Ethereum’s major competitors in the cryptocurrency industry are smart contract blockchains, which are initiatives intended to improve Ethereum’s technology in terms of security and scalability, both of which are part of the blockchain trilemma.

The Ethereum network intends to upgrade to Ethereum 2.0. The update aims to shorten processing time, reduce costs, and improve scalability.

What are Smart Contracts?

Simply put, a smart contract is an agreement between two persons written in computer code.

They are digital contracts stored on a blockchain, automatically executed when specified terms and conditions are met. 

Smart contracts are considered to be immutable, verifiable, and self-contained pieces of code.

Competitors to Ethereum  

Ethereum’s competitors are vying for a substantial market share in the smart contract industry. The blockchain trilemma refers to blockchains’ inability to balance security, decentralization, and scalability.

Decentralization refers to blockchains’ ability to distribute data and processing power across their network’s many devices. Ethereum’s competitors claim to have solved the blockchain trilemma. Some are briefly discussed below

Cardano (ADA)

Cardano is backed by three (3) independent organizations.

The Cardano Foundation is in charge of the Cardano blockchain’s development. Cardano was created by IOHK, as was Ouroboros, the proof-of-stake algorithm that Cardano employs to run its network. 

EMURGO facilitates the adoption of Cardano technology by corporations and larger organizations.

Cardano’s primary use case is to enable transactions in its native cryptocurrency, ADA, and to enable developers to build secure decentralized apps that utilize it.

Cardano differs from other blockchain projects in that it promotes a research-driven approach to design. It believes that academic rigour will aid in the adoption of the technology.

Cardano avoided some of the mistakes made by its predecessors before launching peer-reviewed research. This was a huge advantage because it helps prevent future problems. It was also one of the first blockchains to use a Proof-of-Stake consensus mechanism.

The Cardano team identified three (3) significant issues with the current cryptocurrency exchange system: exorbitant fees, a lack of liquidity, and usability. Cardano is building an open-source, decentralized money trading platform to address these challenges.

Cardano is still in development. The development team has devised a five-stage roadmap. These stages include Byron, Shelley, Goguen, Basho, and Voltaire.

The ultimate objective is to create a self-sustaining decentralized network. 

Solana (SOL)

Solana, named after a beach that Anatoly Yakovenko admired, was formally launched in March 2020. Solana was designed to make the development of smart contracts and decentralized applications, or DApps, easier. Its white paper is quite technical, containing only a few easily understandable lines.

Solana has a block time of 400 milliseconds, which is very fast compared to Ethereum’s block time of 10 seconds. Solana claims that they can handle up to 710000 transactions per second, which is roughly 30 times the amount that VISA currently handles, though they have never been able to go beyond 65000.

Transaction fees for Solana are around $0.00025 per transaction. Solana’s speed and low transaction fees are due to its consensus mechanism.

Solana does not use Proof-of-Work or Proof-of-Stake consensus mechanism. The Solana white paper introduced a novel system called Proof-of-History, which is similar to Proof-of-Stake but incorporates the additional variable of time.

Fundamentally, Proof-of-History is not a consensus mechanism but a method of integrating time into the blockchain data. It uses timestamps to place a specific date and time on the blocks, allowing for instant sequencing of validators. This allows the validators to submit blocks in the correct order without having to communicate back and forth, which saves a lot of time.

Polkadot (DOT)

Polkadot was launched in May 2020, after three years of development. It is a smart contract blockchain advocating for Web 3.0 by emphasizing decentralization, speed, and security. Polkadot, unlike Ethereum, is structured as a web of autonomous blockchains linked by a relay chain. It is essentially a protocol that connects blockchains, allowing the transfer of currency and data across previously incompatible networks (Bitcoin and Ethereum, for example). It is also intended to be fast and scalable.

Gavin Wood, who previously worked with Ethereum and played a major role in the development of Solidity, revealed his motivation for quitting Ethereum and launching Polkadot was due to his dissatisfaction with Ethereum’s delayed move to Ethereum 2.0.

Polkadot is well-known for its interoperability, which allows numerous blockchains to merge into a single network, allowing them to exchange data without jeopardizing their security. Interoperability is one of the significant features of the proposed Web 3.0.

Polkadot offers on-chain governance relay chain functionalities, allowing users to vote on updates. If a specific update is voted on and approved, it is instantly deployed to the relay chain, eliminating time-consuming controversial forking. Ethereum, on the other hand, is community-centric. Therefore, an update by forking off takes a long time.

Algorand (ALGO)

Algorand was created in 2017, and its mainnet ALGO coin debuted in June 2019. The blockchain addresses the scalability and consensus mechanism difficulties that plagued first- and second-generation blockchains. The main feature of Algorand is its Pure Proof-of-Stake consensus mechanism, which selects validators at random based on their staked ALGO tokens.

The blockchain’s main strength is its power decentralization, as every stakeholder has the opportunity to be a validator. ALGO is utilized for network transaction costs and earning block rewards in addition to consensus.

Algorand utilizes a ‘democratized’ Pure Proof-of-Stake (PPoS) consensus mechanism, which means that only a chosen group of miners are compensated for dedicating their computer resources to the blockchain. This randomization is the outcome of a one-of-a-kind cryptographic technique known as the VRF (Verifiable Random function).

Pure Proof-of-Stake is a distributed consensus mechanism. ‘Pure’ Proof of Stake refers to the requirement to lock up or bond the ALGOS to participate in the staking process, and the power is proportional. Other blockchains need stakers/validators to lock up tokens to participate in transaction validation.

Elrond’s (EGLD)

Elrond is a fast, cheap, and efficient blockchain designed to be applicable in several use cases. Elrond Network provides industry-leading scalability by utilizing Adaptive State Sharding and its own Secure Proof-of-Stake (SPoS) consensus process.

Elrond’s cryptocurrency, EGLD, is crucial to the network’s upkeep. EGLD can be used for transmitting data, rewarding network contributors, and executing smart contracts.  Users who own and stake EGLD acquire the right to vote on network enhancements and are rewarded with newly minted EGL tokens in proportion to the amount staked.

Elrond is approximately ten thousand times faster than Ethereum, which is limited to 20 transactions per second. This limitation will not be addressed until ETH 2.0 Phase sharding is fully implemented.

Conclusion

• A smart contract is a two-person agreement written in computer code.
• Ethereum’s competitors are vying for a substantial market share in the smart contract space.
• Solana, Cardano, Algorand, Elrond, and polkadot are some of these competitors.

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