Why Dapps Are More Important Than Ever in Light of FTX Fraud

The world of crypto has taken a hit with the recent collapse of FTX – the cryptocurrency exchange and hedge fund founded by Sam Bankman-Fried that suddenly went bankrupt in November 2022. Now considered “one of the biggest financial frauds in American history,” the scandal has raised scepticism around all things crypto-adjacent, including blockchain technology, decentralised finance (defi) and web3 in general.

The problem with this scepticism is, the FTX scandal wasn’t actually caused by cryptocurrencies or defi. So, what went wrong?

Despite being an exchange for cryptocurrencies which implied an emphasis on decentralisation, FTX was a centralised institution that sat within the wider centralised financial system, leaving it vulnerable to the shortcomings that come with centralised finance, including but not limited to:

• high intermediary cost
• unequal access
• lack of transparency
• and of course, fraud.

Blockchain technology can prevent fraud in financial services

Not only were blockchain technology and defi not the culprits, they could have helped prevent the fraud that led to FTX’s collapse through a decentralised, secure and transparent system.

This is because a blockchain is essentially a digital ledger where each block of transaction data on a decentralised growing list of records stores information about the block previous to it, thus forming a chain resistant to modification. It is secure and verifiable by design.

Blockchain-based solutions can play an essential role in financial services, sustainable development, and any market that benefits from verified provenance, transparency and immutability.

What is a dapp and why decentralised applications are important

When it comes to the applications and software we use for transactions, it is equally important to consider the importance of using a decentralised system to prevent fraud.

A decentralised application (dapp) is an application built on decentralised networks, such as Ethereum. It is a lightweight application that interacts directly with the blockchain, usually with a user-friendly interface, making these interactions seamless and intuitive.

They can facilitate peer-to-peer financial transactions, such as the transfer of assets, without relying on third parties or intermediaries.

Introducing the Allinfra Climate Dapp

When it comes to green finance, renewable energy and climate markets, Allinfra uses blockchain-based technology, amongst others, to ensure data collected is verifiable and tamper-proof, and that product relying on that data is able to be permanently linked and referenced to it. This helps to mitigate risks around greenwashing and double counting.

With the Allinfra Climate Dapp, producers of renewable energy can now create and transfer digital environmental financial products, such as renewable energy certificates (RECs) or energy attribute certificates (EACs) in digital form (dREC™), without intermediaries.

The dapp works alongside Allinfra Climate – sustainability data management software that collects climate-relevant information in verifiable, tamper-proof form directly from assets and devices. Producers of renewable energy are able to use the dapp to batch this data into vintages (e.g. a batch of kWh produced over a certain time period), and mint dRECs referencing that data.

The Allinfra Climate Dapp is an example of a decentralised application that is simple, user-friendly and provides the user with a method of creating a highly transparent, secure and reliable product with fewer intermediaries and friction costs than traditional methods.

The future of blockchain technology

While FTX and the crypto market will persist as a hot topic of debate in the near term, there is no doubt that blockchain technology, including dapps, will continue to evolve and grow in importance.