With the rise of blockchain technology and increasing adoption, the focus is shifting towards a specific area with great potential - decentralized applications (dApps).
In 2021, the daily active wallets connecting to dApps increased by 7 times, reaching a record high of 2.7 million at the end of last year. The transaction volume is also higher than ever before.
This helps to emphasize the interest that dApps are experiencing - and why you should pay attention to them.
Today, let's take a look at what a dApp is and all the information you need to know about decentralized applications.
What is a decentralized application (dApp)?#
dApp is short for decentralized application. In short, a dApp is an application that runs on a blockchain or peer-to-peer (P2P) computer network instead of a single computer (or centralized server).
For example, dApps, also known as "dapps," are essentially like any other application or game you might have on a mobile device, with the main difference being that dApps are built and run on decentralized networks like Ethereum.
Due to their decentralized nature, dApps do not have a single authority or control entity, so they rely on the community for verification and validation.
Currently, dApps are widely used for various purposes, from finance and gaming to social media, marketplaces, and entertainment.
CryptoKitties is a popular example of a dApp.
Now that we know what a dApp is, let's take a closer look at how they work.
Characteristics of dApps#
Most of the applications available today are centralized, meaning they are controlled by a centralized entity. They provide all the data and systems needed to run operations.
Think of Uber, Instagram, or Twitter. All these traditional centralized applications run on a computer network owned and operated by an organization. Here, users have no say or power over the functionality of the application.
However, for dApps, operations are run through smart contracts, which can be easily accessed by anyone as they are based on open-source code. This means dApps operate autonomously without specific control.
But wait - what is a smart contract?
Explanation of Smart Contracts#
Smart contracts are an integral part of blockchain and can be defined as digitally executed contracts where the terms and conditions of a bilateral agreement are automatically verified and enforced by a computer network. Once deployed on a decentralized network, smart contracts cannot be changed.
As mentioned earlier, dApps can run on P2P (peer-to-peer) networks or blockchain networks. BitTorrent is an example of a P2P network where participants in the community receive, send, and share data without a third-party intermediary.
So far, we have established what decentralized applications are:
Decentralized: Applications run on an open public decentralized platform with no single individual or group having complete control. Decentralized storage is also another key feature.
Open-source: All necessary changes are decided by the majority of users. This requires the code repository to be available for evaluation by all users.
Provides cryptographic security: Decentralized data blocks are verified and proven to be authentic.
However, there are some more important aspects to keep in mind.
dApps are built and run on blockchain systems - often using the Ethereum network. These applications use cryptographic tokens to verify access to the application. Taking Bitcoin as an example, it is the biggest example of a decentralized application, where the mining process provides new coins to those who use their computers to process transactions, ensure security, and keep the entire network in sync.
Benefits of Decentralized Applications#
There are many features that make decentralized applications a valuable asset. They provide the following benefits:
Privacy: The ability of the program to protect user privacy is one of the biggest advantages of decentralized applications, as they do not require users to provide their personal information to access the functionality of the application. dApps use smart contracts to facilitate transactions between two anonymous parties.
Autonomy: Once set up, a dApp operates independently by the user community, without external tampering or involvement of third parties. This means decentralized applications (as the name suggests) do not rely on centralized hierarchical entities to make decisions or implement changes.
Data Integrity: Data stored on the blockchain is almost impossible to tamper with or alter in any other way, as the consensus algorithm of the blockchain ensures that the stored data is protected and cannot be changed. Additionally, due to fault tolerance, even if a single node in the network is down, the decentralized platform remains available, making it unlikely for hackers to target enough nodes to disrupt the dApp.
Zero Downtime: Once a smart contract is deployed on the blockchain, the network is always available to serve parties interested in interacting with the contract. Therefore, hackers cannot launch a denial-of-service attack against a single dApp. Flexibility: The Ethereum blockchain is a flexible platform capable of supporting rapid development of dApps in various industries, providing infrastructure for developers to focus on creating innovative digital applications.
Drawbacks of Decentralized Applications#
Decentralized applications are still in their early stages and, like any emerging technology, they are subject to unknown factors. Investing in a decentralized environment has the following weaknesses and drawbacks:
Scalability: There are questions about whether these types of applications can scale effectively compared to centralized networks. If running an application requires a significant amount of computational resources, leading to severe network congestion, it can be a challenge.
Maintenance: Currently, dApps are difficult to maintain and update, as any changes require consensus from the majority of users in the blockchain network.
User-friendliness: Traditional applications are often easy to use for the average digital audience accustomed to a certain type of user interface. dApps must meet these expectations and experiences, which can be challenging for end users to adapt to new processes, such as using private and public login keys instead of the usual username and password.
Coding: Implementing code modifications poses another limitation for dApps, as data and code deployed on the blockchain are difficult to modify, making it challenging for developers to implement enhancements, fix bugs, and address security risks.
Examples of dApps#
The most popular example of a decentralized application is Bitcoin. But there are many other examples that can illustrate the concept of such blockchain applications more specifically, including the following Ethereum dApps:
Golem: This is a decentralized computing power marketplace. It consists of a network of nodes that implement the Golem network protocol. Through this system, anyone with idle computing power can contribute it to the Golem network in exchange for tokens. It is used for various purposes, including artists using it to render computer graphics animations.
Peepeth: A blockchain-driven social media platform that aims to replace Twitter powered by the Ethereum blockchain. The network aims to "promote mindful engagement online and offline" while giving users control over their digital legacy, thanks to how their data is stored on the blockchain.
TraceDonate: A donation platform supported by blockchain technology, providing end-to-end transparency. It connects charitable organizations with donors, increasing transparency. Users can donate to individuals and appeals associated with the platform through international non-governmental and humanitarian organizations. All funds can be traced through digital wallets.
CryptoKitties: As a game that allows players to breed and collect virtual cats in exchange for native tokens, CryptoKitties has become one of the most successful dApps on the Ethereum blockchain. These tokens can also be traded with real-world money.
How do dApps work?#
Don't get too overwhelmed, but here's a simplified version of how dApps work:
• dApps rely on backend code, usually in the form of smart contracts.
• These digital contracts help set up the operations required to run the dApp based on the terms and conditions written (encoded) into the smart contract.
• If the contract requirements are met, operations or transactions are executed within the P2P network. All details are correctly recorded and stored on the blockchain.
• If the conditions are not met, the dApp's operation is neutralized, and the system returns to its initial state.
Of course, dApps are much more complex than what we just attempted to explain. If you're interested in learning more and how to develop your own dApp, we recommend checking out tutorials and resources like Ethereum's own dApp introduction.
Conclusion#
Like traditional applications, dApps can serve as gateways to various digital experiences. They have already been used by social networks and financial institutions, but soon they may become a common sight in gaming, productivity, and marketplace applications.
The benefits brought by decentralization are certainly catching the attention of companies and investors who want to seize the next major development of applications that can provide more value to users while also being more secure and protecting private data.
Therefore, we can expect that as blockchain technology continues to expand and prove its many benefits to society, dApps will become alternatives to traditional applications.