If you are just getting into the world of cryptocurrency, NFTs, and online investing in this wildly volatile and unpredictable marketplace, chances are you are lost in a mess of alphabet soup. Of course, the online world loves abbreviations. Anything to save some time, right.
To help you keep all of these letters and numbers straight, we have the resources to set you on the path to understanding. Let’s dive into the “dApp” and what that phrase even means.
Table of Contents
The Decentralized Application
The first break down the dApp, let’s understand the full name. dApp stands for a “decentralized application.” A decentralized application is an application that allows for an automated function to occur.
No Human Needed
This means the utility or action is done without human interaction and is simply conducted through the use of smart contracts. The dApp operates on a decentralized computing system known as a blockchain.
In short, the dApp will combine the smart contract operation with the user’s interface. This makes the compatibility smoother, and in many cases, gives programmers a chance to use smart contracts created by others.
An application by definition is simply some program that performs a function for the user. It provides service in some way that is needed.
No Single Ownership
Additionally, a feature of a dApp is that it is not owned by anyone single user.
Instead, ownership is distributed through tokens to many users. As an item that is decentralized by nature, it is not under the authority of one single entity. Instead, its ownership is distributed, via the tokens, with a programmed algorithm.
Users in the system in which the dApp exists will have an equal and fair chance to possess the ownership and control of the application. This diluted ownership and control fulfill the “decentralized” aspect of the dApp.
The Use of Smart Contracts
Instead of a person pushing through an action or function, the process involved in a dApp is handled by a smart contract. Smart contracts are an automated, collection of codes. It works on an “if/then” process.
For example, let’s take a look at a vending machine. IF you put in a dollar, then one candy bar will come out. In very basic and toned down terms, this is what a smart contract does within a dApp. If X occurs, then Y will happen.
Who Owns a Smart Contract?
Smart contracts are deployed by a user on the blockchain. They are then decentralized and owned by the users of the blockchain. Again, this means there is no single owner nor power over others. Instead, the smart contract is then out there for the use of all.
Developers can share and use others’ creations because they are shared on this blockchain. It is this technology that allows for dApps (and their backend operations, the smart contract) to function at all.
Blockchain Network
To clearly understand any of the aforementioned features that live on a blockchain network, it would be ideal to also understand what a blockchain network is. A blockchain is typically referred to as a type of public ledger. It is a space that any user can access, and it is a space that records the “comings and goings” as it were, or transactions, of anything happening on the chain.
A Decentralized Network
Much like the aforementioned features of a dApp and a smart contract, the focus of the blockchain is its decentralized network. This means that there is no one single power or authority over the space, but instead, there is a peer-to-peer network of users sharing the responsibilities of the system.
The main pillar of all of these factors is this sense of shared responsibility. It is freedom for some to be able to operate without the typical oversight of a government, bank, or powerful business. Instead, you are working shoulder to shoulder with fellow programmers and users to conduct whatever the business may be of your particular blockchain.
Uses of dApps
Now that you understand roughly what a dApp is and how and where it operates, it is important to understand the practical uses for these applications. Firstly, let’s take a look at applications that are not decentralized, but instead are housed on centralized servers. This can help you to understand the very wide-open possibilities that could also exist in a decentralized space.
Centralized Apps
While you may not be familiar with the term centralized apps, you likely are familiar with its uses. Some popular centralized applications are likely on your smart device right now. From Twitter, Facebook, and Instagram, to Netflix and online banking, there is a massive variety of applications that operate on a system of centralized servers.
These apps are not free for all to use. You cannot take the tech behind them and start your own. There are central authority figures controlling such uses, and even laws and governments backing some of the uses or rules.
These centralized apps are far more known to the masses, as rely on massive advertising campaigns, word-of-mouth, and International promotion to continue operations. They’ve become a mainstay in our digital society, and many users are familiar with their operations, style, and uses.
Decentralized Apps
Less common in name to the average user may be the dApp. However, these functions are becoming more popular by the day, with developers anxious to have applications that are not controlled by single entities, but instead are controlled by the logic written into the contract.
Not only does the decentralization of applications allow for distributed ledger technologies, but it also means that all users can have access to, apply the functions of, and share the language behind each decentralized app.
The creation of such apps opens a world of possibilities, allowing for a free flow of shared information, instead of authorities owning each detail.
dApps on the Ethereum Network
While there is no rule that says they can’t, most all dApps do happen to live on the Ethereum Network. The main push of this trend is Ethereum’s “Ethereum Virtual Machine” EVM. There, most dApps are created, shared, and exist.
Because these tools are made readily available, are easy for most users to operate, and do not require a user to develop his own platform, the use of the EVM makes up a large majority of decentralized apps out there today.
The Benefits of a dApp
Clearly, there are many pros when it comes to the dApp. Developers enjoy the free flow of information and nearly endless possibilities of uses the dApp represents. Additionally, a dApp enables users incredible potential. But the positives don’t stop there.
The decentralized app also allows for:
- User privacy (no personal information required for use)
- Promotes free speech (with no authority to censor)
- Infrastructure built in, increasing access to the masses
- No downtime (the dApps are always available online)
- Data integrity
- Predictable and accurate way to execute transactions
There are many reasons that decentralized applications are used by so many, and are growing in popularity, each and every day.
Disadvantages of the dApp
Of course, nothing in this world is completely perfect. And that means, even with decentralized applications, there is a downside. Some of the challenges those using decentralized apps face include:
- Network congestion caused by in-depth required computations
- Maintenance (smart contracts cannot be changed once locked into the blockchain)
- Difficult to scale
- Fears of centralized servers
Yes, even Ethereum could become a powerhouse of authority. dApps present a chance for the giant to use its business technology and take it to “the dark side” of centralized power. No inklings of this have been yet made, but it is a fearsome online users have of the future.
The Future of dApps
Decentralized applications are truly in the infancy stages of creation. They have, as The Carpenters sang, “only just begun.” As decentralized networks grow in popularity, so too will the use of decentralized applications.
While we may be used to user interfaces written for a centralized network, you can rest assured that there is certainly more to come. Distributed networks are on the rise, and users are asking for these positives.
If the disadvantages can be squashed, the rise of dApps has a long way to go. As users continue to push for a more decentralized environment overall, it will only come as second nature for conventional apps to go the way of the dinosaurs, while dApps operate at a far more frequent rate in the years to come.
Follow the Funds
Of course, with multi-billion dollar operations such as Twitter, Facebook, and Instagram still at the forefront of the application marketplace, it is not likely that they are going anywhere anytime soon. The centralized entity currently makes such companies quite a bit of profit, and no one is walking away from such money.
Instead, it will be up to the dApp to show it can also be a financial windfall in the years to come. While security, access, and privacy are great, nothing will likely ever beat the almighty dollar. Money is a language most anyone can speak.
Staying Informed
While today a vast majority of applications remain centralized, change is in the wind. There is likely a lot more to come as many dApps are being created each and every day. As solutions are created for these technologies still in the very earliest development stages, it is going to allow for a smoother and more user-friendly experience, which in turn should show a financial gain for those focused on making money.
Wherever this crazy industry is headed, one thing is for sure: it is always changing. The best way to understand and stay informed of such change is to rely on trusted sources. At FLOLiO, we will continue to offer research-based and informative resources to help you make smart choices when interacting in the industry.
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