Since 2009, the innovative blockchain technology worked its way from a strange hardly applicable solution to a well-known system which promises to disrupt many traditional industries. While cryptocurrency is still the main blockchain-powered thing, there are much more possible implementations.
In which ways decentralized platforms based on blockchain can be useful for businesses? Let's focus on decentralized applications and smart contracts, trying to figure out their potential usage.
Blockchain is similar to peer-to-peer networks. It has appeared as a basis for Bitcoin, the first cryptocurrency. That's why people often equate blockchain with crypto. However, decentralized systems may be applied to any sphere, not only money transfers. The same is true for DApps and smart contracts based on blockchain.
DApps and smart contracts were originally designed like extensions for blockchain. Undoubtedly, they can be used for business purposes, so it's recommended for entrepreneurs to learn about these technologies.
Decentralized applications are pretty similar to traditional ones, but they are based on peer-to-peer networks consisting of numerous computers instead of centralized servers on a single device. Note that DApps emerged earlier than blockchain. For instance, Tor and BitTorrent are classical DApps which exist in traditional networks. But with the emergence of blockchain, they got tools for improvement.
Smart contracts are unique digital arrangements with pre-written conditions which can't be modified after being signed. Technically, they are pieces of code based on blockchain, similar to decentralized applications. They get rid of intermediaries because two parties can easily set all possible rules themselves.
Smart contracts are:
- Self-executing. After the signing, programs no longer depend on users.
- Irreversible. Terms and conditions can't be edited.
- Transparent. Anybody can check the rules saved in blockchain.
Well, it's clear that both solutions work thanks to blockchain and share its key benefits. Though, DApps and smart contracts are different. In comparison with centralized technologies, DApps are like sites because they have the user interface and display content, while smart contracts replace APIs which connect sites and databases.
Related article: All You Need to Know About Public & Private Blockchains
How DApps and smart contracts can help business?
Now, let's move to approaches of how to facilitate various businesses using these technologies. Note that DApps and smart contracts rarely exist without each other and are normally implemented together.
So far as decentralized applications are similar to traditional websites, they are suitable for different businesses and industries. They expand blockchain's benefits and share them with regular users. While only the minority realizes how to interact with blockchain itself, these applications may help thanks to their understandable interfaces.
Ethereum's blockchain, designed specifically for developers, allows creating, modifying, and sharing DApps. Ethereum provides a system with in-built Turing-complete language, useful for decentralized programs. Ultimately, developers may create any application but there are three main types:
- Financial: they are focused on payment transfers and money management.
- Semi-financial: they use money but are focused on non-payment purposes.
- Governmental: non-financial programs like voting platforms.
Here are some examples of how DApps are used in different fields: token projects replace fiat money to separate business from existing national currencies and make it more independent; identification systems help increase the trust in partners or products to remove the need in intermediaries who provide extra guarantees; file storages facilitate information exchanges.
The key advantages and possible benefits for business:
- Simplified transaction process. All entrepreneurs have to deal with money transfers, and smart contracts make simple and fast transactions performed automatically. They are useful for both internal and external purposes.
- Trusted proof of identity. Many businesses related to digital or physical goods face the problem of frauds and counterfeited products. Smart contracts can control the identity to increase the level of trust.
- Efficient data management. The world enters the era of big data, and smart contracts make analyzing huge amounts of information automated and therefore more efficient.
Companies that want to be ahead of the game implement blockchain quite actively: for instance, the French airline AXA improves its flight insurance; Propy sells real estate using smart contracts. Some services like escrow can be totally destroyed and replaced by this solution. All doubts about smart contracts' ability to function outside the digital world should be assuaged now. For more details, you can check the report by Deloitte which clarifies how smart contracts can improve various business fields.
Related article: Will Blockchain Technology Transform the MedTech Industry?
Blockchain has made a long way from initial development to wide recognition, but there are more challenges ahead. A lot of experts claim that if not accepted and adopted by the majority, DApps and smart contracts will disappear. But the tendencies show that they are actually gaining more trust and application areas. Even small businesses can benefit a lot from automation that smart contracts bring – we could only imagine the changes inside large-scale industries. And while DApps enable cheaper storages, identity protection, and business intelligence, they can be helpful for every sphere from finances to healthcare.