Defi and Smart Contracts: DFINITY and Ethereum
by Adam Pease
Recently, blockchain-based cloud computing provider DFINITY listed its cryptocurrency, ICP, on the Coinbase general exchange. ICP is of interest not just to investors and crypto traders, but to the enterprise as well. Like Ethereum, which maintains ETH, a currency used to facilitate payments for applications developed on its platform, DFINITY positions ICP as a token with a business-critical use case for developers. In this blog, I consider the ICP listing and what it means for Ethereum and the future of decentralized app development.
Defi and the Growth of the Crypto Market
Earlier this year, the decentralized finance (DeFi) market exploded into the mainstream. In the wake of the GME short media cycle, many inexperienced investors flooded into the stock market looking for quick returns, a shift that funneled considerable liquidity into volatile cryptocurrency exchanges.
Since then, a market for ‘altcoins’ listed on deregulated exchanges, as thousands of new coins hope to achieve the ‘meme’ value that $DOGE has become famous for recently. At the same, though, there has been a growing market for tokens and blockchain-based projects that are not purely speculative gambles on social media appeal, and strive to implement use cases that have value for the enterprise. Ethereum, and now DFINITY, are crucial players in this space.
Smart Contracts, Ethereum, Decentralized Applications
Still, DeFi and the altcoin market is only the most visible effect of innovation in the blockchain. Defi infrastructure is built on top of the Ethereum blockchain, which enables the development of apps through smart contracts. Smart contracts, which Aragon covered in its recent Technology Arc for Blockchain, are ways to automate traditional agreements by implementing them as computer code that automatically executes when the conditions of the agreement are fulfilled.
Developers can leverage smart contracts to built new applications that take advantage of blockchain’s novel functionality. Smart contracts can streamline and simplify while providing a basic common denominator (token) that can facilitate processes across the application platform. One provider, Storj, for example, uses the Ethereum blockchain to support decentralized cloud storage for developers.
Internet Computer: DFINITY Enters the Game with ICP
After launching for general purchasing, DFINITY’s ICP currency is now the #4 cryptocurrency in the world by market cap, two spots behind Ethereum’s ETH. The ICP currency is an element of the broader Internet Computer platform, which promises, like Ethereum, to offer a critical infrastructure layer for blockchain-based app development.
DFINITY’s app development platform attempts to go beyond Ethereum’s emphasis on financial technology and become a foundation for web app development more generally. The company showcased a mockup of LinkedIn designed on Internet Computer last year. The ICP token itself is an integral element of the platform akin to ETH, enabling a reward structure and facilitating network governance.
It remains to be seen if Internet Computer will compel a new era of decentralized app development that extends beyond the financial sector to address other use cases. In our Technology Arc, we noted that there are many emerging applications for blockchain-based apps in sectors like healthcare and supply chain management. It is now up to providers to deliver on this, but Internet Computer presents a new opportunity.
The crypto market is heating up as decentralized finance moves into the mainstream. ICP’s striking performance since its general release suggests the market has its eye on Internet Computer. It remains to be seen what effect the launch of Internet Computer will have on Ethereum, but for developers, the expansion of the decentralized ecosystem is a win.