The Future of Applications is Decentralized. In the Blockchain world, DeFi or decentralized finance applications are already alive and well in thriving DeFi marketplaces. (see DeFi and Open Finance).
NFT marketplaces are perfect examples of new types of decentralized apps. We refer to them as DeCo (Decentralized Commerce) since NFTs do not represent financial applications (i.e. DeFi) involving fungible tokens (FTs) and assets. Instead they represent NEW FORMS of decentralized commerce and value exchange.
We just published research DeFi, CeFi and How Blockchains Interoperate: Case Study in Carbon Trading that explains how decentralized applications support the exchange of tokenized assets and data without the need for middlemen or consortia governance.
Our research presents a case study on carbon trading as an example of how centralized and decentralized applications interoperate on blockchains. In this hypothetical application, interoperability is achieved through gateways that manage token exchanges from one blockchain to another.
Several other protocols have emerged that support blockchain interoperability as noted in our research. One protocol is the evolving Polkadot multi-chain network Polkadot Network where users can implement parachains that plug into Polkadot’s Relay chain (layer 0) in order to benefit from its consensus/security services and integration with other parachains (layer 1).
Lumena, a startup studio located in France and Luxembourg, is using Substrate to develop a parachain that supports an EMV charging and payment application network, where the charging stations themselves serve as blockchain nodes. See Delmonicos on Github
Thankfully, there are many decentralized blockchain platforms to choose from:
- Polkadot and its ecosystem seems best suited for major decentralized application infrastructures such as the EMV charging use case above or the recently announced Tether Stablecoin project. See Tether USDT Polkadot Project
- Other blockchain networks are more suited for entrepreneurs who want to deploy already-made services that support individual decentralized applications, precluding the need to build an entire blockchain sub-infrastructure (e.g. a parachain).
- Ethereum is already proven to securely support DeFi and smart contracts. But its gas (transaction) fees have become relatively high due to surges in demand, and the full rollout of the more efficient Ethereum 2.0 has been slower than expected.
- Alternative blockchains supporting dApps that benefit from Ethereum 2.0 delays include Solana, Avalanche, Cardano and more. Future ‘winners’ are TBD but there should be plenty of room for healthy competition.
- One category that is certain to win is blockchain interoperability solutions that support the interconnections of multiple DeCo and DeFi applications.
- For those who want more protections and regulations, other winners are CeDeFi/CeDeCo (Centralized Decentralized Finance/Commerce) networks that we explain in our research. These networks essentially marry “New World” innovation and “Old School” regulatory protections.
One sure way we will know these architectures are taking hold is by not noticing them at all, i.e. by not caring about what is happening on the back end.
In our decentralized application future, we will mainly hear about the applications and use cases – such as the sale of digital NFT art for over $65 Million worth of Ethereum.
We won’t need to be bothered understanding the details of how the backend blockchain networks work together, when we can readily experience and enjoy all kinds of new products and commerce services we can’t yet even imagine.
Blockchain for Good (ESG)
And this isn’t all about hedonism and new products. Expect to see much in the way of societal, global, and personal health and welfare benefits. We wrote about some of these in a case study on the oil and gas industry sponsored by Environmental Defense Fund working with Context Labs. This project demonstrates how locking in verified data on a blockchain contributes to reductions in greenhouse gas emissions. That’s a longer more inspiring story that you may want to read about here. See Truth and Transparency in Supply Chain: 3 Case Studies on How Blockchain, AI and IoT Are Shedding Light
Decentralized smart applications that run on blockchains are not buzzwords. Instead, they deliver unique value that can only live on this technological foundation. It’s worth our time and investments to understand it now and begin to use it sooner rather than later.