Since the birth of Bitcoin (BTC) over a decade ago, blockchains have evolved to unlock various new features and use cases beyond just currency. One of these new avenues is the creation of decentralized applications (DApps) to use blockchain technology to enhance many traditional sectors and services.
What are decentralized applications (DApps)?
Decentralized Applications (DApps) are digital applications or programs based on smart contracts that run on blockchains instead of central servers. They look and feel like regular mobile apps on your smartphone and offer various services and features, from gaming to finance to social media and more. DApps operate on decentralized peer-to-peer networks, as the name suggests. An initial report suggested that DApps have the following characteristics: Open Source: DApps source code is publicly available, which means anyone can review, use, copy and modify it.
There is no single entity that controls most of your coins or tokens. Users can also suggest and vote on changes to the app. Decentralized and Cryptographically Secure: To ensure data security, all information in the DApp is cryptographically protected and stored on a public, decentralized blockchain managed by multiple users (or nodes). A tokenized system: DApps can be accessed using a cryptographic token. You can adopt cryptocurrencies like ETH or generate a native token using a consensus algorithm like Proof-of-Work (PoW) or Proof-of-Stake (PoS).
The token can also reward backers such as miners and participants
Based on this broad definition, the Bitcoin blockchain can be defined as a DApp, arguably the first DApp ever. It is open source; all data resides on its decentralized blockchain, is based on a cryptographic token, and uses the PoW consensus. Algorithm. The same applies to other blockchains that have the properties mentioned above. Today, however, the term “DApps” generally refers to all applications that have smart contract functionalities and run on blockchain networks. The Bitcoin blockchain doesn’t support smart contracts, so most people wouldn’t consider it a DApp.
Since June 2022, most DApps have existed on the Ethereum network. It provides a solid infrastructure for DApp developers to extend existing use cases. But as DApps matured, developers started building them on top of other blockchains, including BNB Smart Chain (BSC), Solana (SOL), Polygon (MATIC), Avalanche (AVAX), EOS, etc.
How do DApps work?
DApps are applications based on smart contracts. Your backend code runs on distributed peer-to-peer networks. A smart contract works like a set of predefined rules applied by computer code. When certain conditions are met, all nodes in the network perform the tasks specified in the contract. Once a smart contract is implemented on the blockchain, it is difficult to change or destroy the code.
Therefore, even after the team behind the DApp has disbanded, users can still access the DApp.
Benefits of DApps
While the interfaces of DApps and traditional applications may seem similar, DApps offer several advantages over their centralized counterparts. Web applications store data on central servers. Or permanently unusable. Centralized systems can also suffer data leaks or theft, putting businesses and individual users at risk. In contrast, DApps are built on distributed networks without a central instance.
Without a single point of failure, DApps are less vulnerable to attacks, making it harder for malicious actors to hijack the network. The P2P network can also ensure that the app continues functioning with minimal downtime, even if individual computers or network parts fail. The decentralized nature of DApps also means users have more control over the information they share. Because no companies control users’ personal information, they don’t need to provide a real identity to interact with a DApp. Instead, they can use a crypto wallet to connect to DApps and have full control over what information they share.
Another advantage of DApps is that developers can easily integrate cryptocurrencies into their core functions using smart contracts. For example, DApps on Ethereum can accept ETH as a payment method without integrating third-party payment providers.
Limitations of DApps
DApps have the potential to become an important part of a censorship-free future, but there are two sides to every coin. Decentralized applications are still in the early stages of development, and the industry has yet to overcome constraints such as scalability, code changes, and a small user base. DApps require significant computing power to run, which could overload their networks. For example, achieving the security, integrity, transparency, and reliability that Ethereum strives for requires every validator to execute and store every transaction performed on the network. This could affect the system’s Transactions Per Second (TPS) rate, leading to network congestion and excessive gas charges.
Making changes to a DApp is also a challenge. To improve user experience and security, a DApp will likely need to be continuously modified to fix bugs, update the UI, and add new features. However, once a DApp is deployed on the blockchain, it is difficult to change its backend code. It would require a majority consensus of network nodes to approve changes or improvements that could take a long time to implement.