How will smart contracts work on Cardano?

How will smart contracts work on Cardano?

How will smart contracts work on Cardano?

Although Cardano is a smart contract platform, until now it didn’t actually support smart contracts! The Cardano project is being released in stages and it’s only now, in the summer of 2021, that Cardano is finally going to support smart contracts.

Cardano (ADA) is a decentralized, open-source smart contract platform that’s secured by a Proof of Stake (POS) consensus mechanism. Created in 2015 by Charles Hoskinson and Jeremy Wood, Cardano’s primary attribute is that it’s built on peer-reviewed research. That is, the code that Cardano runs on has been checked and approved by professional researchers, as opposed to projects like Ethereum which run on community-created code that hasn’t been peer reviewed.

In this article we’ll explain how smart contracts will work on Cardano, and why they’re going to be such a game changer for this promising project.

    All About Smart Contracts

    A smart contract is a contract written on the blockchain which executes automatically based on a certain set of rules.

    If X happens, do Y.

    That’s a very simple example but smart contracts can be incredibly complex. For example, the decentralized exchange Uniswap is a smart contract, as is the decentralized lending protocol MakerDAO. Coins like LINK and UNI are also based on smart contracts.

    Where to Use a Smart Contract

    Smart contracts are very versatile and can be used to support all sorts of functions. In addition to decentralized applications and tokens, the following are three use cases for Cardano smart contracts:

    1. Government Programs

    Land deeds, car titles and property records are just a few of the things that can be recorded to the blockchain via Cardano smart contracts. It’s easy to imagine the increased efficiencies that this could introduce into government programs.

    For example, to transfer a car title the seller has to write out a receipt by hand and sign the title. The buyer takes the title and the receipt to the DMV, waits in line for two hours and then pays a $75 fee. Six weeks later they receive a new title in the mail.

    A smart contract could do all of that in a few minutes and charge a $0.25 transaction fee. There are thousands of ways for Cardano smart contracts to improve government programs and cut down on slow, bureaucratic processes.

    2. Insurance

    Insurance companies can use Cardano smart contracts to process claims faster. A smart contract can check that a driver has a valid license, registration and insurance policy, all of these documents being stored on the blockchain. The contract can then approve a payment and release the money to the driver and mechanic.

    3. Voting

    Cardano smart contracts can be used to effectively end voter fraud (and also false allegations of voter fraud from corrupt politicians). Personal identification can be securely stored and verified on the blockchain, without third parties needing to break the privacy of the ID holder. Votes that are cast will be recorded on an immutable blockchain ledger which cannot be altered or tampered with, therefore it will be harder for politicians who lose elections to sow discontent by falsely claiming election fraud.

    These are just a few examples of where Cardano smart contracts can be used. Other examples include:

    • Accounting
    • Voting
    • Recordkeeping
    • Buying and selling property
    • Medical records

    And so much more…

    The Alonzo Hard Fork

    The name Alonzo is borrowed from Alonzo Church, the US mathematician who made several key discoveries in the field of computer science. The Cardano team is paying tribute to Alonzo by naming their hard fork after him, the hard fork that will bring smart contract capabilities to Cardano.

    Once Cardano ADA smart contracts go live, developers will have the option to create customized smart contracts on Cardano, just like they can for other platforms like Ethereum and Tezos. This will bring all sorts of benefits to the network.

    Enterprise Benefits

    Enterprises stand to benefit from Cardano smart contracts potentially more than anyone else. That’s because both large and small businesses can use smart contracts to automate work that humans perform now.

    For example, smart contracts are great at tracking outgoing and incoming payments. Although we’re not quite at this point yet, smart contracts will eventually replace many different kinds of accounting jobs, saving enterprises significant amounts of money.

    Enterprise clients can also use smart contracts to improve their supply chain management. Cardano smart contracts can track shipments through the supply chain and make payments accordingly.

    Language Support

    Developers code smart contracts on Cardano using the Plutus Core programming language. Plutus is a special language that’s based closely on Haskell.

    Cardano uses Haskell and Plutus since they’re two languages that allow developers to create new applications while making fewer mistakes in their code. This is a big advantage since creating smart contract applications can be quite difficult and errors can lead to the loss of funds.

    Cardano smart contract developers can also create financial products using the Marlow programming language. More on that in the following section.

    The Cardano Advantage?

    Cardano has an excellent consensus mechanism which allows anyone to stake. Fully 70% of all ADA is staked which guarantees excellent network security. Decentralized staking is definitely one of Cardano’s key advantages.

    The Marlowe programming language is another one of Cardano’s best features. According to the IOHK development website, “Marlowe is special-purpose language for financial contracts on Cardano, allowing contracts to be written in the language of finance, rather than using a general-purpose language on the blockchain. Because it is special-purpose, it is easier to read, write and understand Marlowe contracts.”

    Basically Marlowe is a way for the average person to create a smart contract, even if they don’t have any development experience. Making Cardano smart contracts more accessible to the lay person could be another way that Cardano catches up with the competition, many of whom launched smart contracts years ago.

    Lower fees and faster transaction speeds are another reason why Cardano could prove to be popular. Then there is the Cardano VC-Catalyst fund, which has more than $250 million that can be used to encourage developers to create new Cardano ADA smart contracts.

    Projects that have committed to building on Cardano include Singularity Net, an artificial intelligence marketplace that was previously built on Ethereum, and Liqwid Finance, a DeFi protocol that automates the process of sourcing or supplying liquidity, and receiving interest fees and rewards in exchange.


    Cardano is finally reaching the end stages of its development. Proof of Stake is live, developers can create custom tokens and coming soon are Cardano smart contracts. Here’s where it starts to get interesting and where we’ll get to see just how many people want to use Cardano instead of a competitor like Ethereum or Tezos.

    By the end of the year there should be dozens or hundreds of decentralized applications running smart contracts on Cardano. The network statistics and traction that these projects get will give us an idea of whether Cardano can compete with Ethereum in the long run.

    This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.

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