Interchain Use Cases

So far in the program you have looked at the features of blockchain in general and of the interchain in particular. Now it's time to focus more closely on examples of what the interchain can allow developers to achieve: creating applications that previous blockchain platforms would have proved too limiting for them to truly flourish.

This section will cover:

• A multitude of possible use cases
• Decentralized exchanges (DEXs)
• Open marketplaces
• Commercial token economics
• Game economies

The interchain provides an environment in which different projects can coexist and even communicate with each other, each one free to reside on its own custom-defined chain. This provides some valuable advantages over previous platforms for decentralized apps:

• Flexibility and ease of use: The Cosmos SDK provides a suite of modular resources that shortcut the need to build many universally necessary features from the ground up.
• Sovereignty: Developers can define the rules of their chains independent of many outside factors; once in operation, the governance of each blockchain is in the hands of its users, without the need to worry about platform-level governance impacting applications.
• Interoperability: The Inter-Blockchain Communications protocol (IBC) makes communications and transactions between dApps a straightforward and stable feature of the interchain, and even supports interoperability outside of the ecosystem.
• Speed: Each blockchain only hosts the applications its developer wants it to, so network resources aren't divided between all dApps in the ecosystem. Reliable coding from Cosmos SDK modules, combined with dedicated on-chain resources, means efficiency and speed.

The question is, what can be achieved as a result?

A multitude of possible use cases

The potential use cases for interoperable dApps are incredibly wide-ranging, from establishing resilient, autonomous organizations that empower communities (allowing them to organize and allocate resources to members, vote on impactful governance decisions, etc.) to Decentralized Finance (DeFi) applications that can allow anyone around the world to buy, trade, invest, and lend – even those without a bank account.

A key category of applications is Fintech, a term derived from "financial technology", and refers to software, mobile apps, and other technologies aimed at improving and automating traditional forms of finance for both businesses and consumers. The following examples illustrate the variety of possibilities that can be realized.

Decentralized exchanges (DEXs)

A decentralized exchange is a peer-to-peer cryptocurrency marketplace, where transactions between traders take place directly, often facilitated through the use of smart contracts.

The values of cryptocurrencies, like most things, are typically assessed in terms of their dollar equivalent, and the difficulty of blockchains interacting with each other has meant that trading one cryptocurrency for another typically requires converting an investment from crypto to fiat to crypto again, forcing users in and out of the centralized money markets.

When independent blockchains are able to transact directly, the unmediated exchange of their value tokens becomes a viable prospect. DEXs deliver one of blockchain's great decentralization potentials: allowing individuals to interact without the necessity of handing over management of their funds to banks, brokers, or any other custodian or intermediary agent.

• Eco.com (opens new window) is an example of a Fintech application.

Open marketplaces

Similar in concept to DEXs, the decentralization of marketplaces allows investors focused on traditional market trading to deal with each other directly, instead of relying on centralized stock exchanges (be they in real-world locations, like the New York or Shanghai Stock Exchange, or entirely online, like the Nasdaq).

Exchanges may impose qualification criteria on companies before they can be listed, limiting opportunities both for those seeking investment and those looking for projects to support. In addition, the exclusivity and inaccessibility of market trading as an activity prohibit many ordinary people from even considering the possibility of investment as a way to grow their own wealth.

A decentralized marketplace could allow investors and businesses of all scales to find each other without hindrance from the established ways of doing things, enjoying very low fees and instant transaction confirmation.

• DATA (opens new window), or the "Decentralized AI-powered Trust Alliance", is an example of a decentralized data marketplace.
• AMO (opens new window) provides a number of services based on the gathering of vehicle and driver data.

Commercial token economics

Token economics, or "tokenomics", is a way of grounding extrinsic value in a digital token-based system. Whereas a cryptocurrency is treated as a commodity in itself, token economics allows the same kind of transactional system to be put to use in relation to content creation and commercialization. An example might be monetizing streaming services for music or video, which in turn could help to decentralize content production by funneling more revenues directly to content creators rather than to the media platforms.

Tokens could also be used to reward fan engagement or through community-driven incentives. Community is a big part of fandom, and the nature of blockchain brings certain basic benefits (trustworthy interactions and exchanges, sources of information, data security) that can be usefully integrated into a creator's interactions with their fan base. The adoption of tokens could allow individual fans to support creatives in a tangible way by "investing" in them, while also directly benefiting from value accruing in the tokens they own.

• BitSong (opens new window) is a multifunctional blockchain-based ecosystem built to empower the music industry. You can read more about it here (opens new window).

Game economies

Gaming is a vastly lucrative industry on a number of levels. Revenues that were once entirely generated by unit sales of the game itself are now dwarfed by micro-transactions and in-game purchases to such an extent that many titles are offered as free-to-play in terms of up-front costs to the user. Sub-industries that see players earn "salaries" for their time investment have become very well established, as are marketplaces for in-game assets such as high-level ready-to-play characters, or rare equipment and other valuable "loot".

All these potential revenue streams could find a basis in blockchain-based systems. However, the interoperability that the interchain provides could take things to the next level, with value able to flow between different games, gaming systems, or simply into the real world.

• Crowd Control (opens new window) is an example of a community-driven online card game system.

Look beyond these examples

There are hundreds of projects at various stages of development already taking advantage of the interchain's benefits. To browse an extensive list, check out the apps and services page (opens new window) on the Cosmos Network.

synopsis

To summarize, this section has explored:

• A brief refresher of the advantages the interchain offers to developers.
• An overview of decentralized exchanges, open marketplaces, commercial token economies, and game economies as use case categories that are ripe for investigation.