The introduction of blockchain has sparked a significant mindset shift in addition to the exponential rate of technology improvements. Many businesses, whose data is the foundation of operations, have grown interested in the concept of unprecedented decentralization. Decentralized applications (Dapps) built on blockchain technology are essential to the gradual movement of the business environment from centralized to decentralized structures and methods.
In this post, we delve into the complexities of Dapp and smart contract development and examine some of their most effective use cases.
Dapp development: What is it?
We must first comprehend the underlying technology of Dapps, namely blockchain, which is a public digital distributed ledger made up of nodes (computers) that store data. Simply said, a blockchain implementation gives apps the computing power to execute on several nodes. Applications created on the blockchain are referred to as decentralized applications because there is no centralized authority over them (Dapps). It’s important to note that Dapps are not limited to distributed ledgers because many well-known programs, such BitTorrent, operate on P2P networks.
How Dapps and web apps are different
The front and the back end are the two fundamental components of every web application. Well-designed decentralized applications have a user interface that is identical to any web app. The backside of the two is where there is a significant difference. The data is saved and processed on centralized web servers, which are used by standard online applications. Blockchain is used, however, in the Dapp backend. This suggests that Dapps disperse the transactional load among thousands of workstations rather than passing data through massive centralized servers.
Smart contracts are essential building blocks for Dapp development since they are electronic protocols that automate the implementation of agreements between parties. Dapps are linked to the blockchain using smart contracts, as opposed to traditional web applications, which communicate with a central server using the HTTP protocol.
Depp’s benefits and drawbacks in a nutshell
The following are the main advantages and characteristics of Dapps:
Open-source. Through consensus procedures, the code is seen by all users of the network.
Transparency. The operational records of applications are kept on a blockchain. Therefore, the data cannot be altered or changed.
Zero downtime One of Dapp’s most significant characteristics is that it lacks a central authority, making it nearly impossible to knock down without simultaneously taking down thousands of hosting nodes.
Zero censorship
Anyone can deploy Dapps because there is no central authority in the network.
Data security. Applications’ operational records become irrefutable and immutable thanks to blockchain-enabled cryptographic primitives.
Privacy. Since cryptographic keys are used to access the apps, users of blockchain-based applications are not required to create accounts or divulge their identities.
The following are the present Dapp development challenges:
Unfriendly to users.
Due to the numerous additional tools required for a Dapp to function as intended, the average end user may find it challenging to interact with it. This shouldn’t be viewed as a significant difficulty because learning new procedures only require a small adjustment period.
Difficult to update. Once a Dapp is installed on a blockchain, it is more difficult to change it because the code is also stored there.
Still in one place. Despite being implemented on the blockchain, some apps might still be categorized as traditional apps. An app loses the majority of the advantages provided by blockchain technology, even if just one part of its business logic is maintained on a centralized server.
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Cases for Dapps
Given that blockchain first became the decentralized ledger for bitcoin transactions, cryptocurrency wallets and exchanges made up the vast majority of Dapps. Developers have discovered that Dapp architecture and its reliance on smart contract apps are especially useful for gambling and games that integrate financial elements over time, given the relatively simple deployment and growing interest in the technology.
Only recently have businesses that didn’t have blockchain at the core of their operations begun to think about the benefits of Dapps to rethink approaches to their internal workflows. Here are the most effective blockchain and Dapp use cases for businesses outside of banking.
Data confirmation
Theoretically, smart contracts can be incredibly advantageous for a variety of businesses, such as construction and insurance. Smart contracts use information and software code to be enforced rather than manual input from humans. This suggests significantly quicker resolution, substantial cost savings, and security.
All the inherited benefits of smart contracts, such as independence from intermediaries and self-enforcement, lose their relevance when dealing with off-chain data that cannot be publicly confirmed. Smart contracts’ independent execution is maintained, but the oracle, which validates outside data, is subject to manipulation. Modern blockchain Dapp development is the solution to this issue.
Chainlink, for instance, has created a framework that enables safe and dependable access to data streams for smart contracts. Chainlink is a decentralized oracle network that secures the data provided to smart contracts using blockchain-like consensus methods, making it nearly hard to tamper with. The system uses external adaptors to link DLTs and APIs. In essence, Chainlink decentralizes the oracle in order to improve security for any smart contract application by removing a single point of failure.
Let’s use smart contracts for insurance as an example now. In this instance, independent policy mediation is used in place of the claims processing portion of conventional insurance contracts.
Most often, smart contract platforms used for insurance applications would require confidentiality and connectivity to outside, real-world events. Smart contracts can be triggered by insurance contracts with secure access to diverse data sources, such as IoT sensors and web APIs.
In order to accomplish this, Chainlink uses a trusted execution environment (TEE), which houses smart contracts. A TEE can be compared to a vacuum-like protected environment where anyone (including the insurer) is not allowed to even peek into the contents. Due to the fact that oracles can now manage even the most sensitive data, such as personal credentials, in an anonymous manner, this opens up numerous prospects for the insurance business in particular.
For instance, a claimant can give the insurance company access to private information via a health wearable gadget without the insurer knowing about it. Similar to smart houses, IoT-enabled equipment can automatically settle claims based on interior damage.
Management of identities
User authentication techniques that use typical username-password combinations have been shown to be susceptible to brute-force attacks. The Know Your Client (KYC) approach was established in order to reduce the risks posed by such abuses. Although it greatly increases the accuracy of identity verification, the procedure is relatively onerous, ineffective, and opaque. Typically, a user submits their documents, and the company checks them against state or internal databases on their end. The company can then interview the applicant in order to be absolutely certain.
Enterprises are now investigating dapp development as a significantly safer and better identity management option. Multi-factor authentication is made possible by blockchain-native capabilities like cryptographic hashing, which make it more difficult for hackers to steal information because the data is now buried behind the cryptographic code. There is no requirement for a third party to verify the accuracy of the information, in addition to greater security. This indicates that only one KYC process must be completed by the user, thus reducing operational costs.
Here are the primary benefits of blockchain-based KYC in a nutshell:
The blockchain-based KYC strategy indicates that data is gathered by a network of participants and stored in a decentralized database as opposed to being kept in a centralized system. On the other hand, when not using blockchain, a single entity, such as a particular business or a specialized KYC provider, manages the KYC process. As a result of this monopolization of data control, hackers have a huge possibility of attacking the entire database with just one successful system hack.
Users provide each other peer-to-peer access to the data. It’s crucial to realize that companies don’t actually access personal data but rather an identification card that attests to the successful completion of a procedure, enabling secrecy. This is particularly pertinent in light of increasingly stringent laws like the General Data Protection Regulation (GDPR).
Traditionally, different ecosystem members share KYC information. For instance, banks use a number of intermediaries that can use various document management systems and formats to pass data, which also entails manual data verification. As an outcome, there is a shortage of consistency, interoperability, and vulnerability to unwanted access. Data interchange is autonomous, standardized, and safe with blockchain-based KYC and smart contracts in place.
For instance, a variety of organizations are now using KYC-Chain, a global turnkey compliance solution, to automate their KYC procedures. With the aid of its watch list database, which includes more than 100 million companies in 240+ countries, the corporation is able to check the criminal histories of both people and corporate business clients.
Supply chain administration
The supply chain involves having centralized control over numerous corporate units that are frequently dispersed throughout the globe. Centralized approaches to supply chain networks are prone to interruptions brought on by a single point of failure, just like traditional identity management solutions and data verification systems. On the other hand, blockchain-based Dapps make sure that the operations are synced, coordinated, and simple to report. Blockchain standards assume that transactions are unchangeably and permanently recorded by their very nature, allowing businesses to avoid conflicts and improve auditing. Generally speaking, blockchain is crucial to smart supply chains.
The development of blockchain-based Dapps can assist food suppliers in streamlining food tracking and traceability. For nations that depend heavily on imports, this is extremely important. For instance, more than 90% of Singapore’s food supply is imported from other countries. A report from the World Health Organization claims that tainted food causes 600 million illnesses and 420,000 deaths annually. In order to improve traceability, Singapore-based DiMuto has developed an agri-food trade platform that makes a digital twin of each physical commodity. This aids in settling commercial disputes and enhancing trust between various members of the supply chain ecosystem.
Another Singaporean business, DLT.sg (Distributed Ledger Technologies, Singapore), has created a tool for supply chain management and cross-border trade financing. This Dapp is now being used by large supply chain organizations to manage their product flow and automate bill execution using smart contracts. Over 4,000 organizations globally are already using DLT.sg, and the platform has witnessed trades totaling an astounding $3 billion.
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Future prospects
Regardless of the hype around blockchain, a decentralized method of running operations will inevitably become the norm in business. The majority of current Dapp development projects, however, are still focused on the financial sector. Companies can confidently advance toward blockchain-based digital transformation thanks to the favorable beginning conditions created by the very nature of this business.
Three concerns, including regulatory ambiguity, a lack of faith in the technology, and a lack of cooperation among industry players, can be used to explain why Dapp adoption is comparatively slow in other sectors of the economy. For instance, in addition to its obvious advantages, the coordinated efforts of financial industry actors to build a blockchain ecosystem have led to the adaptation of regulatory frameworks.
The establishment of such an ecosystem is essential for the widespread acceptance of blockchain technology and the creation of related Dapps. Fortunately, the emergence of precisely such planned acts that can contribute to its realization is beginning to be seen. For instance, the Enterprise Ethereum Alliance (EEA) is a group of forward-thinking businesses interested in investigating the usage of Dapps to address their problems. But for now, forward-thinking businesses keep experimenting with blockchain and Dapps for their internal operations.
