Decentralized Apps (dApps)

What is a dApp?

A decentralized application, also called dApp, is a digital application that can run autonomously through the use of smart contracts on the blockchain or other peer-to-peer networks. While often built on the Ethereum network, dApps are spreading to a number of blockchains including Bitcoin via Stacks, Solana, BNB, EOS and Polygon. The Binance Smart Chain, for example, is specifically designed for small DApps to reduce delays and high transaction fees.

Dapps follow blockchain-based Web3 core principles and aren't controlled by a single authority. A dApp is operated on a blockchain or peer-to-peer network, enabling users to make transactions without relying on a central authority or third party. The user of a dApp will pay an amount of cryptocurrency to download and use the program's source code, otherwise known as a smart contract, and will not be required to reveal any personal data.

Dapps are open-source and their data and records are public. The network is secured through cryptographic tokens and maintained by multiple users (nodes). Use cases of dApps include DAOs, DeFi (decentralized finance), DEXs, digital asset exchanges and NFT marketplaces such as LooksRare on the Ethereum blockchain. They can be accessed with a cryptographic token and can adopt cryptocurrencies like ETH, or generate a native token using a consensus algorithm, such as Proof of Work (PoW) or Proof of Stake (PoS). As an example, Steemit, a blogging platform, has its own token. The token can also be used to reward validators (miners) and stakers.

Differences between centralized and decentralized apps

The dApp ecosystem is still experimental, and testing the limits of decentralized networks and blockchain technology. The growing popularity of decentralization has led to many new businesses being built on the blockchain network.

Some examples of dApps include Augur, a decentralized betting marketplace; Peepeth, a social network alternative to Twitter; Cryptokitties, a dApp game that allows users to buy and sell virtual cats; Uniswap, a DEX that enables users to swap tokens peer-to-peer; Decentraland, a metaverse platform in which users can interact as avatars and buy NFTs representing virtual objects or land; and MakerDAO, a decentralized credit service supporting the stablecoin Dai and allowing users to open a collateralized debt position (CDP).

Unlike centralized apps and social media platforms which use centralized servers, dApps are censorship resistant. As there is no single point of failure, decentralization makes it very difficult for governments or powerful individuals and companies to control the network. Users use a crypto wallet to connect to DApps and fully control what information they share.

Like traditional applications, dApps offer functionalities and utility to their users. They use the same frontend code to render a web page, but the backend code is different. User interface and user experience can be trickier with dApps, as they are often developed to prioritize functionality, maintenance and stability. Difficulties in making changes in the code and the potential difficulty to scale are some other drawbacks of dApps.

It is important to note that in an ecosystem without intermediaries, users must do their research, and identify and verify each app to avoid scams.

The future of dApps

Dapps are still in their early stages, but are expanding rapidly. Through the use of blockchain technology and smart contracts, dApps have the undeniable potential to bring even more innovative use cases to the market. There are thousands of dApps, and as DappRadar reported, there were almost 2.4 million daily active users of dApps by Q1 of 2022.

Dapp developers and the blockchain networks they build on have many challenges to address before they reach the mainstream, including scalability and user experience.

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