All You Need to Know About Decentralized Applications

Blockchain is booming, and the dApp development company must keep up with it for a wide range of digital solutions. This blog explores a relatively new phenomenon: blockchain applications, also known as decentralized applications. This article answers the most important questions regarding blockchain applications and their benefits.

What is a dApp?

I define "dApp" as a decentralized network-based program or application that serves as an alternative to conventional or centralized applications. DApps are a collection of interconnected smart contracts. Each smart contract performs a specific function within the application's backend. It is essential to understand that dApps resemble traditional apps built via blockchain dApp development companies. Three characteristics distinguish a decentralized application from a conventional application:

• A dApp must always be open-source and decentralized, functioning independently without centralized control.

• Data and records within a decentralized app development must always be accessible to the public.

• The application requires the use of a cryptographic token to ensure network security.

What does “decentralized” mean?

The term "decentralized" plays an undeniable central role in blockchain applications. But what exactly does it mean? The majority of applications today operate on networks governed by a central authority. For example, social media platforms, banks, and streaming services store your information on centralized servers. When you use these applications, a request is sent to their servers, and a response is returned if your credentials, including your username and password, are valid. While this method of centralizing online exchanges between the provider and consumer is efficient, it controls massive amounts of personal and private user data by a small number of extremely large corporations. Your personal information is vulnerable to breaches and intrusions because it is in the hands of large tech companies such as Google and Amazon that profit from it.

These data privacy vulnerabilities in centralized networks increased interest in privacy-preserving solutions, such as blockchain technology and decentralized applications. dApps, like many other current blockchain dApp development services, aim to eliminate the middleman and "decentralize" application ownership. When you book a ride on Uber, you do not pay the person transporting you from A to B. An intermediary takes a substantial commitment in this transaction, which increases the cost of the service for users and reduces drivers' earnings compared to when they drove independently. DApps eliminate this requirement for an intermediary. Regardless of their nature, all transactions are conducted between the provider and the consumer and recorded on the blockchain.

What are dApps used for?

DApps connect Web 2.0 platforms to Web 3.0, the future of the internet in which decentralization will play a central role. Due to the novelty of blockchain technology, there are fewer decentralized applications than traditional apps. Nonetheless, constant innovation has begun to diversify the application ecosystem. So, what can we anticipate for the future of dApps? What do they appear like, and what are their functions? Here are some examples:

Cryptocurrency wallets

Crypto wallet dApps are essential elements of the Web 3.0 decentralized ecosystem. For the purchase, sale, and exchange of cryptocurrencies, custodial or non-custodial crypto wallets are necessary. Custodial wallets are platforms that store your private keys, which are analogous to your account's PIN or password. Binance and Coinbase are examples of wallets with custody. You control non-custodial wallets, which means no one else can access your private keys. Instances include Zeno and Edge.

Decentralized exchanges (DEXs)

Typically, DApps are accessed through a web browser. After visiting the DEX web address (URL), you will find an interface that allows you to connect your cryptocurrency wallet to the platform or website. After that, you can interact with the DEX dApp and utilize supported features such as liquidity pools, lotteries, NFT markets, and others.

Gaming

Decentralized gaming is one of the most popular aspects of the blockchain ecosystem. Non-fungible tokens (NFTs) are utilized in popular game dApps like Splinterlands, Axie Infinity, and My DeFi Pet to ensure players retain the value they earn in the metaverse. As a player, you can purchase unique in-game items, such as NFTs, to enhance your gaming experience by assembling a collection of weapons or accessories, for example.

Social media platforms

Social media decentralized applications, such as Steemit, facilitate online communication in the same manner as social media platforms, such as Facebook and Instagram. However, rather than collecting and selling your data, decentralized applications invert the flow of value and compensate you for participating in the network.

What types of dApps are there?

Even though all dApps function identically, we can classify them into three distinct categories based on their protocol layer and purpose. A protocol layer is analogous to a layer of a wedding cake, where multiple layers can be stacked atop one another to add features to the cake or, in this case, the decentralized application.

• Type 1: A decentralized application with its blockchain network, constituting the "cake's" foundation. Bitcoin is an example of a type 1 dApp, often referred to as the first dApp.

• Type 2: Type 2 decentralized applications are built on top of Type 1 and require a utility token to function. Omni Protocol, for instance, is a decentralized trading platform constructed on the Bitcoin blockchain.

• Type 3: These applications utilize the Type 2 protocol. For instance, the SAFE (Secure Access for Everyone) Network is a decentralized data storage and communication network that enables the creation of censorship-resistant websites and applications. The SAFE Network issues SafeCoins using the Omni Protocol.

Type 1 dApps are analogous to the operating system on your device, Type 2 dApps are the browser that runs on that operating system, and Type 3 dApps are browser extensions such as an ad blocker or password manager. In this manner, dApps are constantly evolving by adding functional layers in the form of protocols.

What are the benefits of dApps?

Now that we have a solid understanding of what a dApp is and how it operates, we will discuss some of the most notable advantages of these blockchain applications:

Dependability

DApps are more reliable than traditional applications because blockchain networks cover multiple nodes. All users may lose access to the application and data if the centralized servers of Instagram fail. The failure of an application requires each node or server to fail simultaneously.

Open source

Because blockchain applications are decentralized, all network participants must have access to the source code. In an environment without a middleman, consumers must identify and validate each program created in order to avoid fraud and exploitative viruses. Thus, the community ensures the quality and viability of each blockchain-based dApp.

Utility tokens

Similar to how you pay for traditional applications, many decentralized applications include so-called utility tokens that govern the platform's features. For instance, numerous utility tokens enable protocols such as in-app transactions and other functionalities. Utility tokens allow a high level of scalability because they can continuously add and improve features on an existing decentralized application layer.

Decentralized consensus

Due to the absence of a central authority, blockchains must rely on consensus procedures to ensure the validity of all transactions. When a dApp transaction occurs, the entire network is responsible for its verification.

What happens next?

DApps are still in their early stages. However, hundreds of dApps already offer various activities, such as playing games, transferring funds, and raising digital cats. What does this mean for application development in the future? Since blockchain applications are still in their infancy, market volatility should be anticipated. Nevertheless, the technology is robust and holds great promise, particularly in terms of data security and data ownership.

Need assistance with the creation of your application? Our development specialists are delighted to discuss the possibilities. Fill out our website's contact form to receive a free digital consultation and learn what we can do for you and your business.