*obligatory not financial advice*
Smart contracts are programs that run a blockchain and cannot be altered or sabotaged after they are launched, this makes it possible to use your cryptocurrencies in a trust less manner where you don't depend on a third party like a bank. I like to compare them to vending machines, the machine is holding the product and will only give it out after it gets the money then it holds the money until the seller collects it, both sites get what they want thanks to an unbiased and emotionless machine. Smart contracts or DApps, for decentralized applications, are much more complex of course and can be used for many different things like programs that allow you lend or borrow cryptocurrencies or many other things. They are essential for decentralized finance and will likely play a huge role in the future, that’s why I want to show you my 5 favourite smart contract blockchains.
1. Ethereum ETH
Ethereum is the smart contract king. It is the second largest cryptocurrency by market cap and many people believe that it will eventually surpass even Bitcoin. It has healthy and established ecosystem because many famous projects like Aave and Enjin are running on Ethereum. It supports NFTs, Blockchain games, decentralized finance and much more. The ETH coin is used to pay for transactions and smart contract executions, so it becomes more valuable if more people use it. The network uses a proof of work consensus, which means ETH can be mined like Bitcoin.
Currently ETH is facing serious scaling issues because transactions and smart contract executions need several minutes and can cost more than $10. However, developers are currently working on switching to proof of stake which would hopefully solve this problems. Until then it makes little to no sense to use Ethereum for transactions with little money, unless you use a second layer solution like Polygon.
Ethereum is far from perfect but it is still being further improved and it has first mover advantage when it comes to smart contracts. Ethereum is here to stay.
2. Tezos XTZ
Tezos is desinged to embrace long-term upgradability, open participation, collaboration, and smart contract safety. Tezos has seen quite a lot of adoption recently, Red Bull Racing and Marvel have partnered with Tezos and will build NFTs for their fans on the blockchain, even European governments have started to adopt the blockchain to build digital IDs and maybe they will create Central Bank Digital Currencies with the network.
Network fees are paid with the XTZ coin that is also used for staking. The blockchain uses a special liquid kind of proof of stake that allows XTZ holders to stake their coins without locking them up, which makes it much more convenient to participate in staking and governance. For a long time the project has neglected marketing but this changed a few weeks ago when they started to advertise on Reddit and the Brave Browser. With all the bullish news that Tezos had in the past few weeks it’s a mystery to me how it’s only the #42 cryptocurrency by market cap. Everything about it just screams undervalued.
3. Cardano ADA
Cardano is a blockchain with very slow, but thoughtful development. All proposals and changes are strictly reviewed and only implemented after everything has been double and triple checked to be perfect. This makes everything painfully slow but the recent Poly hack where somebody abused a flaw in the system to steal several millions of dollars’ worth of crypto shows that you cannot be careful enough. However Cardano is seriously behind in its development compared to the other blockchains in the list because smart contracts have yet to launch on the main network, but with such a dedicated community behind it, it is very likely that the Cardano ecosystem will grow like crazy.
The native coin of Cardano is called ADA. Similar to Tezos, Cardano is a proof of stake blockchain that uses a liquid kind of staking that doesn't require you to lock up your funds. One great thing about staking ADA is that staking pools that grow to big will earn less rewards, this is why Cardano has well over thousand different staking pools, making it in theory one of the most decentralized cryptocurrencies.
I can totally see how someone would consider ADA to be way overpriced for the moment considering it doesn't even have smart contracts yet, but I do think that it will soon grow into a healthy blockchain ecosystem if smart contracts finally get implemented successfully.
4. Algorand ALGO
Algorand was invented with the intent to disprove the blockchain trilemma that was proposed by Ethereum founder Vitalik which states that a blockchain can only focus on two of the following attributes at a time:
- Scalability
- Security
- Decentralization
Vitalik argues that you cannot make a blockchain more secure and scalable without making it less decentralized, or more secure and decentralized without making it less scalable. Algorand was founded with the intent to max out all three of this attributes. So far it has gained some popularity and has been adopted for a numerous different things, for example there is tokenized gold and the Marshall Island are building their official digital national currency with the blockchain.
ALGO is the native coin of Algorand and it is used for paying network fees, which are a fraction of a cent, and for staking which also doesn't require you to lock up your funds. One big problem that the cryptocurrency has is its terrible tokenomics, the founders hold a huge amount of the supply and keep selling them each time the price starts to rise in order to fund the development, this bad for the price because this huge selling pressure brings the price down again and prevents it from gaining bullish momentum. However, by 2030 all coins will have been sold and this will stop, until it could be better to invest into the other cryptocurrencies on this list but Algorand will likely keep growing as a network.
5. Solana SOL
Solana is a blockchain that built from the ground up to be very scalable. It can process several thousand transactions per second, making it one of the fastest blockchains. This insane processing power makes it very convinient to use DeFi protocols. Audius, a decentralized competitor to Spotify and YouTube Music, is running on Solana, and it has seen a lot of growth in the past week due to its partnership with TikTiok, this could bring a lot of new users to Solana. The SOL coin a max supply of 489 million coins and is used for staking. Solana was made to be useful for both institutions and for regular folks, so far it has seen a steady growth and will likely continue to grow.
Honourable Mentions
Tron: This was originally a scam that the founder used to raise money to pay of his debts, but he had money left and decided to actually build the blockchain. Since then it grew to a well-established proof of stake network that is cheap to use and has plenty of DeFi protocols and blockchain games running on it.
Binance Smart Chain: A smart contract platform that was built by Binance, the world biggest exchange. 90% of its nodes are run by Binance which is why it doesn't enable DeFi but CeDeFi (centralized decentralized finance). Plenty of newer shitcoins like Safemoon and Safemars are built on it, this may sound like a bad thing but this means that the Binance Smart Chain is easy to use and that especially for beginners in the crypto world.
Zilliqa and Harmony: Both blockchains that make use of sharding and sidechains to be more saleable, just like Ethereum 2.0 will eventually do.
