Benzinga Reports: Ethereum Predicted to Become the Global Standard Smart Contract Blockchain

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Contributor, Benzinga
June 2, 2021

According to data collected by Benzinga from crypto traders and investors, Ethereum is the smart contract blockchain most likely to become the global standard. Out of 100 investors polled, 56.7% said Ethereum, 20.6% said Cardano, 8.2% said the Binance Smart Chain and 14.5% reported other platforms. 

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Investors also reported that decentralization, application ecosystem and scalability play a role in which blockchains they are most bullish on. Of these factors, investors are on average most concerned with scalability and least concerned with decentralization.

Scalability refers to the blockchain’s processing times and ability to charge low fees. Typically, a blockchain’s ability to scale and be decentralized are inversely related. While scalability has been a problem for Ethereum in particular, investors are still most bullish on ETH. We attribute this to its future scalability, robust DeFi ecosystem and user network effects.

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What are Smart Contracts?

A smart contract is a piece of code executed on a blockchain that defines an agreement between parties based on the parameters of the code. Smart contracts execute automatically on the blockchain, allowing users to make complex agreements in a trustless, permissionless and decentralized way.

The concept of smart contracts was first described by cryptographer Nick Szabo in the 90’s. Vending machines represent a high-level example of a smart contract. The machine’s code executes a function based on user inputs: if a user selects and pays for Gatorade, the machine will dispense a Gatorade autonomously. 

Ethereum and other blockchains have their own programming languages that allow developers to build all sorts of applications using smart contracts. The future of finance is likely to become increasingly reliant on smart contracts and blockchains.

Ethereum 

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Ethereum has the first mover advantage as a smart contract compatible blockchain, but younger competitors like Cardano and the Binance Smart Chain are on the hunt for a chunk of Ethereum's market share. Ethereum is currently a proof of work blockchain undergoing a major upgrade, Ethereum 2.0. Among these major upgrades are a change in consensus and shard chains.

Consensus. 

Ethereum 2.0 will upgrade the blockchain’s consensus model from proof of work to proof of stake. Instead of miners competing for computational power to add blocks to the chain, stakers will lock currency for the right to add blocks (and reap the block rewards). Miners are incentivized to sell Ethereum to pay for additional computing power and energy bills, which makes stakers inherently better incentivized. Proof of stake will decrease the energy consumption of the network by over 99.9%.

Shard Chains

Shard chains are parallel, connected blockchains that will allow Ethereum to drastically increase its throughput and scalability allowing for a new wave of users who are currently priced out by high gas fees. 

Cardano

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Cardano is a proof of stake blockchain that released its payment settlement layer in 2017, and conducted an ICO for the coin, ADA, alongside it. Cardano plans to add smart contract capabilities in 2021 via a smart contract layer called the Cardano Computation Layer. Ethereum co-founder Charles Hoskinson started the Cardano project after leaving the Ethereum foundation when Vitalik Buterin decided to take the project forward as a non-profit. 

The Binance Smart Chain

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The Binance Smart Chain (BSC) is a proof of staked authority (PoSa) blockchain created by the largest centralized cryptocurrency exchange in the world, Binance. Binance’s Smart Chain is admittedly more centralized than Ethereum and Cardano, but has lower fees as a trade off. 

Binance Smart Chain runs in parallel with Binance Chain, and it’s the smart contract execution layer of the Binance Chain. The Binance Smart Chain has the 2nd largest ecosystem of decentralized applications, second to Ethereum. 

With Ethereum gas fees pricing out many retail investors, the BSC has seen significant growth. Decentralized exchanges, most notably PancakeSwap, have seen faster growth than platforms on Ethereum as of late.

Conclusion

Ethereum’s struggle to upgrade from proof of work to proof of stake has been highlighted by high gas fees and harsh criticism from environmentalists. This chink in Ethereum’s armor has been targeted heavily by Cardano and the Binance Smart Chain, and only time will tell if the flaw is fatal. For now, Ethereum is still home to the largest DeFi ecosystem, and layer 2 solutions show promise to scale Ethereum before the ETH 2.0 mainnet goes live.

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