In this article, we will talk about decentralized applications that are based on blockchain technology. We’ll find out what DApps are, how they work, how they differ from ordinary applications and even how to create one! Also you will find examples of these applications here, so let’s get started.
What are DApps?
DApp may look like an ordinary application, but it’s not. Based on blockchain technology it’s completely decentralized. Such apps are not controlled by anyone and everyone can use its code for their purposes. Usually DApps are being developed in order to help create other apps like DeFi, games or socials. There are several main characteristics of these applications:
- Open source. Everyone should have the opportunity to see the DApps codebase.
- Decentralization. All transaction records of a decentralized application should be kept in the blockchain, so no one could control it.
- Rewards. Blockchain validators invest in their work, so they should be rewarded. Usually this is done using crypto.
- Protocol. DApp is usually based on some cryptographic algorithm. For example, Bitcoin uses Proof of Work (PoW).
Benefits of DApps
Let’s find out what advantages DApps can offer us:
- Security. Being decentralized, DApps are tamper proof and it’s almost impossible to hack them.
- Speed. Faster payments due to the absence of third parties.
- Anonymity. Usually the login process is quite easy and does not require some personal data from a user.
- Reliable data records. We are able to take a look at the data that is safely kept on the blockchain, in case we need to verify a transaction, for example.
Types of DApps
According to the dapp.review website, there are more than 6 thousand DApps. The dappradar.com divides decentralized applications as follows: games, social, finance, exchanges and “other”. However, we would like to give you one more way to classificate these apps. DApps can be:
- Financial. These include decentralized exchanges and other applications designed to interact with cryptocurrencies. For example, the Compound app, with which you can lend cryptocurrency and earn money on it.
- Partially financial. Applications that involve working with finances, but whose purpose is not related to them. These include auctions, marketplaces, and games. For example, in order to play some games, you need to buy a piece of virtual land. Finances are involved only in order to start playing.
- Non-financial. These include applications for sharing disk space or processing power. For example, the SAFE Network uses Safecoin tokens, which are not sold anywhere. They can only be exchanged or received in exchange for disk space. Finances are not directly involved in the operation of the application.
How to create a DApp
DApp development requires the ability to code smart contracts. For example, a DApp on the Ethereum blockchain will require knowledge of Solidity. You will need to create a "Roadmap" of the project. This is a plan that shows the current state of development and next steps with precise dates. Also, many DApps developers post on their blog on the Medium platform, where they publish news and reports.
Some develop decentralized applications on their own. For example, the creators of the decentralized exchange aggregator 1inch created it by themselves during a hackathon. And others attract investments through private investors or through ICOs. For instance, Decentraland was financed with the help of ICO. However, the popularity of ICOs has decreased due to the large number of scam projects.
Before launching a DApp on the main blockchain network, you need to run it in a test version. It will show all the functionality of the application, but with free test tokens. So you can find errors without risking losing money. Moreover, the source code of the project should be audited by special companies. They check the code for vulnerabilities and errors. Since the developers will not have direct control over the project after launch, such audits are needed to identify errors before the app goes live. The code audit and the code itself are published in the public domain on GitHub or similar sites.
When the DApp is launched, you’ll need to distribute tokens. The main ways to do it are:
- Airdrop is a free distribution of tokens to those who use the project. For example, a person publishes news about the project on social networks, and makes a review of the application. And as a reward for that he might receive tokens.
- ICO. Investors usually receive a certain number of DApp tokens, in accordance with the amount invested in the project.
- Distribution among private investors who financed the development of the project.
- Listing them on exchanges.
As a rule, several distribution methods are used at once. For example, Decentraland's MANA tokens were distributed to ICO participants, early investors, and rewarded to content creators for the app.
Example of DApps
Golem is an application whose goal is to create a global marketplace for computing power. Golem is a decentralized supercomputer for complex computing operations such as scientific calculations and machine learning. Users can rent out some of the computing power of their devices and receive GLM tokens as rent. Or they can buy GLM tokens and use them to pay for computing operations on the computers of suppliers. The application uses the Ethereum blockchain.
SAFE Network is a network of decentralized servers. Users, who install the application, can send messages or store information there. Decentralization and encryption algorithms ensure the anonymity and protection of user data. In order to access the network, Safecoin tokens are required. You can get these tokens by renting out some of your disk space or computing power. The SAFE Network is based on the Omni protocol, which runs on the Bitcoin blockchain.
Decentraland is a metaverse, a virtual world built on the Ethereum blockchain. The universe of Decentraland is basically created by the users themselves. They buy pieces of land in a virtual space and develop them as they wish. Users can communicate with each other, play games, explore the Metaverse. Decnentraland has its own currency – MANA tokens, in exchange for which you can buy a piece of land or clothes for your avatar.
DApps are decentralized applications. They differ from ordinary applications because their database is not stored on the developer's server, but is kept inside the blockchain. In order for an application to be considered decentralized, it must be open sourced, be based on the blockchain, use tokens in its work, and have a consensus algorithm for generating these tokens.
Would you like to learn more about the crypto? Then you should check out our blog! You might like our articles “Stablecoin War” and “Matt Damon’s Crypto.com Ad — What Could Go Wrong?”.
