What’s a sensible/ smart contract?
A smart contract may be a sort of autonomous decentralised application.
Autonomous. It’s automatic and may run itself.
Decentralised. It’s not held in anybody place, or owned by anybody person. Instead, it’s a part of the blockchain. this suggests it’s tamper-proof and really reliable.
Application. A computer virus .
Smart contracts are one among the explanations everyone’s so excited about cryptocurrencies and therefore the blockchain.
It’s like having a robot which will do things automatically and which theoretically can’t be hacked or tampered with.
For example, someone could put $500 into an account guarded by a sensible contract, and set it up to send $5 to someone annually for his or her birthday for subsequent 100 years.
They can theoretically do that with 100% certainty that the cash are going to be sent exactly as programmed, and 100% certainty that nobody can ever tamper thereupon program or steal the cash .
Without smart contracts, you’d need to give the cash to somebody else then trust them to send it onwards, even after you’re gone.
The blockchain is common to both Bitcoin and Ethereum, and (almost) all cryptocurrencies. The decentralisation of the blockchain system is what makes it 100% reliable and tamper-proof.
But having the ability to program various functions into the blockchain, like sending $5 a year for 100 years, is that the smart accept action. That’s what Ethereum added.
While Bitcoin also allows for easy programmable actions almost like smart contracts, Ethereum was specifically designed to permit a particularly flexible range of smart contracts.
As you’ll imagine, smart contracts have enormous implications for businesses in almost any industry. tons of the new cryptocurrencies being created lately are offering built-in smart contract technology.
What makes bitcoin and Ethereum similar?
There are tons of similarities aside from the programming.
Both coins are valuable: At the time of writing bitcoin and Ethereum are the amount 1 and a couple of coins respectively in terms of market cap. They’re the world’s biggest and most precious cryptocurrencies.
Both coins are popular: Even with many other cryptocurrencies now alive , bitcoin and Ethereum remain widely used.
Both coins are old: a number of the newer coins outperform bitcoin and Ethereum in various ways. Other coins are quicker to transfer, or have lower fees, or have extra features.
Both coins use proof of labor mining: Mining is how transactions are processed on the blockchain. Back when bitcoin and Ethereum were created, proof of labor mining was how all cryptocurrencies handled transactions. lately , not all coins use proof of labor and a few coins don’t even need mining.
Also, both coins have scaling problems. Because they’re so old, both Bitcoin and Ethereum are having trouble with being too popular and having too many of us using them.
Having too many users means both can experience slower transactions and better transaction costs. to unravel this, both also are introducing their own different solutions to the present problem.
Over the years both coins have gone their separate ways, but their intended solutions to the scaling problem will make them even more different.
THE BITCOIN SOLUTION TO THE SCALING PROBLEM
Over the years Bitcoin has had offshoots that were specifically designed to unravel its scaling problem. Litecoin and Bitcoin Cash are two well-known examples.
But the Bitcoin as we all know it today resisted those hard forks and remained unchanged. Instead, it introduced a system called “SegWit”, and has plans involving something called the “Lightning Network.”
SegWit: how of arranging data to form transfers faster and easier. The downside is that it requires specifically compatible address types, so you’ll only use SegWit with certain wallets and certain exchanges. This basically means Bitcoin users often need to turn SegWit on and off to use it properly. For this reason, most of the people seem to only keep it turned off.
The Lightning Network: A system that basically involves fixing multiple payment channels to travel round the blockchain. the thought is to stay smaller transactions off the most bitcoin network. As of April 2020 it’s operational, but in limited use.
THE ETHEREUM SOLUTION TO THE SCALING PROBLEM
Ethereum’s smart contracts are extremely useful, but also can hamper the network. Especially when there are tons of complicated smart contracts with tons of various steps.
It needed different solutions. Its intended updates include:
Plasma: The Plasma update will only broadcast smart contracts to the most Ethereum blockchain after the contract’s completion. Basically, it moves all the complicated and slow parts behind the scenes and only puts the ultimate result on the most blockchain. this might prevent smart contracts, especially more complicated ones, from slowing down the network. As of April 2020 it’s believed that development on Plasma has stalled.
Proof of stake: this is often a serious change. It involves switching from the old proof-of-work mining system to a replacement and more efficient proof-of-stake algorithm. instead of having computers solve problems to verify blocks, it’ll instead have people verify transactions just by holding ETH in their wallets. It’s an increasingly common mining method for brand spanking new coins, but modifying an old blockchain like Ethereum may be a lot harder , and it’s going to introduce security risks.