The idea behind Ethereum is ingenious: Connect computers from all over the world to build the most decentralized world-computer possible. However, we also all have seen the problems of the current, monolithic “one blockchain fits all” solution: Exploding fees, clogged network, long processing times and subsequently slow adoption in the real-world. You have all heard about Ethereum layer 2 solutions like Elrond or Polygon. But have you ever considered to solve Ethereums problems by seeing it as a second layer of an even more fundamental network?
This is exactly the strategy the IOTA foundation revealed with its recent IOTA smart contract protocol (ISCP) beta release.
They made the unique decision to have smart contracts not as a part of their feeless base-layer (the “Tangle”), but instead as a second layer solution. Each smart contract is one individual blockchain and is run by its own committee of nodes. This committee performs all smart contract computations internally and connects to the IOTA main-layer to create and send digital assets (NFTs, wrapped tokens, etc.) IOTA tokens and to communicate seamlessly with all other IOTA smart contract chains.
This layout allows IOTA smart contracts to be extremely flexible in design, different for each usecase and each user, while bein extremely scalable. It is the antithesis of the “one blockchain fits all” paradigm, a true cooperative multi-blockchain environment.
IOTA smart contract chain can choose freely between:
– Permissionless (for high decentralization) or permissioned (for trusted consortia) validators
– PoW, PoS, PoX or any other consensus mechanism
– Being feeless or getting paid in any currency (outside of the network in fiat or other crypto currencies, with a currency minted inside your IOTA smart contract blockchain (i.e. ETH) or with the native IOTA token)
– Creating own internal tokens (IOTA smart contract chains are complete blockchains after all)
– Communicate feeless and seamlessly with other SCs over the IOTA Tangle. You can interact with other smart contracts, build complex multi-SC networks and send around data, L2 tokens (i.e. ETH) or IOTA-based L1 token to every other connected SC chain.
– Control IOTA tokens and IOTA digital assets on the Tangle
– Use any programming language you want (currently supported Rust, Go and Solidity (Ethereum virtual machine), many more languages and bridges planned).
As you can see, IOTA smart contracts can be made in any way any company, government, DeFi developer, game-designer or private person would want them. It is a completely open playing field, a sandbox, ready to be flooded with ideas and use-cases.
The role of Ethereum in the IOTA smart contracts eco-system (“Apes together strong”)
IOTA is not an Ethereum-killer, it is an Ethereum enabler.
Ethereum is plagued by unpredictable fees and a clogged network because every single Banano -> Squirtle-coin swap needs to be processed by this literal world-computer. Every crypto-kitty, gambling-app or other fun little smart-contract project today gets secured with the insane levels of hash-power a literal world-computer has to offer and in turn becomes slow and expensive. Yes, there is a thing as having TO MUCH security for your crypto application and your latest gambling roulette or smart-neighborhood application in a suburb of Buenos Aires is a prime example for that.
All these smaller and mid-size use-cases can now migrate onto the IOTA Tangle (IOTA 2.0 DevNet for now, mainnet next year) by creating their own, individual smart contract chains. Decentralized finance can for example be performed by smaller consortia using proof of stake on an individual smart contract chain. Gaming apps can be processed by just some dozens of validators instead of hundreds of thousands. Both speed and costs of DEXes would improve DRAMATICALLY – no more 100$ swaps that take one hour! We are talking DeFi happening in seconds and for the cost of mere cents.
So what´s the role of Ethereum here?
In this new context Ethereum can be seen the most decentralized and highest security IOTA smart contract chain possible. It will be the go-to solution for REALLY high stake smart contracts like high value life-insurances or large real-estate trades.
Ethereum gains from being part of IOTA smart contract landscape:
– High reliability and use-ability for high-value use-cases because it is less clogged by smaller projects and games
– Seamless communication with ALL OTHER smart contracts on IOTA, even those which are impossible on Ethereum as of today (such as permissioned smart contracts by industry consortia)
– A more diversified and therefore decentralized crypto-landscape, no single point-of-failure
Growth of the cryptocurrency space can only happen when technology evolves and projects work together – not “kill” each other. This is now possible in a previously unknown new direction: Not by adding second layers on top of Ethereum, but instead adding a “Layer 0” solution under its feet.
More details about IOTA smart contracts:
Absolute beginner/non-programmer guide to create your own IOTA smart contracts: