What are ‘Smart Contracts’? What is a ‘Distributed App’ (DAPP)?

Cryptocurrencies have brought their own means of payment and networking alongside them, and one of them is “Smart Contracts” popularly used by the Ethereum Blockchain network and its distributed applications (DAPP). This article aims to explain the two concepts of Smart Contracts and DAPP in sufficient depth, after which you will not only be fascinated by the technology behind cryptocurrencies, but also how you might like being a part of this revolutionary movement towards a cashless and racier society.

Smart Contracts

The efficiency of systems used to operate offices and payment procedures today can be improved drastically through the use of smart contracts. A smart contract is basically a piece of code, and that code is used to execute transactions on the blockchain network that it is part of. It may seem confusing but let us take an example to improve your understanding.

Dilemma: The On-Time Pizza Parlor

Suppose a new Pizza Parlor just opened up in a neighborhood around where you live, and it has a policy of delivering at two different prices: one for houses within a 10 km radius of the parlor and one beyond that.

Solution: Smart Contracts

The owner of the parlor wants to impose a system of partial refund in case the delivery boy is unable to make it to the house he is delivering to on time. For the sake of simplicity, let us assume that the parlor accepts Ethereum as a possible means of payment and this policy is valid on the use of Ether only. The owner decides to hire coders of the blockchain who can create a code that self-executes every time the condition of the time is not met according to the blockchain’s very own real-time determining technology. Now, every time a delivery boy is unable to make it on time, the customer gets a partial refund, which means excellent marketing for the pizza parlor and balanced satisfaction for the customer!


Regardless of how practical and incredible the technology sounds as of now, there are certain limitations which exist and are trying to be removed from the system of smart contracts. The limitations are outlined below:

  • Since the technology is very new, it is very expensive to deploy. This is because for businesses opening up on small and medium scales, it is difficult to afford the pay of the coders, the costs for maintenance, and the associated fees for any memberships they will have to take in order to get legitimate services.
  • It is not wise to assume that people will just turn to Ether all of a sudden knowing how there are other competitive currencies, how volatile the market is, and how much they will have to adapt to a new lifestyle just for the sake of getting a few benefits.
  • Smart contracts are starting to surface, but as of now they are very prone to interception, security concerns, and crashes because integration of such advanced technology into present mechanisms is quite difficult.

The Future

The example used above should be able to give a rough idea regarding just how incredible this technology can make everyday life and how much time we can save. If you still feel that smart contracts are quickly on the rise, you need to hop aboard the fast express!

Smart contracts obviously need a network to function on, especially if they are being used to redesign something on a much greater scale such as the subway system of a country, where multiple stations exist and all need to be on the same plane. This is where the concept of “Distributed Applications” come into play, which will be the second main focus of the article.

Distributed Applications (DAPP)

The very first concept that needs to be understood if you plan on becoming a trader in cryptocurrencies is that there is no central authority that regulates the flow of currency and has a complete record of the thousands of transactions that take place every day. This also means that the distributed applications which are based on the usage of cryptocurrencies for the sake of carrying out transactions or filling in payments are also completely decentralized, and you will virtually find no semblance of hidden charges, censorships, etc., in them.

Why does that make distributed applications so incredible? For starters, your crypto wallet is the only wallet you need as far as you are operating on DAPP. In addition, it is a fast and efficient way of gaining access to many services online in exchange for a new currency.

DAPP for an Organization

Suppose an MNC (Multi National Corporation) decides to integrate the usage of smart contracts for its marketing wing in every country, and it plans on doing so by making a decentralized application including each end of the wing so that the people have access to all information they should, without the issue of transparency and confidentiality breach.

The following are ways in which this introduction of smart contracts will help the organization:

  • The absence of a hierarchal model will benefit this marketing wing particularly because any proposals and transactions will not have to go through this series of confirmation and proofreading from the executive authorities of the organization;
  • There is no outsourcing of services involved, which means that there will be no undue leakages from the cryptocurrency finances circulating within the DAPP;
  • There will be no circumstance under which an integral person to a particular task or information session will be left out because the DAPP belongs to everyone equally.

If these two technologies keep on improving and are deployed at the pace they are increasing, we can expect whole financial processes, including generation of salaries, wages, supply rates, etc., to fall under the hands of these codes called smart contracts within DAPP. As of now, the volatile nature of cryptocurrencies disallows them from being deployed at such a high level, but we can predict nothing with surety about the future of this incredible technology.

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