Cryptocurrency

What is Ethereum Smart Contract? Top 5 Ethereum Crypto Projects

Snapshot:

  • What is a smart contract? 
  •  How do smart contracts work?
  • Top 5 Ether projects (DeFi and Dapps)

‘Smart Contracts’ play a vital role in many decentralized applications (Dapps) and other projects being built on blockchain. Ether smart contract is simply a program that is based on the Ethereum blockchain. It consists of code and data that is stored in the Ethereum blockchain at a particular address. 

The Ethereum smart contract is such that developers can use the existing APIs to create more tokens that will be backed by the Ethereum network. The set of standards being followed by the majority of the tokens is the ERC20 standard. These smart contracts are self-executing contracts that consist of the terms of an agreement between the sellers and buyers. 

Ethereum tokens or popularly known as ERC20 tokens have seen a lot of traction in a very small period. The expanding use-cases of these tokens have made them quite popular in the crypto space. Investors and crypto experts can understand these ERC20 tokens and their utilities better only if they are clear about the fundamentals of the Ethereum blockchain and its smart contract. Let us understand what is a smart contract? 

What is Smart Contract? 

A smart contract is a self-executing contract that contains the terms of the agreement between the seller and the buyer through lines of codes. This code of agreements is present in the decentralized and distributed blockchain network. The transactions are trackable and irreversible while the code controls the execution. 

These smart contracts come in handy in permitting trusted transactions between anonymous and disparate parties without the intervention or requirement of any middleman or centralized authority. This trustless system of transactions governed by smart contracts requires no legal system or any external mechanism for enforcement. 

Blockchain technology came into the limelight as the foundation of the world’s largest cryptocurrency in terms of market capitalization, Bitcoin but it has expanded its wings far and beyond.

A smart contract, as stated by an American computer scientist and inventor of ‘Bit Gold’s virtual currency, Nick Szabo calls smart contracts computerized transaction protocols. These protocols execute the terms stated in the contract, hence the name smart contract. 

How do Smart Contracts work? 

1994 was the year when smart contracts were first proposed by Nick Szabo, the American computer wizard who invented ‘Bit Gold’. This was ten years before Bitcoin came into existence. Nick Szabo is often rumored as the real Satoshi Nakamoto, the hidden inventor of Bitcoin. However, he has denied all these rumors. 

These smart contracts were defined by him as the computerized transaction protocols which are capable of executing the terms of contracts written in the form of code. This man wanted to extend the functionalities involved in electronic transactions to the digital world. 

The paper proposed by Szabo also included the execution of the contract for synthetic assets including derivatives and bonds. The new world of modern transactions has seen many of the ideas proposed by Szabo come to reality. The complex term structures for payments are now being built in the form of standardized contracts with low transaction costs. 

Smart contracts are more like Ethereum accounts. They have a balance and are capable of sending transactions over the network. They are completely devoid of any control from an external user. They are just deployed onto the network and run as programmed. The different user accounts can then interact with this smart contract by executing certain functions that are defined on these smart contracts. As mentioned earlier, smart contracts define certain rules and can execute them just like regular contracts with the help of code. 

Top 5 Ether Projects 

Ether  project  Type  Volume  Number of Users in 24hr  
Decentraland  Property  $ 936, 799,000 44
Uniswap  Decentralized exchange  $8,669,930,616 28.05k
Axie Infinity  Game  $1,314,933,606 18.73k
Compound  DeFi  $2,100,562,528 395
Status  Wallet $183,512,000 125

Source: CoinMarketCap, DappRadar 

Many Ether projects have their focus on decentralized finance (DeFi). The goal of decentralized finance is to broaden the spectrum of cryptocurrency utilities. DeFi aims to expand the use-cases of cryptocurrencies from daily transactions to more complex financial uses such as derivatives and loans.  Get a detailed overview of the Top 5 DeFi cryptocurrencies of 2021: what is DeFi?

This decentralized finance space gained quite a traction in 2020 where the total value of the assets locked in these protocols rose more than 2000%. The ethereum dapps have gained quite a popularity in a very short period. This popularity of dapps has led to increased congestion and thus high fees. The fee is generally paid through the ether, the native token of the Ethereum network. This ether fees due to the increased congestion have become higher than ever. This is also because dapp users want their transactions to be processed faster by the ethereum miners. The greater is the fee attached the faster an ethereum miner will add them to the blockchain. 

Some of the widely used Ether projects or dapps are: 

Decentraland 

Decentraland is an ethereum backed virtual reality platform. Users can create and experience along with monetizing their applications and content. The native token for this platform is MANA. According to the developers, the introduction of blockchain technology to own land in the virtual world through decentraland has been a pioneering project in the field of property and blockchain technology. 

This ethereum backed dapp allows individuals to monetize the virtual estates and claim their ownership over the virtual properties. The virtual assets can be monetized by the owners through the native cryptocurrency MANA.  Here is a detailed overview of what is Ethereum Dapps? Top 5 Dapps of 2021. 

Uniswap 

Uniswap is a decentralized exchange (DEX) that does not take control over the user’s fund. This decentralized exchange is a milestone in Ethereum’s latest DeFi projects and movement. This exchange facilitates the trade of different cryptocurrencies.  The unique feature of this ethereum project is that it utilizes an automated market maker (AMM) system for the facilitation of trading. This implies that the underlying liquidity pools manage the actual coin-swapping that are run by smart contracts in opposition to the traditional financial system. 

Unlike the traditional trading system where the market price is determined by the supply and demand, an AMM-based exchange such as Uniswao has a pricing algorithm to determine the market price of each asset. The liquidity is provided by the investors who incentivize by pooling together for the execution of trades. This is one of the most popular DeFi projects of the Ethereum network. Here are the latest DeFi trends of 2021 that every crypto enthusiast and investor has his eyes on. 

Axie Infinity 

Axie Infinity is an ether blockchain-backed game where users can collect as well as raise digital characters called Axies. Axies are a type of non-fungible tokens (NFTs). This implies that these characters are cryptographically unique and rare. The gamers have full ownership over these NFTs. NFTs are collectible in nature leading to a huge market capitalization of this sector. Axie Infinity is famous for the NFTs gamers earn here which in turn can be used as collaterals or can be exchanged for monetary value. Confused between NFT and DeFi? Get a detailed overview on NFT vs DeFi: Top 5 DeFi and NFT projects. 

Compound 

The compound is a decentralized lending platform. It also runs on the ethereum blockchain and is credited for the invention of liquidity mining. The unique coin released by this company can be obtained by only those who contribute to the liquidity of the platform. It is another DeFi project that is taking the cryptocurrency world by storm. This DeFi technique has become a foundational technique for users to make money and for companies to attract new users. 

Status 

Status is an ether hardware wallet and also an ethereum based messaging company. It was launched in the year 2019. It can be easily downloaded on android mobile devices and has high-end security that is found in modern credit cards. Learn about the ethereum backed dapp wallets that will store your ether and other ERc20 backed tokens with the most advanced security features. 

The Final Takeaway 

Although most of us got acquainted with the blockchain world because of Bitcoin, Ether’s blockchain network ethereum has indeed revolutionized the way we perceive this technology. It is not limited to only finance or to be more accurate decentralized finance but has also put forward its foot into various sectors of  NFT, games, decentralized exchange, and many more. The dapps that are ethereum based have a wide range of use-cases which is gradually changing the world as we see it today. 

Experts believe that these dapps and other ether projects have the potential to become a household technology one day as is the internet. The power and trustless system that decentralization brings with it are enormous and we have just touched the tip of the iceberg. There are so many dapps being launched every month that are expanding the horizons for the ethereum network and its ERC20 tokens such as ether, aave, etc. 

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