Despite the recent downward trend of the crypto market and it’s undergoing the ‘crypto winter,’ popular terms such as ‘decentralized app’ and ‘Blockchain’ are still being mentioned more and more often to describe the Web3-based tech world of tomorrow.
According to DappRadar, the amount of daily active wallets connected to decentralized apps hosted by one of the 30 popular Blockchain networks they were tracking hit 2.7 million in 2021. The number of connections was 592% more than in 2020. Therefore, it is time to elaborate on what dApps are all about, and why they are attracting more and more people.
What are decentralized applications (dApp)?
A Decentralized Application (dApp) is an application built on a decentralized network that combines with a smart contract and a frontend user interface. A decentralized application is, for most of the part, similar to any other software application; for instance, it could function on a desktop or mobile device, and will have a graphical user interface (GUI) just like any other application.
What makes dApp unique is how it functions behind the scenes, with the app being powered by transactions taking place on a decentralized network. Most or all of the backend programming takes place on a decentralized system like Ethereum.
How does dApp work?
In a nutshell, dApps run on P2P Blockchain networks, instead of centralised servers. dApps are both stored and executed on a blockchain system — commonly using Ethereum. The app is verified with the use of crypto tokens, which are required to access the application.
Interestingly, 2014 saw the release of a report defining the dApp, named “The General Theory of Decentralized Applications, dApps.” It was written by various authors with experience in the space such as David Johnston and Shawn Wilkinson.
The paper defined dApps as entities with the following characteristics:
- A dApp must have open-source code and work without third-party intervention and it must be user-controlled.
- dApps must have some sort of crypto token for access and they must reward contributors in the said token, such as miners and stakers.
- All information must be held in a publicly accessible blockchain network. Decentralization is key, as a central point of attack will not exist.
- A DApp must have a consensus method that generates tokens, such as proof-of-stake (PoW) or proof-of-work (PoW).
From there, the paper classifies three “layers” of dApps based on the way users interact with them.
Layer 1: dApps exist by themselves on their own blockchain. The most popular projects are this type of dApp, such as Bitcoin, for example. They require a consensus algorithm and baked-in rules, for example.
Layer 2: dApps are generally built on top of layer one, harnessing the power of said blockchain. Often considered protocols, they utilise tokens for interactions. A scaling solution built on top of Ethereum is a good example of a layer-two dApp. Transactions may process on this second layer before committing to the first, taking some load off of the main chain.
Layer 3: Last but not least, layer-three dApps are built on top of layer two, often holding the information required for the other two to interact. It might store the application programming interfaces (APIs) and scripts necessary for layer one and layer two to operate. For example, a layer-three protocol could house various layer-two dApps, facilitating the user experience through them all.
While a traditional application is supported by centralized servers and databases, a decentralized application is supported by a smart contract that is stored on a blockchain. Ethereum is the most popular blockchain for running smart contracts. Smart contracts enforce rules defined in the code and mediate transactions. Since a smart contract consists of the back-end only and is often just a small part of the whole dApp, creating a decentralized app on a smart contract system requires combining several smart contracts and employing third-party systems for the front-end.
What are the benefits of dApp?
Enhanced security
Once a single node in the network is still working, a decentralized network can stay available. The ability of dApps to protect user privacy is at the heart of the program. Users of decentralized apps do not have to submit personal information to use the app’s features. Since there is no centralized network, a hacker would not likely be able to attack enough network of nodes to take down a dApp.
Alternatives for social media platforms
dApps may also be developed as alternative social media platforms. As no single participant on the blockchain can delete or block messages from being posted, a decentralized social media platform would be resistant to censorship.
Increased Motivation
Using the power of gamification, personalized push notifications, and other such elements, fitness mobile apps also develop a positive environment and encourage users to spend more time on the platform. This eventually helps the brand enjoy higher user acquisition and retention rate.
To conclude…
Blockchain technology has changed, and is still changing around the globe. It brought innovation to many different industries, and enabled companies to introduce new and exciting services and capabilities. dApps are just one of the byproducts, providing secure open-source software for everyday users and businesses. As with all advancements, it is inevitable that numerous practices currently in use will become obsolete, as evident by the growing number of finance-related dApps indicating more blockchain adoption in the industry. As dApps continue to grow in number and more innovations enter the playing field, it is always important to understand each application and technology as we adopt and adapt.
Check out our article on Medium to find out more about decentralized application! 📱✨https://t.co/LIJaczG2lj
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