What Are Decentralized Applications (dApps)?

Decentralized applications (dApps) are digital applications or programmes on a blockchain or peer-to-peer (P2P) network of computers rather than a single computer. DApps (sometimes spelled “dApps”) exist outside of the jurisdiction and control of a single authority. DApps, which are frequently constructed on the Ethereum platform, can be created for a range of purposes like gaming, banking, and social media.

KEY TAKEAWAYS:

1. Decentralized applications, abbreviated as “dApps” or “dapps,” are digital programmes that run on a blockchain network of computers rather than on a single computer.
2. dApps are free from the control and intervention of a single authority since they are decentralized.
3. The advantages of dApps are the protection of user privacy, the absence of censorship, and the development freedom.
4. The possible inability to grow, problems in establishing a user interface, and difficulties in making code adjustments are all disadvantages.

Understanding Decentralized Applications (dApps)

A typical web app, such as Uber or Twitter, runs on a computer system owned and maintained by an organisation, allowing it complete control over the app and its operations. There may be several users on one side, while a single organisation manages the backend.

DApps can run on either a peer-to-peer or a blockchain network. For example, BitTorrent, Tor, and Popcorn Time are software that runs on computers that are part of a P2P network, in which numerous participants are consuming content, feeding or seeding content, or performing both roles at the same time.

In the context of cryptocurrencies, dApps operate on a blockchain network in a public, open-source, decentralised environment, free of control and intervention from any single authority. A developer, for example, could design a Twitter-like dApp and place it on a blockchain where any user may publish messages. Once posted, no one—not even the app—can remove it.

History of dApps

Although Bitcoin (BTC) was the first blockchain network, the technology has progressed well beyond a primary financial transaction. When Vitalik Buterin and his colleagues suggested Ethereum (ETH) in 2013, they had a much bigger goal in mind: a decentralized way of life.

Buterin envisioned a blockchain-based internet where consumers controlled the internet rather than businesses. To do so, Ethereum would power smart contracts, which are automated if-then statements. These contracts are unchangeable because rules and constraints were baked into their coding. This means that any party can deal without the requirement for a middleman, obviating the necessity for centralized platforms.

Surprisingly, in 2014, a report defining the DApp, titled “The General Theory of Decentralized Applications, Dapps,” was published. A group wrote it of experts in the field, including David Johnston and Shawn Wilkinson.

The paper defined DApps as entities with the following characteristics:

1. A DApp must be open-source and run without the involvement of a third party. It must be user-controlled so that users can propose and vote on modifications that are then automatically applied.
2. All data must be stored in a blockchain network that is open to the public. Decentralization is essential since there can be no one point of attack.
3. DApps must use a cryptographic token to gain access, and contributors in the token, such as miners and stakers, must be rewarded in the token.
4. A consensus method that creates tokens, such as proof-of-work (PoW) or proof-of-stake (PoS), is required for a DApp (PoW).

The report then divides DApps into three “categories” or “layers” based on how users interact with them.

DApps at the first layer exist on their blockchain. This sort of DApp is used by the most popular applications, such as Bitcoin. They necessitate, for example, a consensus algorithm and built-in regulations.

Layer-two DApps are typically developed on top of layer one, leveraging the capability of the underlying blockchain. Tokens are used for interactions in these protocols, which are frequently referred to as protocols. A layer-two DApp would be a scaling solution built on top of Ethereum. Transactions may be processed on this second layer before being committed to the first, relieving some of the strain on the main chain.

Finally, layer-three DApps are created on top of layer two, and they frequently contain the information required for the other two to interact. It may keep the application programming interfaces (APIs) and scripts needed to function for layers one and two. A layer-three protocol, for example, may house many layer-two DApps, enhancing the user experience across the board.

DApps are diverse applications that are powered by a core blockchain, according to the report. Some may develop on top of that first layer, but if they fit the above criteria, they are all termed DApps.

Advantages and Disadvantages of dApps

Advantages

Many of the benefits of dApps revolve around the program’s ability to protect user privacy. Users of decentralized apps do not need to provide personal information to use the app’s functions. DApps use smart contracts to conduct transactions between two anonymous individuals without the requirement for a central authority.

Proponents of free expression point out that dApps can be created as alternatives to social media platforms. Because no single participant on the blockchain can delete or block messages from being posted, a decentralized social media platform would be impervious to censorship.

Ethereum is a versatile platform for developing new dApps, providing the infrastructure required for developers to concentrate their efforts on discovering novel uses for digital applications. This could allow for the quick deployment of dApps in many businesses, including banking and finance, gaming, social media, and online retail.

Disadvantages

Because the use of dApps is still in its early phases, it is experimental and subject to various challenges and unknowns. There are concerns about the applications’ ability to scale successfully, mainly if an app requires many computations and overloads a network, producing network congestion.

Another challenge is the capacity to create a user-friendly interface. Most users of traditional centralized institutions’ apps expect ease of use that motivates them to utilise and interact with the app. To persuade people to utilise dApps, developers must build an end-user experience and degree of performance that rivals popular and well-established products.

Another restriction of dApps is the difficulty of modifying code. Once deployed, a dApp will almost certainly require continuous updates to make enhancements or repair bugs or security threats. According to Ethereum, developers may find it difficult to make necessary upgrades to dApps because the data and code broadcast to the blockchain is difficult to modify.

Pros

• Promotes user privacy

• Resists censorship

• Flexible platform enables dApp development

Cons

• Experimental, may not be able to scale

• Challenges in developing a user-friendly interface
• Difficult to make needed code modifications

The Future of dApps

Dapps are still in their infancy. However, there are currently thousands of dApps available that provide a wide range of activities, such as playing games, transferring money, and raising your digital cats.

By the second quarter of 2020, dApp transaction volume had reached $12 billion, up to $4.5 billion from the previous quarter. However, there is still more work to be done. Before dApps take off, developers and the networks on which they are built must address a number of issues, including scalability, security, and user experience (UX).

When they do, the era of the decentralised app will begin.