there are some key differences between what a smart contract is and what a decentralized application or Defi is stay tuned
SmartContract vs Dapps
we discuss smart contracts versus Dapps what you will see is that many people sometimes use both terms interchangeably and that is actually incorrect there’s some marked differences between smart contracts versus Dapps
let’s start first with a definition of what smart contracts are
smart contracts also known as smart code or smart property our computer protocols that can act as a contract .
let’s assume that two people want to actually enter into an agreement and they need to draft the contract instead of needing a lawyer or some broker any type of a third party to be able to be there and certify and notarize that contract instead a smart contract is created in computer code .
recently it’s been used in blockchain the reason why we say recently is
because smart contracts the term was first coined in the 90s by Nick Szabo so the concept of smart contracts has been around for some time but the use of blockchain and that decentralized nature of blockchain has made smart contracts a very powerful tool and that’s why right now they’ve gained so much prominence
in the context of using a smart contract with a blockchain based platform what you have is that you have a contract that’s fully created in code that runs on a blockchain .
for example : the ethereum blockchain now because of this these contracts need to be front-loaded .
what that means is that ?
that contract needs to take into account every single consideration because once you set a contract or a smart contract in motion you can’t stop it and you can’t cancel it because otherwise it would be rendered null and void as a result you need to make sure that every single possibility has been taken into consideration before
you set that smart contract in motion because if there’s a mistake in that smart contract there’s nowhere to change it now that’s a smart contract let’s move now to a Defi so a Dapp or DAP both terms are used some people call it Dapp like email some people call them DAPs is short for a decentralized application and what we mean by that
that is an application that is mainly or fully decentralized so think about it when you use an application you’re not just using a contract you are using a full application like .
for example : a web application that you would engage with you put in some information you get some sort of return so the key thing is that Dapp is mainly or fully decentralized
that because many of these centralized applications are not fully decentralized .
because many of the key things
for example : hosting messaging need to run on centralized products so the key thing is that a Defi doesn’t necessarily have to be fully decentralized it can be mainly decentralized and still be idea so key things to point out is that as the dapp works it can use multiple smart contracts
it’s not merely one smart contract there may be multiple smart contracts that are operating within Dapps as a result these smart contracts are pieces that can work an elements inside Dapps
now the smart contract can be used to decentralize the back end what that is the business logic of the Dapp could run on smart contracts but key things that we need to take into consideration is that not everything on a Defi needs to run on smart contracts and in fact it can’t run on smart contracts some things
for example : such as storage it’s prohibitively expensive to keep information inside smart contracts so as a result you do not want to store the main information inside smart contracts additionally as I mentioned the cost of smart contracts also makes it prohibitive for you to be able to use it for every single part of the functionality as a result that is important to note that Dcentral applications do not require exclusively to use smart contracts to handle the business logic and in fact what you should do is actually reserve only the most important pieces that need to be trusted to rely on using a smart contract otherwise you’re better off using a different solution