dApps are blockchain-based applications that run on a secure blockchain system. Their records are kept in a decentralized system, where transactions are stored in a fictitious vault, shielding them from the potential dangers and uncertainty of the mediators in a centralized landscape.
This article will serve as a guide to all you need to know about decentralized applications, how they work, and the popular use cases.
What Are Decentralized Applications(dApps)?
Decentralized applications (dApps) are digital applications or programs that exist and run on a blockchain or peer-to-peer (P2P) computer network rather than a single computer.
DApps appear to be similar to other software applications available on a website or mobile device, but they are P2P enabled.
Because dApps are decentralized, once a developer releases a dApp’s codebase, others can build on top of it. The app is not subject to the authority of a single entity. A decentralized application (dApp) is used to create a variety of applications, such as those for decentralized finance, web browsing, gaming, and social media.
How dApps Works
Decentralized Applications are smart contract-powered applications. Their backend code is distributed across peer-to-peer networks. A smart contract is made up of a set of predefined rules that are enforced by computer code. When and if certain conditions are met, all network nodes will carry out the tasks specified in the contract.
It is difficult to change or destroy a smart contract once it has been deployed on the blockchain. As a result, even if the dApp’s development team has disbanded, users can still access the DApp.
Decentralized Apps, like the well-known term Decentralized Finance (Defi), operate on a blockchain system. Dapp records are kept secure through decentralized computing systems of cryptocurrencies such as Ethereum or Bitcoin, thanks to the wonders of blockchain.
Advantages Of dApps
dApps has some amazing benefits including;
Disadvantages Of dApps
Decentralized applications also have the following weaknesses:
- Maintenance. DApps are difficult to maintain, debug and update, as all fixes require the consensus of all the peers in the blockchain-based network.
- Hard to scale. Decentralized networks are harder to scale than centralized networks.
- Network congestion. If a decentralized application uses too many resources, it will back up the whole network.
- User experience. Because decentralized applications do not function the same as centralized apps, it may be more difficult for developers to create a user-friendly experience for end-users. Users need a public and private key to log in versus a username and password.
Popular dApps Use Cases
GameFi DApps have been growing in popularity, which is exemplified by the rise of Axie Infinity, a play-to-earn game on the Ethereum blockchain. According to DappRadar, blockchain gaming activity in 2022 Q1 saw a 2,000% increase from 2021. It also attracted 1.22 million unique active wallets (UAW) in March 2022, with over 50% of the activity coming from gaming DApps.
Unlike traditional video games, most gaming DApps give players full control over their in-game assets. They also offer players opportunities to monetize these items outside of the game. Axie Infinity, for example, features game characters, virtual land, and gaming items in the form of NFTs.
Players can store them in crypto wallets, transfer them to other Ethereum addresses, or trade with other players on NFT marketplaces. Within the ecosystem, players can compete with each other to collect ERC-20 tokens that can be traded on exchanges. Typically, the longer they play, the more in-game rewards they can earn.
Entertainment is an integral part of our lives. With DApps, daily activities that people enjoy are being transformed into digital experiences that can also generate economic incentives.
For example, Audius, a blockchain-based decentralized music streaming platform, removes the intermediaries that exist in the traditional music industry to connect artists and fans directly. It allows music curators to better monetize their content and produce immutable records of their work on the blockchain.
DApps are also tackling issues that social media platform users face. Centralized social media giants like Twitter and Facebook are often criticized for censoring posts and mishandling user data. With decentralized social DApps like Steemit, the community can interact freely and express their opinions with fewer restrictions and censorship while enjoying greater control of their personal information.
Borrowing and lending are the most popular types of financial services that decentralized applications provide. DeFi DApps offer instant transaction settlement, minimal-to-none credit checks, and the ability to use digital assets as collateral.
Users can have more flexibility on DApp lending marketplaces. For example, lenders have more control over their loans by choosing which token to lend and on what platform. Users can also potentially earn 100% of the interest generated from the loan since they don’t have to pay any intermediary fees.
DApps can empower users to play a greater role in the governance of online organizations by introducing a more community-centric decision-making mechanism. With the help of smart contracts, users that hold governance tokens of a particular blockchain project can create proposals for the community to vote on and cast their votes on others’ proposals anonymously.
One of the decentralized governance models is Decentralized Autonomous Organizations (DAOs).
DAOs can be considered fully autonomous DApps that use smart contracts to make decisions without a central authority. They have no hierarchy. Instead, it is economic mechanisms that align the interests of the organization with those of individual DAO members.
What Are Ethereum dApps?
These are decentralized applications that are powered and developed using the Ethereum platform. Ethereum dApps use smart contracts for their logic. They are deployed on the Ethereum network and use the platform’s blockchain for data storage.
Decentralized applications extend the functionality of the Web by incorporating blockchain technology into traditional applications.
Dapps are still in their infancy. However, there are already thousands of dApps that provide a wide range of services, such as gaming, investing in DeFi, and trading NFTs. In the future, decentralized applications may bring even more innovative use cases to the market.