Decentralized applications, dApps for short, are a new approach to building more secure, transparent, and highly available applications that leverage blockchain technology to cut unnecessary intermediaries.
Saying that mobile apps have become prevalent in our day-to-day activities would be an understatement. We now have an application for everything and opening them several times a day has become an almost reflex-like activity. In fact, most of us have over 80 apps installed on our phones, on which we collectively spent over 3.8 trillion hours last year! What most people aren’t aware of, though, is that the lion’s share of modern apps run on centralized networks, meaning a dominant authority controls them. It sounds scary, and it can be in some cases. Still, it is pretty standard, and it essentially means that there are servers, or entities, that control the access and data traffic of a particular application. For instance, social media or banking apps store our data on their servers and control the access, data, and activity that flows throughout those servers. This dynamic is how apps have always worked, and while centralization is somewhat efficient, it also increases the chances of hacks, crashes, and tech companies profiting from your data. Enter dApps.
Decentralized applications are a significant move away from the traditional centralization that has become an inconvenience in many scenarios, such as online banking, where intermediaries (i.g., banks in this case) stopped being service enablers and started to become hurdles. In that sense, dApps can help build more independent, reliable, secure, transparent, and highly available applications that leverage modern technologies to free themselves from unnecessary go-betweens.
Seeing that dApps may very well become the applications of the future, we at Foonkie consider it crucial for you to get familiar with them and understand how they work and how they can improve our lives so that when they take the world by storm, you’re ready to tackle them head-on. Let’s begin.
What are dApps?
Before diving into everything dApps, we must first establish some context and define some terms. Most of us know the basics of how the internet works; some even remember how it began its widespread journey nearly three decades ago. In those first years, the internet was a simple directory of limited information known as Web 1.0. Not too long after, it evolved into Web 2.0, which is the internet as we know it today. Web 2.0 made internet content highly interactive, accessible, and dynamic. It concentrates data traffic on centralized servers owned and operated by a single governing entity that controls the applications and the data traffic that flows through them. These types of apps are known as centralized applications, and they make up the vast majority of the current app market. For example, think of apps like Facebook, Twitter, and Instagram. These are all centralized apps because they are owned and operated by one central organization. That’s how the app universe has always worked. However, with the advent of emerging technologies like blockchain, things are changing, and now comes the birth of Web 3.0.
Web 3.0 is the internet’s third generation, and it promises to deliver websites and applications that can process information in a faster, more innovative, and more human-like way by leveraging AI-powered technologies, Big Data, and blockchain, among others. More importantly, though, decentralization is the credo of Web 3.0 as it promises to decentralize data and give us a more democratized version of the online world today. In other words, Web 3.0 will remove the centralized authorities that have traditionally governed data traffic and will eliminate their control over applications, thus promoting individual data ownership, self-governance, and transparency. What’s more, Web 3.0 will bring blockchain technology to the forefront and put it at the crux of all transactions. As a result, internet users will be able to carry out permissionless peer-to-peer business transactions, rendering intermediaries such as banks and central servers useless and placing the focus on data privacy and ownership.
So, just like Web 2.0 has Facebook and Instagram, Web 3.0 has dApps. Decentralized applications are software programs that run via smart contracts on a Peer-to-Peer (P2P) or blockchain network, typically the Ethereum blockchain. A blockchain is a distributed, decentralized online ledger that stores data in time-stamped blocks that, once full, close and anchor themselves to the previously filled block, which forms a chain of information that can’t be modified and is visible to all members of the blockchain. If anyone tries to alter any part of the chain, all participants will see the discrepancy and quickly pinpoint the culprit. This way, the system itself establishes a transparent and secure order of events where a chain-like data structure forms permanently, constituting an immutable and highly secure timeline of information.
At first glance, dApps are basically the same as traditional software applications, but instead of running on central servers, as Facebook and Instagram do, they run on a decentralized network, and you need an e-wallet to use them. As a result, dApps are outside the confines of company-owned servers. Furthermore, they are never controlled by a single authority, thereby securing decentralization and removing the risks of third parties exercising control over their users and violating their privacy. In that sense, dApps give users complete governance over their personal information and give them back data ownership so they can decide if and how they share it with third parties.
Using blockchain technology and leveraging its many benefits for developing decentralized applications is one of the most significant advancements in the modern digital landscape. It represents the beginning of the end of the monopoly third parties and centralized organizations have traditionally exercised over our personal information, and herein lies the attractiveness of dApps. As a matter of fact, even though their adoption isn’t widespread yet, their popularity has increased significantly in the past five years. The world went from having 25 active dApps in 2015 to more than 4,000 in 2022, with nearly 95,000 active daily users and a 24-hour transaction volume of $36.5 million. Furthermore, the global dApp market size is expected to reach almost $369 million by 2027. That’s a whopping 54% CAGR, which highlights the increasing popularity of dApps and their potential to become widespread in the years to come.
How do dApps work?
As we stated above, traditional applications, such as Instagram or Twitter, are governed by a single organization and run on a single server owned by said organization. These apps may have millions of different users on their side, their front end, but their server side, or back end, is administered by a single entity. Similarly, DApps also have a frontend that users use to communicate and need computers that do the same job as central servers. The difference is that, first, these computers don’t belong to one entity. Instead, their workload fans out across all its users’ computers and any blockchain participants. And second, since they work on top of a blockchain, their backend works via smart contracts.
A smart contract is a self-executing program that lives on a blockchain network and runs automatically when certain conditions are met and verified. They are used to execute agreements and transactions between their participants without the need of a supervising third party such as a lawyer, government agency, or organization. For instance, in a traditional paper agreement or contract, interested parties sign a document that outlines specific terms. The law dictates that these terms can’t be violated; if they are, there are consequences. Alternatively, a smart contract has its terms written in code and doesn’t run unless those conditions are met. As a result, the conditions are enforced automatically without the need of a supervising entity getting involved and can’t be changed, thus ensuring decentralization and security.
DApps’ smart contracts execute on a blockchain network, usually Ethereum, and are validated via cryptographic tokens required to access the application.
DApps are still maturing, so jotting down the specifics of what they are and how they work isn’t very straightforward. Nonetheless, most experts and aficionados go by a 2014 paper titled “The General Theory of Decentralized Applications, Dapps,” which outlines the main criteria for an application to qualify as a dApp:
The most crucial criterion of dApps is that they must be open source. This point is essential to ensure that all changes are visible and decided upon by a consensus of its users. The application must also operate autonomously and without a controlling entity.
The application must store all its data and records cryptographically, and this information must be kept in a decentralized blockchain.
The application must give users digital assets such as cryptographic tokens when they validate their records as a form of incentivization.
The application must run according to a protocol and use standard cryptographic algorithms to generate tokens that act as proof of value.
Of course, these criteria aren’t set in stone, and there’s no all-seeing eye ready to enforce them. However, these act as a guide as to what defines a dApp, and anyone with a clue of how they work can develop one that meets some but not all of these criteria and still classify as a dApp. There are also programs that weren’t initially designed to work as dApps but meet these criteria. Most cryptocurrencies, such as Bitcoin, for instance, qualify as dApps but aren’t technically considered dApps even when they fit the mold. So take these criteria with a grain of salt.
Advantages of dApps
Since dApps aren’t owned by any corporation with hidden interests, they have several benefits that make them a remarkable asset. Here are some of them:
Security breaches are running rampant lately, compromising the safety of the personal information of thousands, if not millions, of users. Consequently, it’s crucial to seek safer alternatives to guarantee data breaches don’t keep growing. Since DApps don’t rely on a central server and all transactions are stored on a blockchain network, the transparency, security, and reliability of all transactions are ensured. Moreover, due to blockchain’s characteristics, all transactions are time-stamped and verified, meaning that hackers can’t alter data within the network or corrupt the system without bypassing cryptographic encryption. dApps also use tokens for transactional security, further enhancing the safety and integrity of all activity within the application.
One of the most significant advantages of decentralized applications is that users don’t have to give their personal information to a central authority if they want to access an app. Users have complete control and ownership over their personal data and are free to choose if they want to share it with any third parties. As a result, dApps remove the possibility of a central authority collecting user data, selling it, and profiting off it, an issue that is prevalent in centralized apps.
Building on the fact that dApps are decentralized, no government entity or corporation regulates their content. Centralized applications have to abide by their controlling authority or any regulating entity’s laws, and any content or activity which violates those guidelines is immediately censored. With dApps, censorship is not possible. When a smart contract is executed, there is no way to stop it or modify its terms, making dApps censorship-resistant and ensuring that no one can block users and blacklist them or any content they want to submit. This benefit is crucial to maintain freedom of speech and avoiding discrimination.
DApps never go offline or have downtime issues. As opposed to centralized apps, which go down due to a single point of failure because they depend on a central server, dApps run on a blockchain system. In addition, they rely on a network of computers spread out worldwide; it would be nearly impossible for all those devices to shut down at once.
Cutting out the middleman means faster transactions. In traditional apps, most transactions go through a third party who, apart from charging a fee, has to review the transaction before approving it. If they decide something doesn’t jibe, whether, on a whim or a real issue, they have the freedom to block it. DApps, on the contrary, base transactions on smart contracts, and their approval relies on consensus algorithms within the blockchain. As a result, unnecessarily expensive third parties are eliminated, and transactions occur significantly faster.
Disadvantages of dApps
Despite their many benefits, dApps are still in their infancy. Thus, their development is still mainly at an experimental stage, and it’s prone to unknowns and problems that, while fixable with time, are still worth considering.
As you can see, dApps rely heavily on blockchain technology, which is where most of its benefits stem from. However, most blockchains have some drawbacks regarding their transactional speed and scalability. For example, as of right now, Ethereum can handle about ten transactions per second, leading to network congestion, especially if the application has high traffic or uses too many resources. Centralized applications, on the contrary, are easily scalable, giving them an edge over dApps.
Hard to maintain
For the most part, decentralization is a good thing. But, unfortunately, it does come with its shortcomings, one of them being slower updates. Since centralized apps have a single server, updates and maintenance are pretty straightforward. However, the same isn’t true for dApps. Because of blockchain’s decentralized nature, implementing updates, patches, or even minor fixes requires every node in the system to reach a consensus and update all the copies in the network simultaneously. Needless to say, doing so is extraordinarily time-consuming, and as a result, it can take weeks or even months to implement fixes and update the application.
Humans are creatures of habit, and we love our apps mainly because they are what we’re used to. However, breaking that habit can be challenging. Centralized apps are typically easy to use, have efficient navigational flows, and are often very successful at establishing an adequate user experience, all crucial for common digital audiences. DApps, on the contrary, are still not there yet. Their workings are a lot different, and some could say, more complicated than conventional apps, which makes it harder for developers to match users’ expectations. In that sense, getting people to transition from their usual apps to dApps can be challenging. Also, creating experiences that successfully help them adapt to new interfaces and requirements (i.g., private keys and tokens) can be pretty demanding.
These drawbacks, and more that we may not have included or some that we may not be aware of yet, aren’t necessarily deal breakers when it comes to adopting dApps. However, even though developers are already taking steps to fix these issues, they do require our attention and action to ensure that dApps provide an unparalleled user experience in the foreseeable future.
Ok… but where do I find dApps?
So far, we’ve explained what dApps are and how they work, but we’ve omitted a crucial part…where do you find them? Sure, you have a phone and can quickly go to your app store to find regular apps. But do dApps work the same way? Unfortunately, not quite; dApps still don’t have their own equivalent to the App Store or Google Play. Remember when we said the most common blockchain used to house dApps was Ethereum? Well, it turns out that to access Ethereum dApps, you simply need to go to your browser, access the internet, and go to ethereum.org. Once there, these are the steps to follow:
1. Get an e-wallet: DApps don’t work without an e-wallet, plain and simple. Aside from helping you store your money, an e-wallet acts as your online identity and is at the core of most actions you can perform when interacting with a dApp. The most popular e-wallet is MetaMask, but you can use any e-wallet you like as long as it works with Ethereum.
2. Buy cryptocurrency: For Ethereum dApps, you need to get Ether. For this, you need to go to a crypto exchange platform, purchase the Ether amount you want, and then transfer it to your e-wallet.
3. Find a dApp: using your browser, you can go to Ethereum or sites like dappradar, which allow you to browse and choose from hundreds of dApps.
4. Create your account: Just like regular apps, most dApps require you to create an account. Here, you need to connect your e-wallet, which will act as your login token to access the dApp and the place that will house your transactions.
5. Start interacting with your favorite dApps and enjoy.
Even though their adoption isn’t widespread yet, there are many popular dApps that are growing exponentially and amassing users as they grow. Here are some of them:
Crypto Kitties: An online game where users can breed virtual kittens to earn tokens or exchange them for real-world money.
Sapien: An Ethereum-based social network that promotes independent communities.
TraceDonate: A donation platform that connects charities to donors, facilitating transparent transactions.
OpenSea: OpenSea is the largest decentralized digital marketplace in the world. It allows users to buy and sell over twelve million exclusive digital assets.
ForTube: ForTube is a decentralized lending platform that provides lending services for users so they can deposit, borrow, repay, and withdraw anytime, anywhere.
What lies ahead for dApps?
DApps are still very young, and the world is still far away from widespread adoption. Nonetheless, their potential as bringers of safer, more independent, and immersive digital experiences is astronomical, as is their role as the bearers of decentralization. The benefits stemming from decentralization are manifold, and they are drawing the attention of users who seek to remove the grasp that single-server companies have on our data and seize control of their privacy. Sure, there are still many hurdles to overcome, but dApps will likely become a more secure, empowering, and robust alternative to traditional apps. And, as blockchain’s popularity continues to grow, we’re confident that more people will see the potential of dApps as the better way to keep our line world user-centric instead of the company-centric place it is today.
Hopefully, we’ve managed to enlighten you on everything dApp-related. However, if you still have questions or simply want to talk to us about a project or any other subject, don’t hesitate to contact us. We’re happy to help!