A Dapp development guide for enterprises

A Dapp development guide for enterprises

March 22, 2021

Ivan Kot

Head of Blockchain Competency Center

Along with the exponential rate of technological advancements, the advent of blockchain has also ignited an important mindset transformation. The idea of unprecedented decentralization has become attractive to many enterprises, where data is at the core of operations. The business landscape is slowly transitioning from centralized to decentralized structures and approaches, making blockchain-based Dapps crucial to this manifestation.

In this article, we get into the intricacies of Dapp and smart contract development and explore the most potent use cases of such applications.

What is Dapp development?

Before diving into the nature of Dapps, we need to understand their underlying technology—blockchain, which is a public digital distributed ledger that consists of nodes (computers) that store data. In a nutshell, blockchain implementation provides the computational capability for applications to run on multiple nodes. Given that blockchain has no centralized control, the applications built on it are called decentralized applications (Dapps). It’s worth noting that Dapps are not exclusive to distributed ledgers as many popular applications like BitTorrent also run on peer-to-peer (P2P) networks.

How web apps and Dapps differ

There are two essential elements that comprise any web application: the frontend and the backend. The interface of well-built decentralized applications does not look any different from any web app. The crucial difference between the two is in the backend. Standard web applications use centralized web servers where all the data is stored and processed. The Dapp backend, however, uses blockchain. This implies that instead of channeling data through enormous centralized servers, Dapps distribute the transactional burden between thousands of machines.

Apps vs dApps

Smart contracts, electronic protocols that automate the agreement execution between parties, are integral building blocks of Dapp development. Contrary to standard web applications that communicate with a centralized server via the HTTP protocol, Dapps are connected to blockchain via smart contracts.

The pros and cons of Dapps at a glance

Here are the essential benefits and features of Dapps:

  • Open-source. All network participants can view the code and change it through consensus mechanisms.
  • Transparency. Given that applications’ operational records are stored on blockchain, the data can’t be tampered with or manipulated.
  • No downtime. One of the most important attributes of a Dapp is that it has no central authority, making it almost impossible to bring down as it will require the wrongdoer to take down thousands of hosting nodes at once.
  • No censorship.Considering that there is no authority in the network, anyone can deploy Dapps.
  • Data security. Blockchain-enabled cryptographic primitives make applications’ operational records immutable and indisputable.
  • Privacy. Blockchain-based applications don’t require users to create accounts or reveal identities as cryptographic keys are used to access the apps.

Here are the current Dapp development barriers:

  • Not user-friendly.The average end-user might find it hard to interact with a Dapp as there are multiple extra tools needed for it to run as intended. This shouldn’t be considered as a major complication as it’s just a matter of becoming accustomed to new ways of doing things.
  • Harder to update. Once a Dapp is deployed on blockchain, it becomes harder to modify it as the code is also stored on that blockchain.
  • Still centralized. Some apps, although being deployed on blockchain, can still be considered conventional apps. Even if one component of its business logic is stored on a centralized server, an app loses most of the blockchain-related benefits.

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Dapp use cases

Considering that blockchain first emerged as the public ledger for cryptocurrency transactions, the absolute majority of Dapps were cryptocurrency wallets and exchanges. Over the years, considering the comparatively easy deployment and growing attention towards the technology, developers found Dapp architecture and its reliance on smart contract applications especially useful for gambling and games that involve financial features.

Ethereum Dapp activity by category

Only in recent years, enterprises that didn’t originally have blockchain at the core of their operations started considering Dapps’ advantages to reimagine approaches to their internal workflows. Here are the most potent Dapp and blockchain use cases in the enterprise setting that go beyond finance.

Data verification

In theory, smart contracts can be exceptionally beneficial for a wide range of industries including insurance and construction. Instead of using manual input from humans to execute contracts, smart contracts use data and software code to be enforced. This implies much faster settlement, significant cost reduction, and security.

However, when it has to deal with off-chain data that can’t be publicly verified, all the inherited advantages of smart contracts including independence from intermediaries and self-enforcement become irrelevant. While the execution of smart contracts remains autonomous, the oracle, which verifies external data, can be manipulated. Advanced Dapp development is the answer to this problem.

For example, Chainlink has developed a framework that helps smart contracts access data feeds in a secure and trusted manner. Chainlink is a decentralized oracle network that uses similar consensus mechanisms to blockchain to secure the data fed to smart contracts, which makes this data almost impossible to tamper with. The technology utilizes external adaptors to connect DLTs with APIs. In essence, Chainlink decentralizes the oracle to provide any smart contract application with enhanced security by eliminating a single point of failure.

Now let’s take insurance smart contracts as an example. In this case, smart contracts replace the claims processing part of traditional insurance agreements with independent policy mediation.

In the majority of cases, smart contract platforms applied for insurance would need linkage to external real-world events, while remaining confidential. Chainlink enables insurance contracts with secure access to various data sources, including IoT sensors and web APIs, to trigger smart contracts.

Chainlink does this with the help of a trusted execution environment (TEE), where smart contracts reside. You can think of a TEE as a vacuum-like protected environment that prohibits anyone (including the insurer) to even inspect its contents. This reveals huge opportunities for the insurance industry in particular, as now even the most sensitive data like personal credentials can be handled by oracles anonymously.

For example, a claimant can share sensitive data via a health wearable device with the insurance company, without the insurer having access to that information. Similarly, smart homes can automatically settle claims based on the internal damage measured by IoT devices.

Identity management

Conventional username-password methods for user authentication have proven to be vulnerable to traditional brute-force hacking. To combat the risks of such exploits, the Know Your Client (KYC) procedure was introduced. Although it significantly enhances the reliability of identity verification, the process is rather cumbersome, inefficient, and non-transparent. This usually involves a user submitting their documents and the business checking it against internal or state databases on their side. Then, to be entirely sure, the business can also interview the applicant.

Dapp development is now being explored by enterprises as a much more secure and optimized identity management solution. Blockchain-native features like cryptographic hashing enable multi-factor authentication, making it harder for wrongdoers to hack the information as it is now hidden by the cryptographic code. Besides increased security, there is no need for information authenticity verification by a third party. This implies that the user needs to go through the KYC procedure once, while also significantly decreasing operational costs.

In a nutshell, here are the main advantages of blockchain-based KYC:

  • Instead of storing data in a centralized system, the blockchain-based KYC approach implies that information is collected by a network of participants and stored in a decentralized database. On the contrary, when not on blockchain, the KYC process is handled by one entity, be it a specific company or a specialized KYC provider. Such monopolization of data control serves as a great opportunity for hackers—one successful attempt to crack the system can open up the entire database for exploitation.
  • Access to the data is provided by users in a peer-to-peer manner. It’s critical to understand that businesses don’t exactly access personal data but an identification card that verifies procedure completion, which enables confidentiality. This is especially relevant in the context of ever-tightening regulations like the General Data Protection Regulation (GDPR).
  • Conventionally, KYC information is shared among various ecosystem participants. For example, banks pass data through multiple intermediaries that can use different formats and document management systems, which also involves manual data verification. This causes a lack of interoperability, consistency, and vulnerability to unauthorized access. With blockchain-based KYC and smart contracts in place, data exchange is autonomous, standardized, and secure.

For example, KYC-Chain, a global turnkey compliance solution, is now used by a wide range of businesses to streamline their KYC processes. The company can check criminal records of both individuals and corporate business clients with the help of its watch list database that comprises more than 100 million companies in 240+ countries.

Supply chain management

Supply chain entails unified control over different business entities often scattered across many parts of the world. Similar to conventional identity management solutions and data verification systems, centralized approaches to supply chain networks are susceptible to disruptions caused by a single point of failure. Blockchain-based Dapps, on the other hand, ensure that the operations are synchronized, coordinated, and easy to report. By their very nature, blockchain standards imply that transactions are permanently and immutably recorded, enabling organizations to eliminate disputes and optimize audit. In general, blockchain is an essential component of smart supply chains

Blockchain-based Dapp development can help food suppliers streamline food tracking and traceability. This is especially relevant for countries that rely on imports. For example, over 90% of the food supply in Singapore is imported from around the world. According to the World Health Organization report, 600 million people get sick and 420,000 die every year due to contaminated food. This is why Singapore-based DiMuto has developed an agri-food trading platform that creates a digital twin of every physical product, which enables enhanced traceability. This also helps with resolving trade disputes and improving trust between different participants of the supply chain ecosystem.

Another company from Singapore, DLT.sg (Distributed Ledger Technologies, Singapore) has developed a solution that streamlines cross-border trade finance and supply chain management. Large supply chain companies are currently using this Dapp to track their product flow and automate bill execution with the help of smart contracts. DLT.sg is now used by over 4,000 businesses worldwide with a remarkable $3 billion worth of trades executed on the platform.

Enterprise blockchain use cases by popularity

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Future outlook

Regardless of blockchain hype, a decentralized approach to operations will inevitably become a business standard in the future. However, the majority of ongoing Dapp development initiatives are still happening in finance. The initial conditions set by the very nature of this industry are welcoming enough for companies to confidently move towards blockchain-based digital transformation.

The relatively slow rate of Dapp adoption in other industries can be largely explained by three factors: regulatory uncertainty, lack of trust in the technology, and low levels of cooperation between industry players. For example, along with its apparent benefits, the unified efforts of financial industry participants to create a blockchain ecosystem has caused regulatory frameworks to adapt.

Creating such an ecosystem is crucial to the wide-scale adoption of blockchain and associated Dapp development. Fortunately, we are starting to see the appearance of exactly those coordinated actions that can help make it happen. For example, the Enterprise Ethereum Alliance (EEA) is a group of ambitious enterprises set to explore the use of Dapps to solve their issues. For the time being, though, forward-looking corporations continue to experiment with blockchain and Dapps for their internal operations.