Ethereum was the first smart contract platform and still ranks as the top platform for many developers today.Read our review
Solana was created by a group of engineers from Intel, Qualcomm, and Dropbox in 2017.Read our review
Though still a fraction of Ethereum’s size, Algorand hosts a number of DeFi projects, and has made some traction with central bank digital currencies.Read our review
Avalanche claims to be the quickest smart contract platform in terms of finality, processing and finalizing transactions faster than any other platform.Read our review
Summary: Blockchain-based smart contracts are the technology that powers crypto. Our thesis is that these are among the most promising long-term investments, since the industry will consolidate into 2 or 3 smart contract platforms over time (buying them now could be like buying Microsoft or Apple in the early days). Here are our Top 7 investing opportunities, rated and reviewed.
What are Smart Contracts?
Smart contracts are just agreements: like a traditional paper contract, but using software instead. “Signed” between two or more parties, these contracts execute once predetermined conditions have been met, for example:
- After someone sends the money to you
- When a certain date has passed
- When a certain thing has happened (a price is met, an event is decided, all parties signed, etc.)
Typically, smart contracts are used to automate the execution of an agreement so parties can have an immediate assurance of the outcome. Smart contracts can also automate workflow, triggering an action once certain conditions are met.
Smart contracts follow “if/when…then…” statements, written into code on the blockchain. Once predetermined conditions have been met and verified, a network of computers executes the necessary actions. These actions could include releasing funds to the appropriate parties, sending notifications, registering a vehicle, or issuing a ticket.
Once the transaction is complete, the blockchain is updated. Thereafter, the transaction cannot be altered. Like a paper contract, it’s binding.
What are Smart Contract Platforms?
A smart contract platform refers to the blockchain platform that hosts smart contracts. As these are the “operating systems” that run the world of crypto, DeFi, and Web3, we believe smart contract platforms are among the most valuable investments today.
Our thesis is that the industry will eventually consolidate into just 2 or 3 major smart contract platforms: just as the PC industry has consolidated into macOS and Windows, the smartphone industry into iPhone and Android, and so on.
To find these early winners, we’ve rated and reviewed the top smart contract platforms available today.
|Market Cap||Turing Complete?||Consensus Mechanism||Transactions per Second (TPS)||Total Value Locked (TVL)||BMJ Rating|
|Ethereum (ETH)||$137.71B||Yes||Proof-of-work (but transitioning to proof of stake)||30||$46.98B||5.0|
|Solana (SOL)||$12B||Yes||Hybrid: Proof-of-history and proof-of-stake||50,000||$2.51B||4.5|
|Binance Smart Chain (BNB)||$37.53B||Yes||Proof of staked authority||20-30||$6.18B||4.0|
Investment token: ETH
Ethereum was the first smart contract platform and still ranks as the top platform for many developers today. It has a massive network of users and is known for being incredibly reliable. While it’s a bit slow and expensive due to its popularity, there are various “Layer 2” chains speeding things up, even while Ethereum moves to Proof of Stake. We give it a score of 5.0 due to its dependability and the fact that it is the 800-pound gorilla in the room. (BMJ Rating: 5.0)
Investment token: SOL
Solana was created by a group of engineers from Intel, Qualcomm, and Dropbox in 2017. Its main focus is scalability, and it has already achieved a record-high of 65,000 transactions per second. Due to its scalability potential, we gave Solana a score of 4.5. (BMJ Rating: 4.5)
Investment token: ALGO
Though still a fraction of Ethereum’s size, Algorand hosts a number of DeFi projects, and has made some traction with central bank digital currencies. It boasts some technological improvements that give it high marks on throughput and environmental-friendliness, so we give Algorand a score of 4.5 due to its scalability, speed, and low cost. (BMJ Rating: 4.5 )
Investment token: AVAX
Avalanche claims to be the quickest smart contract platform in terms of finality, i.e., processing and finalizing transactions faster than any other platform. It uses three blockchains to achieve fast finalization while keeping fees low and ensuring scalability, awarding it a score of 4.0. (BMJ Rating: 4.0 )
Investment token: BNB
Created by the largest crypto exchange Binance, BNB Chain supports smart contracts, and is EVM compatible. The platform uses a “proof of staked authority” consensus mechanism to reward stakers and process transactions. We give Binance a score of 4.0 due to its low fees and interoperability. However, it has a low number of validators, making it more centralized. (BMJ Rating: 4.0 )
Investment token: ADA
While Cardano has received some criticism for not delivering everything it has promised, it takes a slow and steady approach to development by testing and peer-reviewing everything before rolling it out. While it only launched smart contracts in September 2021, it already has over 100 projects in development on its ecosystem. We gave Cardano a score of 4.0, as the platform’s consensus mechanism allows anyone to stake, and 70% of all ADA is staked, guaranteeing excellent network security. (BMJ Rating: 4.0 )
Investment token: ATOM
Cosmos refers to itself as the “internet of blockchains.” Its primary focus is on interoperability, meaning that it ensures that different blockchains can talk to one another. Interoperability will become crucial as people and organizations increasingly use various blockchain networks. For this reason, we give Cosmos a score of 4.0. (BMJ Rating: 4.0 )
Smart Contract Use Cases
Trade finance can benefit immensely from smart contracts, as these contracts can help with cross-border payments, the international transfer of goods, and trade payment initiations.
Smart contracts can automate approval workflows and clear calculations that are presently very labor-intensive. This automation will help reduce work hours and dramatically reduce errors.
Every company requires employees to keep records of their communications, transactions, and messages. Typically, employees store these records in the cloud, on company servers, or in paper form. However, when employees need to share information among different businesses or departments, they either need to send the documents through the internet or deliver them by hand.
This can lead to a lot of back and forth, which is where smart contracts come in, as they can streamline the data recording process through automation.
Supply Chain Management
Smart contracts can reduce the risk of manipulation and lost items, as data transparency leads to fewer opportunities for fraud.
Additionally, smart contracts can use sensory data to track the location of goods and record their information during delivery. Then, if an item is lost or stolen during transit, a smart contract can detect the location. Smart contracts can also automate payments and routine tasks, such as inventory checking and delivery timetable planning, saving time and resources.
Smart contracts can help streamline property ownership transfers. Several countries, such as Ghana, Russia, and Sweden, have already launched pilot projects to register property titles using smart contracts.
Using smart contracts in the mortgage process will allow both parties to digitally agree to a property sale before payment processing takes place. Once the payment processing is complete, the smart contract will automatically update to reflect the change of ownership and new property ownership details.
An escrow is a legal agreement in which a third, neutral party receives and disburses money or property on behalf of the primary parties. Smart contracts can help facilitate the escrow process by making it automated and transparent.
For example, suppose a freelance writer accepts a job to write copy for a company’s website. Once the writer submits their work and the company verifies, a smart contract can automate payment securely without needing a third party.
The insurance industry loses millions of dollars due to fraudulent claims each year. In addition to supporting initial insurance policies, smart contracts can help with claims processing by error-checking and determining payment amounts.
Smart contracts can help the healthcare industry do away with paper-based systems and non-secure data servers. They can automate the storage and transfer of personal health records across departments and institutions in a secure, private way so that only relevant individuals can access the information.
Fraudsters can sometimes find ways to manipulate voting records stored on computer systems. Smart contracts offer a simple and cost-effective solution for voter fraud, as they can validate voter identification and record votes.
Smart Contract Platform Benefits
- Automation: No third parties or intermediaries are needed to confirm an agreement.
- Backup: All data is stored on the blockchain, with each node holding its own backup copy.
- Security: Smart contracts are immutable, so the data cannot be altered or changed in any way.
- Interruption-Free: Once the smart contract execution has begun, it can’t be interrupted or stopped.
- Trustless: With smart contracts, you don’t need to place trust in other parties to carry out a transaction.
- Cost-Effective: Removing third parties and intermediaries from the process helps make smart contracts more cost-effective.
- Accurate: By eliminating manual filing, smart contracts can help individuals and organizations eliminate errors.
- Fast: Once the parameters of a smart contract have been set, it can be executed seamlessly and quickly.
Smart contract platforms already power the world of crypto, DeFi, NFTs, Web3, with much more to come. Investing in these platforms now could be like investing in Microsoft in 1996. Our thesis is that the industry will consolidate into a handful of big winners -– the key is to pick those winners now, and hold on for the long term.
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