What are smart contracts?
A smart contract refers to a computer programme that lives on the blockchain. These programmes automatically run or execute specific actions when predetermined conditions are met. The thing that makes this contract ‘smart’ is that, unlike a normal legal contract, there is no need for a third party to see if the conditions have been met or see the transaction through. The computer programme will verify if the smart contract conditions are met before execution.
With the help of smart contracts, the blockchain network becomes a programmable platform that can host other applications — much like how apps work on your phone’s operating system. Smart contracts have become a game-changer in the cryptocurrency market and have created one of the biggest sectors in crypto, decentralised finance (DeFi).
The rise of smart contract technology
Altcoins have shown extraordinary growth over the past year as more people start to adopt and understand the technology behind them. You’ve most likely heard of the earlier smart contract based cryptocurrencies – like Ethereum, Solana, Polkadot – but the lesser-known smart contract players like Terra and Avalanche are actually the ones amassing massive gains and fixing many of the problems found in the earlier smart contract players.
With a market value of $21 billion, Avalanche (AVAX) is the 10th largest crypto, which in itself is a remarkable achievement for an asset barely two years old. Since its inception, AVAX has returned over 1 900%, outperforming Bitcoin, which only returned 350% in the same period.
What is Avalanche?
Those advantages are its scalability, security and decentralisation, the holy trifecta of any blockchain-based protocol.
Like Ethereum, Avalanche supports smart contracts to run decentralised applications (dApps) on its network. Avalanche’s unique Proof of Stake (PoS) mechanism is relatively low in energy use (compared to Bitcoin mining, as an example). Its blockchain design is slick and efficient enough to handle Visa-type transaction speeds (and better), but at much lower costs, and without sacrificing decentralisation or security.
Avalanche’s native token, AVAX, is required to power its ecosystem. It is essentially the currency needed to transact on the Avalanche blockchain, distribute system rewards, participate in governance (PoS allows crypto holders to vote on issues affecting the blockchain) and facilitate transactions on the network.
Why invest in Avalanche?
- Scalability and fees: Avalanche has come up with elegant solutions to the persistent problems of blockchain scalability and fees. Transactions on the Avalanche network are finalised in less than two seconds and can process over 4 500 transactions a second (more than Bitcoin, Ethereum, and Polkadot combined). These features put Avalanche on par with Visa and PayPal at a fraction of the cost. ‘Gas’ fees are a problem for Ethereum users, which makes Ethereum very expensive to use.
- AVAX is an inherently deflationary token: The AVAX tokens are minted into existence and burned (removed from circulation) as gas fees are paid. The burning of fees allows the AVAX supply to be reduced over time, therefore permanently lowering the amount of AVAX in circulation.
- Avalanche solves the issue of interoperability. Currently, many blockchains can’t talk to each other and leverage each other’s functionalities or data. Avalanche’s interoperable blockchains allow for this to be possible.
- Smart contract growth: Based on the total value locked (TVL) into smart contract platforms, Avalanche is currently the fourth largest blockchain, overtaking Solana with 4.6% of all smart contract value locked.
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