Smart contracts are lightweight, programmable code that enable the creation of applications that are self-automating, interactive, and decentralized.
At first sight, the appeal of having such applications might seem difficult to understand, however, smart contracts are the tip of the sword in blockchain technology. While many blockchain projects understand the high stakes involved in creating the first highly adopted smart contract platform, few of them have delivered serious goods.
Aeternity is a smart contract blockchain platform that is going head-to-head with Ethereum in hoping to become the Apple of blockchain. Sure, Aeternity does smart contracts, but its real innovations lie elsewhere.
Taking Transactions Off-Chain
Bitcoin pioneered blockchain, Ethereum pioneered smart contracts, but who is pioneering smart-contract enabled blockchains that can operate at scale? This question is the focus of all of the most brilliant developers currently in the blockchain space, and the reason is simple.
Blockchain use cases are rising exponentially. The sheer amount of industries with the potential to be upended by blockchain tech grows with each passing day, however, what these use cases all require above and beyond all other things is *scalability*. This refers to the network throughput a blockchain is able to handle without slowing noticeably for network participants.
Last year, a decentralized app game called *Crypto Kitties* released on the Ethereum network. It became so popular that the amount of network activity that resulted from it backed up Ethereum transactions for days. Compared with the amount of network traffic received by mainstream applications, the Crypto Kitties volume was a drop in the bucket.
The Tech Behind Aeternity
Aeternity is hoping to be the first platform to change that by taking network activity off of the main Aeternity blockchain, and placing it *off-chain* in state channels. State channels are two-way transaction networks directly between participants that take the load off of the network, allowing for highly scalable interactions. The premise is essentially that the main chain doesn't need to be kept up to date with every micro-transaction that occurs, and can be updated at the *end* of a transaction cycle instead.
The idea of state channels is nothing new -- Bitcoin has been testing the Lightning Network for implementation due any day now. The Lightning Network is a second-layer off-chain scaling solution nearly identical to what Aeternity is developing, and there are many other projects with similar solutions.
Ethereum developers are working on quite a few second-layer scaling solutions like Raiden and Plasma. Aeternity's point of departure, however, is that the mainnet being launched is built with such state channels natively.
Enterprise applications and privacy-oriented individuals will greatly enjoy the state channel functionality of Aeternity because it offers privacy to transaction counterparties. Blockchains are publicly readable ledgers that can be accessed any time, from anywhere, with nothing more than a browser and internet connection. By taking transactions *away* from the main chain, they stop being publicly accessible, which is a win for enterprises looking to lock sensitive data into smart contracts.
Scaling aside, Aeternity's heavy focus on being a smart contract platform for decentralized application development and hosting is put on full display with their oracle development.
Smart contracts and the blockchains they run on are greatly innovative technological infrastructure -- but, they're cut-off from the legacy tech world they're replacing. What this means is they can't interact with other blockchains or other sources of information, like the internet, bank records, or weather stations.
Oracles are interfaces that enable blockchains to communication with off-chain sources of information. With an oracle in place, Aeternity smart contracts can pull information from news sources, games, and anything else that resides in the off-chain world, creating unlimited possibilities for blockchain-based app development.
Aeternity Advantages and Disadvantages
The Good: Aeternity boasts a large team (44+ employees), the majority of which are Erland developers. Their founder, Yanislav Malahov, was a well-known associate of Vitalik Buterin before he founded Ethereum. With these two points in mind, Aeternity seems to have the technical depth and experience to deliver a truly scalable smart contract platform. Combined with a PoW + PoS model, on-chain governance, and a solid use case for the AE token (similar to ETH), Aeternity is fundamentally sound.
The Bad: Aeternity isn't necessarily bringing anything new to the space. Off-chain scaling, hybrid PoW + PoS consensus, oracles, and smart contracts are all been there, done that innovations attributable to other projects and developers. While there's something to be said for combining many of the best technical innovations in the blockchain space into one catch-all project, it also lends to a feeling that other platforms with true innovators on board will always do it better.