Dapps Explained - What are Decentralized Applications?
You may have already interacted with a Dapp without knowing it.
Decentralized applications (Dapps) don’t necessarily look different from other web apps. However, they're built on an open-source network that promotes user privacy and network transparency.
This is quite different from how regular apps function. For example, popular video streaming web apps constantly gather your data. They record what movie genres you like, what products you buy, what music you listen to, or even the type of recipes you enjoy.
While these apps benefit users by using their data-mining algorithms to show you relevant content, they may also sell your data to advertisers or unknown agencies. They can also close your account or censor certain types of content without notice or justification.
Dapps are meant to change how we interact with people and services online. Instead of control being placed in the hands of corporations, dapps are the building blocks for a new era of user-powered networks.
What are dapps?
Dapps are applications built on decentralized networks. Instead of being owned by a single company or person, dapps function peer-to-peer through blockchain technology.
When a user interacts with a dapp, its front-end may appear similar to other applications like banking, media, or communication websites. That’s because most of the aspects that set it apart are operating in the background.
Each dapp relies on a smart contract to function on the blockchain. This way, it can’t be taken down or corrupted. Once the smart contract is deployed, users can interact with the dapp even if part of the network is down.
How do dapps work?
Dapps rely on two main protocols to work: blockchain and smart contracts.
Blockchain is the decentralized, digital ledger that records information and validates this data on a shared network. Once information is verified on a blockchain, it can’t be altered or deleted.
A smart contract is deployed on the blockchain. The contract’s code runs on the blockchain independently, without being controlled by individuals or companies. Once it goes live, users can interact with the smart contract on their own.
Smart contracts can be compared to vending machines. If you put in variables like money and your snack selection, the machine dispenses a snack. Likewise, users interact with smart contracts by fulfilling specific prerequisites, such as making a crypto transaction, and the smart contract automatically performs its function.
Dapps use smart contracts to operate on the blockchain. In everything from gaming to money lending, dapps replace intermediaries in the system.
How are dapps different from regular applications?
Normal web apps rely on centralized operating systems. All of the app’s data and the users’ data are stored on private servers. This gives the app creator complete control over all the data, and they can decide who has permission to interact with it.
For instance, Gmail is a popular web app. You can interact with it through your private password, but the company ultimately controls what happens to your data. They can decide to update their system or terms of agreement at any point, without input from the users.
Dapps, on the other hand, run on decentralized blockchains. No single party controls the data. Everything is publicly accessible and independently verifiable. Only you have access to your private keys, and users can vote on proposals if any changes need to be made to the platform.
History of dapps
Dapps share similarities to the early days of peer-to-peer file-sharing services like BitTorrent. Those applications relied on networks of independent users who shared files with each other.
However, it wasn’t until 2014 that a paper titled The General Theory of Decentralized Applications, Dapps. The Emerging Wave of Decentralized Applications established a more formal definition of dapps.
One of the first dapps to gain widespread attention was the game CryptoKitties. It launched on Ethereum in 2017 and briefly became so popular that it exposed the limitations of Ethereum’s network. Users were waiting days for a backlog of over 30,000 transactions to be confirmed.
Since then, thousands of dapps have launched on Ethereum’s blockchain. Other blockchains such as EOS, Tron, and others offer support for dapps as well.
What are the key features of dapps?
Dapp development is still in the early stages, so its exact definition can vary. Generally, dapps have the following key features:
Decentralized - Dapps should not be controlled by a single entity. Instead, any changes to the protocol should be decided on by network consensus.
Open-source - All data and transaction records should be public and transparent.
Uses cryptographic assets - Digital assets are used to secure the network and provide value for transactions on the network. These assets are also used to reward and incentivize participation.
What blockchains are dapps built on?
Dapps can be built on any blockchain that supports smart contracts. Ethereum’s blockchain hosts the largest dapp ecosystem by far.
Some of the most popular dapps on different blockchains are listed below. In addition, you can explore the entire dapp ecosystem on the State of the Dapps website.
· OpenSea – a peer-to-peer marketplace for NFTs and other digital assets
· Oasis – a DeFi platform for borrowing DAI against your collateral
· Chainlink – an oracle that connects smart contracts to real-world data
· Decentraland – a 3D virtual reality platform where you can buy virtual real estate
· Uniswap – a protocol for automated token exchange
· Upland – a game where you can buy virtual property linked to real-world assets
· Yup – a social platform that tracks and rewards users for sharing their opinions and ratings of things on the web
· Prospectors – a multiplayer strategy game that allows players to earn crypto
· Blockchain Cuties – a crypto game with tradable, collectible NFTs
Benefits of dapps
Since the blockchain is decentralized and peer-to-peer, it can’t be attacked as a whole. So even if part of the network is down, dapps will continue to work as long as the smart contract is deployed on the blockchain.
No central authorities, even governments, can block or control the whole network.
Your identity is not tied to your actions on the blockchain. When you interact with a dapp, you don’t need to provide your private information.
Developers are constantly learning from each other. This encourages the development of more dapps to benefit the community.
Information shared on the blockchain is independently verified by the whole network. Since everyone has access to the same information, it fosters trust in the absence of authority. Furthermore, no one can alter or delete data published on the blockchain.
Disadvantages of dapps
Since dapp smart contracts are open-source, it allows hackers to look for exploits in the code. While blockchain technology itself is very secure, individual dapps can still be vulnerable to attacks.
Due to the nature of blockchain, it’s challenging to update dapp code. This can delay crucial updates.
Many dapps have a steep learning curve that is not accessible for the average user.
Overall, dapp users are still a relatively small crowd. Without greater user adoption rates, the future of dapps is uncertain.
Developers may add features that increase centralization to make a dapp more attractive to the average user. For example, some dapps may store your private keys or other private data. But this goes against the philosophy of decentralization
Resources for building dapps
The first place to go if you’re considering building your own dapp is State of the Dapps. Here, you can explore the different dapps on various blockchains broken down by category and popularity.
Below, you’ll find some helpful links for getting started with building dapps on Ethereum.
Create Eth App
Create Ethereum-powered apps with one command.
Future of dapps
At the time of writing, 3,799 dapps had been developed, and around 1,930 are still live. The daily active user count has grown to over 230,000. In addition, an average of $300 million would have traded in the past 24 hours.
In terms of real-world applications, these numbers are still small. For instance, YouTube has over 2.3 billion active monthly users.
It remains to be seen whether dapps can catch up to these kinds of numbers. Unfortunately, there are still significant roadblocks to greater user adoption, like complicated user interfaces and steep technical learning curves.
Still, many people in the cryptocurrency industry are optimistic that more people will realize the value of dapps. If we are to build a decentralized future that is more fair and open for individual users, dapps might be the best place to start.