Smart Contract Platforms
A comprehensive overview of the trends, technologies, key players, problems and potential of "Layer 1s" (Note: Data in this section last updated August 26th, 2022)
This article is intended to provide beginners with a somewhat thorough introduction to smart contract platforms. Although I’ve endeavored to simplify things as much as possible, the material is still quite dense at times and the article is over 10K words (a 30+ minute read). There are 8 parts which are summarized below for the tl; dr crowd:
1. What are Smart Contract Platforms?: Smart contract platforms are similar to computers in that you can use them to run programs and access digital businesses. The main difference from traditional computer platforms is that they i) can’t be shut down, ii) aren’t controlled by any one entity and iii) anyone can use them.
2. The History of Smart Contract Platforms: Ethereum was the first smart contract platform, but it has recently seen its dominance decline as competitors such as Solana, Binance, Solana, Avalanche, Tron and Polygon take share.
3. Why are Smart Contract Platforms Important?: They have the potential to create a decentralized economy, which will allows users to own their own data and assets, eliminate censorship, and maintain their privacy. In addition, these platforms will likely be much cheaper than traditional alternatives.
4. How do Smart Contract Platforms Work?: Smart contract platforms store data on a blockchain, run programs via smart contracts and secure the network using consensus mining protocols (all are explained below).
5. What are the Problems with Smart Contract Platforms?: The main problem with existing platforms is high transaction fees due to the “scalability trilemma” – the idea that one can’t create a system that is decentralized, secure AND cheap.
6. How do we Solve these Problems?: There are three proposed solutions to creating cheaper platforms: i) changing from Proof-of-Work to Proof-of-Stake, which is a much faster consensus protocol (consensus protocol improvements), ii) adding additional chains which will allow the processing of parallel transactions (sharding) and iii) reducing the load on the network by hosting data and / or performing transactions “off-chain” (Layer 2 solutions)
7. Who are the Key Players?: Important players to note include Ethereum 2.0, Binance, Cardano, Solana, Avalanche, Polkadot, Polygon, Tron, NEAR and Cosmos.
8. What’s Next? The Multi-Chain World: While it’s unclear whether there will be two, three, ten or one hundred smart contract platforms, it’s almost certain that this won’t be a “winner take all” market
Without further ado, let’s jump into the analysis! 👉
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