SMART CONTRACTS
Smart contracts refer to computer protocols that digitally facilitate the verification, control, or execution of an agreement. Smart contracts run on the blockchain network, which will process all the transactions in a contract; hence, middle men are not required for executing the transactions.
For example, a smart contract could be programmed to release funds for someone's birthday each year. It could also be programmed to release payment once someone confirms receipt of delivered goods. It could be used to enforce particular rights for holders of digital assets.
Similar to traditional contracts, smart contracts define rules and penalties around an agreement and automatically enforce those obligations. While they can work independently, many smart contracts can also be implemented together.
The integral components of a smart contract are termed as objects. There are essentially three objects in a smart contract – the signatories, who are the parties involved in the smart contracts that use digital signatures to approve or disapprove the contractual terms; the subject of agreement or contract; and the specific terms. A smart contract is like a normal legal contract but it is written in a formal language and is enforced by computers. While a normal contract requires the legal system and law enforcement as a last resource to execute the actions triggered by the contract, the smart contract can directly trigger actions on the digital domain, such as making a payment or transferring ownership of a digital asset. Also, some legal contracts require a trustee (sometimes a lawyer or a law firm) as a third-party that executes certain actions at specific times, generally when the contract involves simultaneous exchanges of goods. Smart contracts can emulate the role of the trustee and replace it with a computer program. Therefore, as long as all the program inputs and outputs are in the digital realm, a smart contract can be completely automated and self-executing.
THE PROS AND CONS OF SMART CONTRACTS
AVALANCHE (AVAX)
AVAX is the native token of the Avalanche platform and is used to secure the network through staking, can be used to transact in a peer-to-peer fashion, pay for fees, and also provides a basic unit of account between the multiple subnetworks that can be created on Avalanche.
PROS
Heterogeneous in nature,
Instead of a single set of miners (or validators), Avalanche is a heterogeneous network of many blockchains and validator sets.
Speedy in confirmation
By implementing a new consensus protocol, it achieves finality in a few seconds, and provides the same security guarantees as waiting for the recommended number of confirmations with Bitcoin or Ethereum.
Scaling
Avalanche is designed to be massively scalable, robust and efficient. The core consensus engine is able to support a global network of potentially hundred of millions of internet - connected low and high power device that operates seamlessly with low latencies and very high transaction per second.
Snow Family of concensus protocols;
While the Snow consensus protocols are permissionless, it combines the best of both Classical and Nakamoto consensus.
No mining or high energy expenditure,
There is no mining or high energy expenditure as there is with Proof of Work systems.
Alleviation of network congestion and gas fees
the rise of Decentralised finance (DeFi) saw confirmation times and gas prices on Ethereum reach record highs, limiting participation in open finance to wealthy individuals and large organisations.
DeFi applications based on Ethereum can switch to Avalanche easily, alleviating the demand for block space, network congestion and gas fees. With an estimated throughput of 4,500 transactions per second and security thresholds above the 51% standards of other networks, Avalanche is well positioned to complement Ethereum as a smart contracts platform.
CONS
Decentralisation
While the network can support thousands to millions of block producers and there are already 1283 validators since launch, Ava Labs control ten percent of AVAXs total supply, amounting to 72 million tokens, and a further seven percent of the total supply (50.4 million AVAX) is to be distributed to developers and the community.
The challenge is distributing these tokens to ensure Avalanche is sufficiently decentralised so that any node does not account for more than one percent of the network. The Avalanche-X grant program intends to address this challenge by distributing AVAX to builders and developers within the ecosystem.