How to Create Cardano Smart Contracts? | Coindoo
Cardano smart contracts 

Going Beyond Ethereum! How to Create Cardano Smart Contracts? 

Editorial Team Avatar
Mar 6, 2024
11 min reading time

With Cardano being in the spotlight for quite some time, especially with the launch of the Alonzo Hard Fork, the development team has enabled smart contract creation that can now be developed and deployed on the mainnet. 

So, with all the changes and achievements, we are left with a question: how is creating Cardano smart contracts possible? 

With such a beneficial update, in today’s article, we discuss the Cardano smart contract: what it is, what it does, and most importantly, how to create your own Cardano self-executing contract. 

To begin with, let us discuss the basic definition of Cardano smart contracts.

What are the Cardano (ADA) Smart Contracts?

What is a smart contract? 

Cardano smart contracts, also known as ADA smart contracts, are self-executing programs that run on the Cardano blockchain.

Like other blockchain platforms like Ethereum (as Cardano is often compared to Ethereum), the Cardano Smart Contract acts as a digital transaction protocol that verifies, manages, and processes the operations within the Cardano blockchain.

How Does the Cardano (ADA) Smart Contracts Work?

Launched in 2021, after a long time, the Cardano smart contracts, like most blockchain smart contracts, function by leveraging a combination of predetermined conditions, automatic execution, and distributed ledger technology.

Yet, you must understand that a smart contract does not imply legal language, terms, or agreements but contains hundreds of lines of code, creating a complex algorithm based on simple functions, such as “If-Then-When,” as seen in software programming.  

If I send 10000 BTC, then you will send the price equivalent in ADA when both parties meet the conditions. Straightforward, right?  

As you can see, transactions (outputs) are generated when certain predetermined conditions (inputs) are fulfilled. Upon meeting these conditions, transactions are automatically executed. These outputs, or transactions, are permanently recorded on the Cardano blockchain.

The security of these smart contracts derives from their storage on a decentralized blockchain network like the Cardano platform. Because these contracts cannot be altered, they are immutable, ensuring their integrity and reliability.

How are Cardano Smart Contracts Different?

Although on a general level, Cardano smart contracts operate according to the same general industry principles, they also have some specific factors that differentiate them from other smart contracts, such as rivals Ethereum and Solana, because of how they handle transactions and validation. And now, let’s move on to some slightly more technical aspects, which require a lot of in-depth study.

Here’s how it differs:

1. Validator Scripts – In Cardano, smart contracts are essentially pieces of code called validator scripts. These scripts automatically run whenever someone tries to move funds (UTXOs) locked in a contract’s address. The script checks if the transaction moving the funds follows the rules set by the contract.

2. Components – A Cardano smart contract has two main parts:

  • The on-chain component is the validator script that enforces the contract rules. It ensures that any transaction moving funds from the contract’s address complies with the contract’s logic.
  • Off-chain component is an external script or application used to create transactions that follow the contract rules. It finds the locked funds and creates transactions to move them according to the contract’s logic.

3. State Management – Cardano smart contracts use data attached to each locked fund (UTXO) to keep track of the contract’s state. This data, called the “datum,” is vital for understanding the current state of the contract and ensuring that transactions follow the correct rules.

4. Execution – When a transaction is submitted to the Cardano blockchain, the validator script is automatically executed by Cardano nodes. The script receives information about the transaction, including the datum attached to the locked funds, and decides whether the transaction is valid.

5. Workflow – Off-chain components manage the contract’s state and generate transactions that move the locked funds according to the contract’s rules. Contracts can have multi-step workflows, where each transaction updates the contract’s state.

What Makes Cardano Smart Contracts Better Than Ethereum?

Before discussing whether the Cardano smart contracts are better than the Ethereum smart contracts, it is best to understand the main differentiator between them. So, let us get started. 

First, you must understand that Cardano and Ethereum both provide similar functionalities, the use and creation of smart contracts, dApps, and so on. Yet, they differ in operating systems and general and compensatory policies.  

Cardano and Ethereum are now using a Proof-of-Stake consensus mechanism, even though this was not the case two years ago. Until late 2022, Ethereum used the Proof-of-Work, performing multiple trials and errors to validate the transactions, thus resulting in a never-ending scalability dilemma, high gas fees, and slower loading time. But as the Ethereum network grew and more miners joined it, this resulted in higher energy consumption, thus having a direct impact on the environment. As a result, Ethereum transitioned from PoW (Proof of Work) to PoS (Proof of Stake), reducing the blockchain’s energy consumption by 99.84%.  

Yes, we can all agree that it is an improvement. Still, while Ethereum made the changes, Cardano was the first blockchain to introduce an academic and peer-reviewed consensus mechanism that is more secure and, thus, highly scalable in the future. 

We can say that Cardano is still in its first years of development, but what is striking is the fact that Cardano focused from the beginning on the aspects that drew Ethereum back:  

  • The PoS consensus algorithm, Ouroboros, was designed to be more energy-efficient and resilient to attacks. 
  • The blockchain was built on a rigorous foundation of peer-reviewed research and formal methods to ensure its correctness and quality. 

Cardanos’ self-executing contract platform claims to be more secure, sustainable, and scalable than its rival, thanks to its layered architecture. Still, we have to offer Ethereum credit for being the first network to allow the use of smart contracts. 

But to answer the public on what makes Cardano smart contracts better than Ethereum, we could say that both have similarities; there is no option better than the other, and it all depends on the context of use. Indeed, Cardano addresses and attempts to solve the scalability dilemma, but if you want to learn more about ADA vs. ETH cryptocurrency comparison, check our in-depth article and conclude. 

What Programming Languages Use Cardano Smart Contracts?

The Cardano smart contracts are developed using one of five programming languages, depending on the specs:

1. Aiken for Cardano Smart Contract Development

Aiken is a new programming language for developing smart contracts on the Cardano blockchain. The language is used for on-chain validator scripts only: a language & toolchain favoring developer experience, and you need to write your off-chain codes for generating exchanges in other languages, such as Rust, Haskell, JavaScript, and others. 

2. Marlowe for Cardano Smart Contract Development

The programming language is a domain-specific language (DSL) that surrounds the world of financial contracts, enabling users to create blockchain applications. 

3. Opshin for Building Cardano Smart Contracts

Opshin is a programming language for generic self-executing contracts based on the Cardano blockchain. Its syntax is 100% valid Python code.  

4. Plutus for Cardano Smart Contract Development

Plutus is the Cardano smart contract platform that allows you to write complete applications interacting with the Cardano blockchain. 

5. Plu-ts for Creating Smart Contracts

This typescript-embedded programming language and library is designed for self-executing contract efficiency while staying as close to the Typescript syntax as possible. 

How to Create Cardano Smart Contracts?

Creating Cardano smart contracts involves several steps and requires technical expertise in programming and blockchain technology. 

Here’s a general overview of the process, but it’s highly recommended to seek professional help or extensive learning before attempting to create your own Cardano smart contract.

We will use the Marlowe programming language to exemplify how to create and deploy Cardano smart contracts. The procedure will include these processes:

1. Pay 

The arrangement involves a payment or transaction for a specific token from one account to another. Alerts will be sent automatically if the value is negative or insufficient funds exist. However, a partial payment will be made with the available amount. 

2. Close 

“Close” means how the agreement will be conducted, and paying account holders with an overdue balance is the primary purpose. Before delving into additional types of contracts, it is necessary to define values, observations, and actions. 

3. Values, Observations, and Actions 

“Values” refers to numbers that vary, such as “the current slot number”, “the current amount on a specific account’s account,” and any previous selections, also known as volatile numbers. 

“Observations” are Boolean values acquired by value comparison and may be merged using standard Boolean operators.  

In distinction, “actions” emerge at certain moments throughout execution. As previously stated, actions can be: 

  • Funds deposit, 
  • Selecting one option from a variety, 
  • Points of some external value. 

4. Oracles 

Oracles are created for blockchain and will be accessible for users in Marlowe on Cardano. They are modeled as decisions made by a participant with a specialized Oracle role, “Kraken.” 

5. If 

A used conditional is built on the Boolean value of the observation and will remain the same if Obs cont1 and cont2 are executed. 

6. When 

In the contract, some cases spell out what happens when certain events occur, and the actions may or may not occur at a given time. 

7. Let 

A lease agreement allows a contract to name a value with an identifier. The expression value is evaluated and saved with the name id, and the contract is then extended as cont. 

8. Assert 

The property carries static analysis at every point in the smart contract and would fail if the execution results were in a false assertion. 

Use Cases of Cardano Smart Contracts

Use Cases of Cardano Smart Contracts 

1. Gaming 

Smart contracts have disrupted the gaming industry, allowing users to join teams without a physical registration process. Cardano shaped the gaming industry, making the business more transparent. 

2.dApp Development 

Cardano offers multiple categories of dApps like DeFi (Decentralized Finance), voting, identity management, and many more, powered by the Cardano self-programmable contracts. These dApps have a user-interactive interface with the Cardano blockchain and execute transactions without letting in any third party. 

3. Supply Chain Management

As of 2019, New Balance, one of the essential sports footwear and apparel producers worldwide, has contracted Cardano to check the authenticity of its shoes. Buyers can verify footwear’s authenticity on the distributed ledger using consumer-level verification. 

How Many Smart Contracts Are on Cardano?

As of March 6, 2024, Cardano hosts a total of 36,975 smart contracts, combining both V1 (6,435) and V2 Plutus (30,540) contracts.

Is Cardano Better Than Ethereum?

Cardano’s self-executing contract platform claims to be more secure, sustainable, and scalable than its rival, thanks to its layered architecture. Still, we have to offer Ethereum credit for being the first network to allow the use of smart contracts. 

What is Cardano Smart Contracts Written In?

The Cardano smart contracts are developed using one of five programming languages, depending on the specs: Aikin, Marlowe, Opshin, Plutus, and Plu-ts. 

Final Thoughts on Cardano Smart Contracts

Still, dwelling upon whether to choose Cardano’s smart contracts or Ethereum? In that case, it is essential to analyze how smart contracts are done by examining the whole blockchain and its implications.

Cardano smart contracts are value-related agreements that impact our economic environment, and the Cardano blockchain provides an effective platform for executing real-world contracts. These provide visibility to both parties while offering data safety.

We hope our article offers you the most vital details so you can start immediately, without too many doubts or incomplete information, and have a general view of how Cardano blockchain and smart contracts are changing the economic status.

* The information in this article and the links provided are for general information purposes only and should not constitute any financial or investment advice. We advise you to do your own research or consult a professional before making financial decisions. Please acknowledge that we are not responsible for any loss caused by any information present on this website.
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