What is a decentralized application (DApp)?

What is a decentralized application (DApp)?

By bit.team

The emergence of Bitcoin has given impetus to a new era in the development of blockchain protocols. The developers tried to improve and add new interesting features to the blockchain protocols designed for various use cases. Today, according to Coinmarketrate.com , one can find a wide range of blockchain applications in finance, gaming, web browsing, and even for collecting works of art.

How is it possible to implement blockchain in so many different use cases? The answer will lead you directly to the DApp blockchain applications. Decentralized applications or dApps are essentially similar to traditional programs that run on blockchain networks, and not on central servers. If you are looking for a technical answer to the question “what is a DApp”, then this is, in fact, an application developed in a decentralized network. They are never managed or owned by a third-party authority, thereby ensuring decentralization.

Before delving into the components, as well as the work of decentralized applications, let’s think about the popularity of dApps. Compared to 25 dApps in 2015, we now have more than 3,600 dApps covering various fields such as gaming, decentralized financial services, social media platforms, and much more. Moreover, decentralized applications are responsible for user transactions worth almost $182.5 billion per year. Thus, it is safe to say that DApp is an important topic in the blockchain world.

DApps Operation

Since we are discussing the connection of DApp with blockchain, it is important to delve deeper into the DApp device. Decentralized applications include frontend and backend as two important components in their design. The frontend helps in communicating with the user, while the backend code is, in fact, a smart contract. DApp primarily refers to the Ethereum blockchain.

The front end of a decentralized application is the code executed on the user side of the application. In fact, it serves as an interface for communication between the user and the application. In addition, the dApps frontend also includes a digital wallet that performs various functions.

The digital wallet stores users’ private and public keys for authentication purposes. In addition, the digital wallet helps to interact with the blockchain to manage blockchain addresses and cryptographic keys. The digital wallet in the DApp frontend also helps initiate the execution of backend or smart contracts.

The backend decentralized dApps application brings an interesting twist with the use of smart contracts running on the server side of the application. The dApps backend is located on the blockchain where it is executed, and is open by nature. Smart contracts perform specially defined functions regardless of the conditions in their environment.

Differences between decentralized applications and traditional applications

Twitter and Slack are among the usual examples of companies offering web applications. Traditional web applications also depend on the frontend and backend as important elements of their functionality. However, traditional web applications use software that resides on centralized web servers, rather than on the local operating system of specific devices. The devices use the hypertext transfer protocol or HTTP to exchange encoded messages with servers. Thus, the information on the front side of the web application comes from data on the backend or the company’s web server.

The decentralized application uses a smart contract in the blockchain network as a backend. Blockchain is, in fact, a network of several machines sharing the same transactional load in a distributed network. You may find that DApp uses the same technology to render the page on the frontend. However, dApps differ from web applications in terms of backend, since they interact with the corresponding blockchain networks using a wallet.

The value of wallets in decentralized Applications

Wallets help to manage the user’s address in the blockchain along with the cryptographic keys necessary for his identification and authentication.

Instead of depending on HTTP protocols, wallets are responsible for launching smart contracts or dApps backend. Then smart contracts will interact with the blockchain network and ensure the execution of transactions. Since smart contracts are programmable code that can be adapted to specific use cases, dApps can work for a wide range of use cases.

Key features of decentralized applications

Now you have a clear understanding of the basics of decentralized applications and how they work. Therefore, now is the time to look at the following features of dApps that significantly distinguish them.

  • Open source code

One of the main advantages of a decentralized application is that it should be open source. You cannot allow the application code to be controlled by a single entity. On the other hand, the application code should be completely self-contained and easily accessible for evaluation.

  • Incentives

The next important point of DApp is the requirement to generate tokens. Decentralized applications should be able to generate their own tokens as proof of value, as well as distribute tokens as a reward.

  • Decentralization

As the name implies, decentralized applications differ from traditional ones in that their backend runs on a decentralized blockchain. The association of DApp with blockchain implies the need to store all operational records of the application on the blockchain.

  • Protocol compliance

All interested parties in a decentralized application must express their consent to a cryptographic algorithm to verify the proof of value.

Advantages of decentralized applications

Initial understanding of dApps has led to some promising conclusions regarding their definition, design, and functionality. Decentralized applications are, in fact, traditional web applications that run on the blockchain network. So, what does DApp offer in terms of value to users?

Here are some notable advantages that you can find in decentralized applications:

  • No downtime

The main advantage of dApps is that there is no downtime in them. After deploying a smart contract on the blockchain, the network can always serve the needs of customers who want to interact with this smart contract. In addition, dApps can ensure that attackers will not be able to carry out denial-of-service attacks on specific applications. Since a decentralized application runs in a peer-to-peer system, it will continue to function even if part of the network architecture is not functioning.

  • Resistance to censorship

Another important aspect of dApps concerns censorship resistance. Decentralized applications do not allow one entity to control data and processes. Therefore, no government or organization can block users from making transactions or deploying dApps, or even reading data from the blockchain. Without any specific person or organization controlling the application, users have the advantage of complete freedom to work.

  • Calculations without trust

The next most important advantage associated with the interaction of DApp with the blockchain relates to the analysis of smart contracts and predictable execution without any centralized authority. Decentralized applications lay the foundation for truly trustless systems compared to traditional models.

For example, in online banking systems, you are forced to trust financial institutions and believe that they will not abuse your financial or personal information. However, in DApp, you will no longer have to rely on a central authority, because a smart contract will take care of everything.

  • Privacy

The most important advantage of decentralized applications is anonymity. You will find that most of the decentralized applications do not require real user identification. Instead of going through a complicated and lengthy registration process, users can access dApps using their s without requiring real user identification. Instead of going through a complicated and lengthy registration process, users can access dApps using their Ethereum credentials and digital wallet.

  • Data integrity

Data integrity is also an important factor in expanding the possible answers to the question “What is DApp used for?” in various industries. Thanks to the capabilities of cryptography, decentralized applications provide secure data storage in the corresponding blockchain networks. In addition, the availability of a public blockchain for transaction verification also ensures the reliability of data records.

Risks of decentralized applications

On the one hand, DApp blockchain applications create promising prospects for digital transformation. While you may note advantages such as censorship resistance, higher availability, decentralization, and security, it’s also important to note the potential drawbacks of dApps. Here are some of the notable risks that can be identified in the case of decentralized applications.

  • Service

Decentralized applications present many difficulties in terms of maintenance due to difficulties with modifying the code and data published on the blockchain network. Developers cannot release updates for applications, even if errors or security threats are detected.

  • Network congestion

The problem of network congestion becomes obvious in cases when one DApp consumes an excessive amount of computing resources. Currently, the Ethereum network can process 10 to 15 transactions every second. However, faster sending of transactions may lead to an increase in the number of unconfirmed transactions.

  • Centralization

Although a decentralized application may look like a solution built on Ethereum, it may have some centralized features. For example, some dApps may store keys or other sensitive information on the server side or execute sensitive business logic on centralized servers.

  • Performance overhead

The next dominant risk associated with DApp examples relates to huge performance overhead and scalability difficulties. Each node in the network must execute and store each transaction to ensure the required levels of security, reliability, integrity and transparency in the DApp. In addition, consensus mechanisms such as Proof-of-Work also consume time and resources. Therefore, the overhead of using dApps significantly exceeds the overhead of standard calculations.

  • User experience

Another notable disadvantage of decentralized applications is the difficulty in creating a user-friendly engineering experience. The average end user will face difficulties when setting up a set of tools for secure interaction with the blockchain.

Examples of decentralized applications

The introduction to dApps will be incomplete without mentioning a few popular examples of dApps. Among the popular dApps today are Augur, BitTorrent and Golem. Augur occupies one of the first places among the examples of DApp, its website is visited by more than 100,000 people every month.

It is a decentralized open source prediction market based on Ethereum, which helps to create various prediction markets. On the other hand, BitTorrent serves as a decentralized file-sharing application, while Golem operates as a decentralized marketplace for renting computing power and resources.

Summing up

The popularity of dApps is slowly growing as people and businesses realize their true functionality. Over the years, decentralized applications have evolved significantly thanks to the innovation and creativity of developers. As a result, we can observe many new examples of dApps created for various enterprises in different industries.

The trick to understanding a decentralized application is to determine how the blockchain serves as an important component in its backend. Instead of a centralized structure at the head of everything, dApps use a smart contract to facilitate transactions. However, dApps also have many disadvantages, such as problems of centralization and network congestion.