAR.
What is the best smart contract platform?
Choosing the right smart contract platform depends on the demands that you will place on a given system. Let's look at some of the criteria worth considering during the search.
When it comes to running smart contracts, transaction speeds matter. For instance, Ethereum is notorious for its relatively slow transaction speed. With the market-dominating Ethereum Virtual Machine, it was the first smart contract platform out of the gate. About two-thirds of dApps live on Ethereum, according to State of the dApps. The burden of that popularity can slow it down. With its limited capacity of processing about 15 transactions per second, transactions can huddle up in a long queue.
A second type of speed also factors in – how fast new blocks are added to the Ethereum blockchain. Ethereum's block time is about 13 seconds. In contrast, Bitcoin's block time is 10 minutes. Another smart platform rival, Solana, can add a new block every 0.4 seconds. Solana also claims a theoretical TPS of 50,000, although some measures have shown it operating at 2,000 TPS.
Hedera offers 10,000 TPS (throttled) for its native services, with finality of those transactions in 3-5 seconds. Hedera can process up to 15 million gas per second, the same as what Ethereum aims to achieve in an entire block.
The cost of smart contract platforms typically correlates with speed. Ethereum continues to be an offender in this category. During times of heavy network use, Ethereum gas fees can climb rather high.
The type of transaction affects the speed, and thus the cost. Complex contracts, such as certain token swaps, cost more than a basic transaction. For example, Ethereum transaction fees averaged around $50 in 2021. The average in mid-March was about $3 to $15, depending on the type of transaction. That said, we should note that fees swing up and down routinely. In comparing platforms, it's best to take a long-range view.
An example of a platform that provides a nice mix of cutting-edge speed and fixed, predictable costs is Hedera. The network launched in 2018 with HBAR as its native currency. It claims a speed of 10,000 TPS. For confirming that a transaction is final and immutable, Hedera clocks in at 3-5 seconds. And the average price per transaction with Hedera is a fraction of a penny, and always fixed — due to its scalability, the fees do not fluctuate based on current network usage.
Scalability goes beyond speed, although you often see them lumped together. It means that a blockchain platform can maintain its effectiveness and speed as it adds new users and traffic grows.
With the explosive growth of dApps and cryptocurrency, it's worth considering a smart contract platform that offers greater scalability. Hedera is a smart contract network that utilizes an optimized version of the EVM to take advantage of the scalability offered by its unique hashgraph consensus architecture.
Polygon, which originally was called Matic Network, is a strong contender in this category. It is software that operates on top of the Ethereum blockchain, which is why it's called a layer 2 solution. Polygon exists to bring scalability to Ethereum, at least until it finds its own scalability through Ethereum 2.0. Currently, however, Polygon is orders of magnitude faster and less expensive than Ethereum.
Popularity is nothing to sneeze at when you are as popular as Ethereum. A software development framework has risen up around it. Programmers create innovative solutions that work with current industry standards. They use the programming language, Solidity, that was designed for the Ethereum Virtual Machine. It would not be a stretch to call Solidity the smart contract language. Other contract platforms and layer 2 solutions build themselves to be compatible with Ethereum, so that contracts written for that platform will work on theirs.
While most hacks exploit safety oversights by dApp creators, security of the underlying network is still a crucial aspect.
While Algorand is a newcomer that hasn't gained much attention, it has still made a name for itself by offering some of the most secure smart contracts out there. It uses a pure proof of stake consensus mechanism. Algorand combines a three-chain subnet architecture with a security measure that its creator, Silvio Macali, calls “cryptographic sortition.”
One of the standard attributes for security is practical Byzantine fault tolerance. Hedara offers the strongest possible security for a public distributed ledger: asynchronous Byzantine fault tolerance.
5. Carbon Footprint
One of the mainstream narratives around cryptocurrencies revolves around its impact on energy use and the environment. It all boils down to the proof of work consensus mechanism.
PoW networks like bitcoin and Ethereum reward nodes for solving increasingly difficult cryptographic puzzles for the sake of verifying transactions and maintaining network integrity. For perspective, bitcoin has been estimated to consume more electricity than some European nations.
Rival platforms gain an edge in marketing, and then some, by using consensus algorithms that do not require the same type of massive computing power. Hedera, for example, uses 600,000 times less energy per transaction than Ethereum (0.00017 kWh / txn on average for Hedera). When compared to competing public networks, such as Algorand, Polkadot, Cardano, Ethereum 2.0, and even the VISA network, Hedera comes out on top as the most energy efficient network.
Making the call
The very nature of blockchain technology makes it difficult to recommend a particular smart contract platform — change is the only constant in this space.
Comparisons of smart contract platforms also depend on who is making the comparison. Someone who wants to invest in NFT wants one thing. A dApp developer appreciates other factors. A business looking for the best place to place its first smart contract has its own needs.
A smart contract platform like Hedera offers functions and services that cover a wide range. Its hashgraph virtual voting algorithm sets it well apart from other options. At the same time, Hedera’s investment in an optimized version of the EVM that takes advantage of hashgraph consensus will lead to numerous benefits for developers, including low gas fees, fast transaction finality, carbon-negative operations, and leaderless architecture. Additionally, because new blockchain developers use the EVM 30 percent of the time, Hedera’s EVM compatibility will give entry-level Solidity developers a new, less expensive way to develop and deploy dApps.