What Is a Decentralized App (dApp)?

The Power of Open Source Blockchain Technology
What Are dApps Decentralized Applications

Blockchain technology has opened a whole array of possibilities. After it made its debut as the building block of Bitcoin, it wasn’t long before people in the cryptocurrency world began to look at ways to expand it.

When Ethereum came into being in 2015, developers were given the opportunity to build their own blockchain-based software. They could create applications and networks that were truly decentralized, with no central point.

It wasn’t long before ideas for these decentralized applications (“dApps”) began to circulate. They offered an opportunity for quicker, smoother operations, free from the restraints of a cumbersome central power.

dApps come in all shapes and sizes, although they all have certain things in common. To understand dApps, it’s important to look at the similarities and differences.

What Do All dApps Have In Common?

  • All dApps are open source. This means that the code on which they’re built is accessible to all, and can be copied and modified. The backend code of dApps (this is the ‘behind the scenes’ part of the app that users don’t interact with) is stored on the blockchain, so it can be accessed by anyone.
  • Another common feature of all dApps is that they’re decentralized. As mentioned above, this means they have no central point. Because the code is stored on the blockchain, which is distributed between many different computers, there’s no central server and no powerful body in control of the software. This is important for a few reasons, which we’ll come to later.
  • dApps also run on tokens. These are cryptocurrencies, like Bitcoin and Ethereum, although many dApps choose to use their own unique token. The dApp generates these tokens, and the tokens fuel the app by paying people in the network to incentivize participation. They can be bought and sold, and they act as proof of the value members of the network bring to the app.

These are the ways that dApps are the same, but there are also different types of dApps. Let’s take a look at some of those.

The Different Types of dApps

In the Ethereum whitepaper, dApps are classified according to their financial functions.

  • Some dApps are purely financial. They deal only with monetary issues and help users do things like manage their money and set up contracts. Examples of this are sub-currencies and crypto wallets. The most famous example of this type of dApp is, of course, Bitcoin.
  • Other dApps are only semi-financial. This means they do have a financial element, but it’s not the whole picture. dApps that focus on trading money for other items or services fall into this bracket.
  • The third type of dApp is the non-financial kind. These have nothing to do with money at all, and are used for things like decentralized government and online voting processes.

Another way to classify dApps is by looking at how they use the blockchain. This way, it’s possible to divide dApps into another three categories:

  • Those that use their own blockchain, like BitCoin.
  • Those that use the blockchain of an existing dApp. Examples are dApps built on the Ethereum blockchain. These rely on tokens to fuel them.
  • The third type of dApp uses the protocol of the second type of dApp. These also rely on tokens, and are generally more specialized than the others.

These are the different types of dApp, but what are the advantages of dApps in general, and how are they used?

How & Why Are dApps Used?

One of the most attractive things about dApps is that they’re decentralized. As mentioned earlier, this means that they are shared between several computers instead of having one central point which controls everything.

The advantages of decentralization were first showcased by Bitcoin. As it doesn’t rely on a central body to facilitate transactions, it’s cheaper, safer, and quicker to send money. It’s also completely anonymous.

Bitcoin owes its decentralized nature to blockchain technology, and it’s the same with dApps. Because the backend code of the dApp is stored on the blockchain, it’s distributed across a network of servers.

This means dApps can operate without a central body. Users can interact in a peer-to-peer fashion, without having to pay fees to a third party or worry about corruption.

There’s also the security element. Traditional, centralized apps are located at one central point, which is vulnerable to attack. If this server falls victim to hackers or is targeted by a cyber attack, the entire app is in trouble. Because dApps have no central point, they’re much less vulnerable to attack.

Decentralized apps are smoother, cheaper, and safer than their counterparts, and this simplified way of doing things has many possible uses. These include safely managing identity, building peer-to-peer marketplaces, and constructing self-reliant networks.

The Future For dApps

dApps are still in their infancy, as Ethereum has only been around for two years. As time goes on, it’s likely that many new functions for this technology will be discovered, and developers will get better at building useful and user-friendly software on the blockchain.

One of the more exciting things about dApps is that they represent a totally new way of organization. They allow users to work together directly, without being under the control of expensive and demanding third parties.

They have the potential to change the way businesses and software is organized, and the future looks extremely interesting.

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