How do smart contracts work?
Smart contracts are an innovative layer of blockchain technology that lets people talk and do business with each other through a “robotic middleman.” A smart contract can be thought of as a bunch of code that runs itself and does things that would have to be done by hand otherwise.
So what’s the deal with smart contracts? They add the element of not being able to be trusted that blockchains need. Can you trust a person you don’t know to follow up on a deal you made online? No, of course not.
Smart contracts can also automate tasks, host decentralized applications (DApps), and give people confidence. So, DeFi developers often use them to automate flash loans, standard loans, staking, and other features that aren’t found elsewhere.
On blockchain-based platforms, developers can make smart contract apps with simple interfaces. Smart contracts can be used on many of the existing blockchain platforms. This article will talk about and analyze the five most popular smart contract platforms: Ethereum, Hyperledger Fabric, Corda, Stellar, and Rootstock. It will also look at how popular they are in the growing community and how far along their technical development is.
Smart contract development platforms
This section discusses Ethereum, Hyperledger Fabric, Corda, Stellar, and Rootstock, which are the five most popular smart contract platforms.
What exactly is Ethereum?
Ethereum is a decentralized platform that makes it possible to carry out smart contracts. In contrast to Bitcoin’s Turing complete script system, Ethereum has made Turing complete languages like Serpent, Solidity, Low-level Lisp-like Language (LLL), and Mutan for applications that don’t use cryptocurrency.
Ethereum turns smart contracts written in Solidity, Serpent, LLL, and Mutan into machine code. This code is then loaded into the Ethereum virtual machine (EVM) and run. On the other hand, Ethereum smart contracts use a data format that is based on accounts. Each participant is identified by their digital wallet.
Like Bitcoin, Ethereum uses the proof-of-work (PoW) consensus method, which is hard to calculate. But Ethereum will soon stop using proof-of-work and start using proof-of-stake (PoS). This was always the plan, as it is a key part of the plan for the Ethereum community to grow through Eth2 upgrades. Ether (ETH) is used instead of Bitcoin to pay miners for the work they put into solving problems (BTC). To put it another way, the gas acts as an internal fee for completing a transaction to make up for the fact that the price of ETH changes all the time.
Informally, the total cost of a transaction can be estimated using the formula gas limit*gas price, where gas limit is the maximum amount of gas that can be used to build a block and gas price is the cost of one unit of gas (in ETH).
Users can spend different amounts of gas to confirm their transactions sooner or later (i.e., a large amount of gas resulting in fast confirmation). PoW takes a lot of processing power so it can waste a lot of power on useless block mining jobs. The mining process is expected to be used for useful things, like helping solve math puzzles and doing tasks for machine learning.
What is Hyperledger Fabric?
Distributed ledger technology, like Hyperledger Fabric, can also be used to run smart contracts. The code for a Hyperledger Fabric smart contract is run by a Docker container. This is different from Ethereum, which uses virtual machines (VMs) to run smart contracts (i.e., EVM). Containers, unlike VMs, can let smart contract applications run for less money without sacrificing privacy (i.e., applications in one container are running on top of one operating system).
The Hyperledger Fabric project is run by the Linux Foundation. IBM did, however, give them a large amount of money. In any case, it may be known to some of you as the IBM blockchain. The fabric lets high-level programming languages like Java and Go be used instead of building smart contract languages (aka Golang).
Fabric is also “Turing complete,” and its data model is a “key-value pair” (description of the value and the value). The following is an example of a key-value pair: “car”: “Mercedes.” In this case, the key is the car, and the value is Mercedes.
Fabric’s blockchain network is private or a consortium because it can be used for a wide range of enterprise applications. Certificate authorities (CAs) must give users permission to join the network before they can do so. There are different kinds of CAs in the network because they have different jobs to do. For example, the enrollment certificate authority lets users sign up for blockchains. After registering, the user must also go to the transaction certificate authority and ask for transaction certificates. In the permissioned blockchain network, it is easy to come to an agreement.
What is Corda?
Corda focuses on digital currencies applications, while Ethereum can be used for many different things. It is a platform for storing and working with data about digital assets from the past. But does Corda support smart contracts? Corda smart contracts run on top of the Java Virtual Machine (JVM) and use high-level programming languages like Java and Kotlin. In the meantime, Corda is Turing incomplete, so it can be checked. In addition, Corda’s data model is based on transactions.
Corda is often used to make private platforms, networks businesses build to trade digital assets safely. On private blockchain platforms, it’s easy to come to an agreement quickly. Corda uses the Raft algorithm to decide what to do.
Raft is a crash-fault-tolerant (CFT) ordering service that works with a “leader and follower” model. A leader node is chosen for each channel, and other nodes copy its decisions. CFT makes the protocol more reliable by adding a layer that lets the algorithm keep going and reach an agreement even if some of its parts fail.
In Raft, consensus can be reached by choosing a leader, copying logs, and making sure everyone is safe. Corda uses a point-to-point messaging system instead of blockchains’ way of sending messages to the whole world. The users have to choose who will receive the message and what information will be sent.
What is Stellar
Stellar is like Corda because it is a digital currency application platform. Stellar is a cryptocurrency that is easier to use and understand than Ethereum. On the other hand, Stellar might be able to support many languages, such as Python, JavaScript, Golang, and PHP. But is there a smart contract for Stellar?
Stellar does support smart contracts, but Stellar contracts are not Turing complete, so how do you make a Stellar smart contract? A Stellar smart contract is a group of connected transactions that are carried out using different rules. Its purpose is to send, store, and trade value.
Stellar smart contracts have restrictions like Multisignature, which means that transactions from an account need to be signed by more than one person, and Batching/Atomicity, which means that many operations can be done in one transaction. Atomicity is the promise that even if one part of a transaction fails, the rest will still work.
Stellar, like Fabric, run code on top of Docker containers, which reduces the amount of work that needs to be done. Stellar, for example, charges only $0.0000002 to carry out a single transaction, which is almost nothing. Also, one transaction takes about 5 seconds to finish in Stellar, while it takes about 3.5 minutes in Ethereum.
Stellar is a great place to build apps for digital money because of this. The account-based data model is used by both Ethereum and Stellar. Stellar’s consensus algorithm is called Stellar Consensus Protocol (SCP). SCP lets people agree on something without having to rely on a closed system to keep track of financial transactions. Because Stellar is permissioned, it is easy to come to an agreement.
What is RSK or Rootstock?
RSK is built on top of Bitcoin and makes it possible to process transactions faster. For instance, RSK may be able to confirm a transaction in less than 20 seconds. RSK, on the other hand, works with Ethereum (e.g., adopting Solidity to implement contracts). Smart contracts that are based on rootstock are also Turing complete. RSK also made its virtual computers so that smart contracts could run on them. Even though RSK is a public blockchain system, its data model is also based on accounts.
RSK made a consensus system based on Proof-of-Work (PoW) and put it into place in a lightweight way to lower the overhead. Like Corda and Stellar, RSK was made so that mostly digital currency applications could be made.
RSK makes sense because it is much safer than systems that aren’t built on blockchains because it is built on Bitcoin. But this could put more stress on the Bitcoin blockchain. RSK needs to figure out what to do to fix the problem.
Comparison of smart contract platforms
In this section, we’ll talk about the most important parts of the smart contract platforms we’ve already talked about.
Execution environment
EVM is used to run contracts on Ethereum. Corda and Rootstock each use a virtual machine called JVM or RSK. On the other hand, Fabric and Stellar run smart contracts on top of Docker containers, reducing overhead but making it harder to keep applications separate.
Turing completeness
Ethereum, Fabric, and RSK all have smart contracts that are Turing complete. On the other hand, Corda and Stellar only have smart contracts that are Turing incomplete. Most of the time, contracts that are Turing-complete say more than contracts that are Turing-incomplete. But Turing completeness makes it more likely that software bugs will be able to be attacked by bad people.
How smart contracts can be used
Stellar and RSK only work with digital money, while Ethereum and Fabric can be used for a wider range of things, such as digital money, digital asset management, capital investment, government, and the sharing economy. In the future, Corda, Stellar, RSK, and their offspring may be able to be used for more general purposes.
Supported languages
Solidity, Serpent, and Mutan are programming languages made just for Ethereum. At the moment, Fabric and Golang are supported, but Corda uses Java and Kotlin. Stellar can work with a number of languages, such as Python, JavaScript, Golang, and PHP. RSK’s contracts are written in Solidity so that they can work with Ethereum.
Permission
Smart contract platforms like Ethereum and RSK are public, meaning anyone can join the network at any time. Corda and Hyperledger, on the other hand, are private platforms that can only be accessed by users who have been verified. Stellar is a blockchain that is run by a group of companies. It is in between public and private blockchains (or organizations).
Consensus algorithms
Ethereum and RSK use Proof of Work (PoW) so that the trustworthiness of a block can be checked in the same way that a difficult math problem can (i.e., a puzzle). Most PoW consensus algorithms require a lot of computing power.
Fabric chooses the Practical Byzantine Fault Tolerance (PBFT) consensus mechanism, which has authenticated nodes go through many rounds of voting to reach a decision. Because of this, PBFT uses a lot of networks. Instead of a global system, Corda uses a simple consensus mechanism called Raft to reach agreements between different sectors on a deal-by-deal basis. On the other hand, Stellar uses a simple consensus method called SCP to reach a decision.
Data model
The unspent transaction output (UTXO) mechanism is used by both Bitcoin and Corda. In the UTXO model, each payment must list the last unspent transaction as the input. The transaction in question is then finished. The changes will be made to new transactions that haven’t been spent yet.
On the other hand, Ethereum, Stellar, and RSK all use account-based models. In account-based models, the balance of an address is kept track of directly instead of by adding up all the transaction amounts that haven’t been spent yet. Fabric uses the key-value idea, which says that data is stored in blockchains as pairs of keys and values.
The table below lists the main features of the smart contract platforms we’ve already discussed.
Why is it important for businesses to work on smart contracts?
When companies work with third parties, a lack of trust is one of the most important problems they face. Due to a lack of trust and openness, organizations are careful when making agreements and spend a lot of time and money on middlemen.
When the terms of a contract can be seen by the public, smart contracts can help by cutting out the middlemen. Using blockchain technology, these contracts make it easier for both parties to trust and understand each other. Also, they make it possible to make contracts that can’t be changed and can be accessed by anyone.
Smart contracts are a new type of technology that can make a lot of different fields more efficient. As technology gets better, more businesses will use it to cut costs and make transactions quick and safe. When details of an agreement can be seen by the public and digitally, smart contracts can take the place of mediators. By automating laborious tasks, smart contracts, for example, can replace lawyers in legal processes that use traditional torts, property, civil procedure, evidence, or contract analysis.
Most contracts take a long time to finish because they involve multiple people and a lot of paperwork. Smart contracts, however, can be done faster because they don’t need middlemen. Also, because smart contracts are written in computer code, parties are less likely to make mistakes when writing them by hand.
The fact that blockchain technology is decentralized makes transactions safer as well. For example, hackers would need to control at least half of the blockchain’s computing power to change the amount of money in a transaction. Even though the technology doesn’t make the system impossible to break into, it does make the process harder.
