The way forward for smart contract adoption for enterprises

Decentralized finance (DeFi) markets might have cooled lower in the last year, however the technology powering these applications is constantly on the advance. Particularly, smart contract platforms which allow transactions to occur across DeFi applications are maturing to satisfy enterprise needs. 

While it’s notable that enterprises have formerly proven curiosity about DeFi use cases, smart contract limitations have hampered adoption. A study printed by Grayscale Research in March puts this in perspective, noting that “Despite handling countless transactions each day, smart contract platforms within their current condition could be not capable of handling even 10% from the worlds’ internet traffic.”

This notion is especially difficult thinking about the marketplace chance behind DeFi. For example, Grayscale Research’s report mentions that DeFi and Metaverse applications combined will probably possess a market capital much bigger compared to current digital asset market.

How smart contracts are evolving

With all this potential, it’s become obvious that smart contracts must advance to be able to accommodate growth. John Forest, chief technology officer from the Algorand Foundation — the supporting organization from the eponymous blockchain ecosystem — told Cointelegraph that today’s smart contracts have many technical limitations, for example scalability issues, that have led to slow transaction some time and the lack of ability to process complex computations.

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Forest shared that smart contracts submitted towards the Algorand blockchain are applied mainly to traditional DeFi use cases which allow such things as automatic buying and selling of on-chain digital assets. Yet, with regards to enterprise use cases, Forest pointed out he believes it’s better to put very little info on-chain as you possibly can. He stated:

“I’ve formerly labored with large enterprises that may wish to conduct DeFi use cases like publish-trade settlement on the blockchain network. After I was building individuals enterprise applications, I’d only put the most crucial information on-chain. This could allow smart contracts to do efficiently without getting to complete heavy computation on-chain.” 

Based on Forest, this technique enables enterprises to profit from smart contacts, yet only if simple computations are participating. Although this is a strategy to current limitations, advancements are now being made to make sure that all enterprise data could be based on smart contracts.

For instance, Scott Dykstra, chief technology officer and co-founding father of Space and Time — a decentralized data platform — told Cointelegraph that his firm is creating a community-operated off-chain data platform that may handle any workload in one cluster.

“We’re trying to enable developers to operate queries against data we’ve indexed all major blockchains and knowledge loaded from the off-chain source,” he described. After queries are run, Dykstra described that Space and Time uses patented novel cryptography, referred to as “Proof of SQL,” which could prove each query outcome is accurate which the actual data hasn’t been tampered with.

It is really an important point, as Dykstra noticed that enterprise data queries are usually run in off-chain data warehouses. But, since these data warehouses are centralized, query results frequently can’t be reliable with a smart contract and, therefore can lead to limitations.

Considering that Space and Time can cryptographically prove that every data query outcome is accurate, Dykstra described this enables for complex computations to become connected straight to smart contracts without limitations.

“Space and Time’s capability to connect analytic query results straight to smart contracts (with cryptographic guarantees), will function as a trustless intermediary between enterprise data and also the limited storage from the blockchain,” he stated. Consequently, this method will automate more complicated business logic for enterprise use.

Even though this solution enables for complex data to become processed by smart contracts, privacy concerns remain. Paul Brody, global blockchain lead at EY, told Cointelegraph that although the worth proposition of smart contracts for enterprises is gigantic, so might be the obstacles. He stated:

“The greatest is privacy — public blockchains don’t natively support privacy. Since companies consider their buying plans to become sensitive information, no firm will deploy these solutions until they’re positive about the privacy approach.”

Forest can also be conscious that enterprises are reluctant to make use of smart contracts because of privacy concerns. “Everything presently done across an open blockchain network is transparent, but enterprise use cases require some security. What’s coming next is privacy on smart contracts,” he stated.

As a result, Forest shared that Algorand is presently focusing on a good contract privacy solution. While not one other details were revealed, Forest — who formerly labored because the director of Cardano architecture at Input Output Global (IOHK) — described that IOHK can also be searching into solving privacy around smart contracts having a product known as Night time.

Brody further noted that EY is building tools to allow both private payments and transfers around the public Ethereum network and it is developing its very own privacy-enabled products. For instance, in This summer 2021, EY announced the discharge of Dusk 3, something that combines zero-understanding proofs with Positive Rollups to enhance transaction efficiency and privacy on Ethereum.

“Nightfall is really a zero understanding-positive roll-up for payments and transfers under privacy,” Brody stated. He added that Starlight is yet another product from EY, which functions like a compiler that converts solidity contracts into zero understanding, privacy-enabled circuits. “Both are contributions in to the public domain and available to all,” he stated.

Despite privacy across smart contracts, anonymity remains a problem for big companies. Weijia Zhang, v . p . of engineering at Wanchain and also the regional mind of China in the Enterprise Ethereum Alliance, told Cointelegraph that smart contracts today don’t have a mechanism to ensure a user’s identity. Consequently, bad actors can exploit flaws inside a smart contract’s design, which can lead to stolen assets by unknown actors. Indeed, this can be a major concern as DeFi hacks still increase.

Smart contracts later on

Concerns aside, it’s notable that solutions are now being designed to advance smart contract abilities. Skillfully developed are, therefore, certain that enterprises uses smart contracts later on. 

“There isn’t any doubt that enterprises will ultimately adopt smart contract solutions. You will find multiple promising technologies occurring within the public blockchain space which have smart contracts in their core,” stated Zhang.

That stated, it’s vital that you point out that platforms which smart contracts execute will also be evolving. For instance, Forest noted that Algorand concentrates on scalability to aid enterprise use cases. “It’s not too smart contracts want to get more significant, but we have to give more sources to smart contracts too. We should also concentrate on scaling blockchains to make certain they’re faster capable to connect with more smart contracts per second.”

Zhang further described that the zero-understanding Ethereum Virtual Machine can solve privacy and knowledge challenges, while mix-chain bridge technology can solve interoperability issues. He added that sharding can solve scalability.

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“Smart contract solutions will transform complex systems that need the participation of multiple parties, leading to system-wide efficiencies. It isn’t that enterprises may wish to begin using these solutions. It’s that they’ll need to,” he stated. Yet, Brody pointed out that it is vital that you temper expectations, noting:

“Companies implement systems gradually in most cases only if necessary, due to a major upgrade or a general change in business operations. Which means that adoption rates that people see within the consumer world aren’t likely. What requires a decade for consumers can happen gradually over 3 decades within the enterprise space.”

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