A decentralized application, or dApp, operates on a peer-to-peer (P2P) blockchain network instead of confined to a single computer. It is an open-source software application. These dApps are innovative versions of popular apps, powered by smart contracts and developed within the Ethereum network.
Key Criteria for True dApps
According to blockchain pioneer David Johnston’s book “The General Theory of Decentralised Applications, Dapps,” an application must meet the following requirements to be classified as a dApp:
- The application should be fully open-source, operating independently and without any single entity having control over most of its tokens. Furthermore, The application can make protocol adjustments based on proposed enhancements and market feedback. Its users must agree upon all changes by consensus.
- To access the application, users must utilize a cryptographic token, such as bitcoin or a token specific to the system. Furthermore, any contributions of value from miners or farmers are duly rewarded with tickets within the application.
- A standardized cryptographic algorithm requires the application to produce tokens. These tokens are evidence of the value that nodes contribute to the application.
What Sets Decentralized Applications Apart from Conventional Software?
Software Applications: Meeting User Needs
In the realm of computer technology, a software application – also referred to as an application program – serves a crucial purpose: it handles specific tasks for users. This intricate software acts as a guiding force for the computer, executing commands provided by the user and encompassing any program responsible for processing user data. Examples of these applications range from commonly used payroll software to spreadsheets and word processors.
Decentralized Applications (dApps): A New Frontier
dApps, also known as decentralized applications, serve users by utilizing the same front-end code commonly found in websites and mobile apps. However, what sets them apart is their distinctive back-end code that offers a wide range of features. Once a dApp’s codebase is released, it functions on a decentralized peer-to-peer (P2P) network, devoid of control from any singular authority. These versatile applications find utility across various sectors like self-executing financial contracts, multiplayer gaming, and social media platforms.
Dapps introduces a fresh approach to managing personal finance. When considering traditional finance, it’s common to find essential financial tasks such as lending, borrowing, and saving driven by centralized authorities like banks or other financial institutions.
In a decentralized world, how do financial tasks function? This question becomes particularly relevant when considering the widespread belief that cryptocurrencies and blockchain technology hold the key to the future of finance.
DApps allow users to perform financial tasks in a decentralized environment. These applications are supported by a blockchain-distributed ledger and operate on a decentralized network. Users utilize DApps to process data across remote networks and conduct financial operations.
Are DApps Utilized for?
- Help safeguard blockchain-based governance and voting.
- Work as integrated browser plugins to show advertisements, monitor user behavior, and collect cryptocurrency contributions.
Some industries that employ dApps are
- Identity verification
- Real estate
- Predictive markets
- Supply chain management
- Social media
- Financial services
Pros & Cons of dApps
- Zero downtime, always accessible.
- Protects user privacy with smart contracts.
- Resistant to censorship and tampering.
- Enables innovative digital applications.
- Ensures data integrity and security.
- Difficult to modify published code.
- Scaling challenges due to performance.
- Complex setup for average users.
- Slow updates and consensus are needed.
- Not user-friendly for non-tech-savvy.
Top 5 Most Popular dApps Available Now
In November 2018, a decentralized protocol based in the US was launched. This protocol allows users to swap and trade ERC-20 tokens easily. With over 150k monthly users and an average daily trading volume of $2.5 billion, it has become one of the largest crypto exchanges on the internet today.
Pancake Swap, a part of the Binance Smart Chain (BSC) network, utilizes Uniswap’s source code based on the Ethereum blockchain. It serves as an Automated Market Maker that facilitates trading of BEP-20 tokens. In addition to swapping tokens, Pancake Swap offers features like staking, farming, participating in contests, and lotteries.
This open-sourced liquidity protocol offers complete transparency to its users. With this decentralized platform, users can lend, borrow, stake, and earn interest on their digital asset deposits. Aave stands out by facilitating flash loans within seconds and allowing users to actively participate in policy-making and vote on critical decisions using the native token.
OpenSea, the first NFT marketplace to gain mainstream attention, was launched in December 2017. It initially operated on the Ethereum network but later integrated with the Polygon blockchain to reduce transaction costs. With over 10K diverse NFT projects, OpenSea showcases renowned brands like Bored Ape Yacht Club, Crypto Punks, The Meebits, and more.
This NFT marketplace has been developed on the Ethereum blockchain and offers the ability to trade NFTs across various chains. Users can engage in trading, minting, and listing of NFTs. Rarible encompasses a wide range of NFT genres, including photography, music, 3D illustrations, and more. The native token RARI allows users to participate in governing the platform and casting votes on future decisions.
The Future of Decentralized Applications or dApps
Decentralization: A Shift in Control and Authority
Decentralization involves the dispersion of control or authority, signifying power distribution over various aspects, be it information or an organization’s system. This distribution is achieved without reliance on a central governing entity, such as a centralized server, a main computer, major corporations, or governmental bodies.
The Potential of DApps
DApps have the potential to revolutionize various aspects of life, including work, communication, and transportation. They can also reshape the internet landscape by strengthening the fight against online censorship and fostering greater trust in the system. In addition, DApps are poised to redefine the business landscape through decentralization and leveraging peer-to-peer networks.
DApps in Daily Life
DApps, embedded in our daily routines, have the potential to reduce costs and eliminate intermediaries from personal and business transactions. This technology is expected to revolutionize automation and enhance transaction security, captivating a dedicated following among enthusiasts.
Embracing Criticism and Looking Ahead
Criticism is an inherent part of the evolutionary process for blockchain technology and DApps. Federico Ast, the Founder of Kleros, remains optimistic about their future despite acknowledging this temporary criticism.
The Future of DApps
DApps offer various advantages, including distributed storage for heightened security and redundancy and distributed computation for enhanced scalability and efficiency. However, they currently remain in their infancy, awaiting further development. The eventual utilization of their power and the unfolding of their impact are events that only time will unveil. With their numerous advantages, DApps are poised to supplant certain centralized applications soon.