There are a couple of things everyone’s talking about — cryptocurrency and decentralized applications. Cryptocurrency, being the byproduct of blockchain, is the most popular amongst investors and those outside of the investment world. Bitcoin cryptocurrency is the first decentralized application that spearheads the entire crypto world. However, there have been other decentralized applications created since.
Decentralized applications are, as you can guess, applications where the source code is not held in a single location, but on multiple computers. It is exactly how the internet works but in a much different way.
Ethereum is the most popular blockchain-based decentralized application platform for the development of decentralized applications. It allows the creation of smart contracts.
Ethereum has two native tokens — Ether and Ethereum Classic. While both are used in the Ethereum blockchain, Ether is the product of smart contracts. Ether can be traded on cryptocurrency exchanges, while Ethereum Classic is based on its own blockchain.
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Decentralized Applications vs. Traditional Apps
Decentralized applications (or dApps) are the next step in app development. With a decentralized business model, there is no middleman taking a cut of transactions. While regular apps are developed to be used on mobile devices, dApps are made specifically for decentralized blockchains and distributed ledgers; this ensures security and privacy by encrypting data at the endpoints of the blockchain and ledger system.
Most of the traditional apps we use online depend on connecting to a server to sync data. These enterprise apps have some things in common: they connect to servers, and they rely on central authorities like companies to make sure that their data are safe.
Decentralized apps, however, run on peer-to-peer networks known as blockchains with no central servers. All of the information that makes up such apps is stored across numerous computers, not just in one centralized location.
There’s an ongoing debate among web developers about the “web 3.0” revolution, which aims to replace centralized architecture with decentralized, blockchain-based approaches. DApps strive to put the power back in the hands of the user by removing intermediaries and establishing trust through automated distributed cryptography becoming a complete solution to a centralized database.
Although dApps look the same on the surface as regular apps do, there are some telltale signs that can help you distinguish between them.
What are Ethereum dApps?
Decentralized applications are a new concept in the world of technology — they’re similar to mobile apps, the only difference is they’re decentralized. What does this mean? Mobile apps are centralized, meaning there is a central database for all information about the app; dApps, on the other hand, have their code hosted on a decentralized blockchain, which means that there is no central database and all information is stored across multiple nodes.
Blockchain is a decentralized public ledger that stores transaction data in encrypted blocks. It is kept secure by the users, who must validate each block before it can be added to the chain — as such, no one person can alter blockchain data. A distributed smart contract is incredibly flexible, much more than just a regular app; real-world conditions can be coded into a smart contract, and it will execute automatically whenever those conditions are met.
A dApp front-end was coded in any language, making its back-end code run on a peer-to-peer network like Ethereum. This system allowed the dApp to run on the blockchain, which means that you could build a dApp using this system.
You can use the system to power your dApp, which means that you can build a dApp using this technology.
To explore more, review the following terms:
- Open-source. dApps are open source, meaning the original source code is made visibly available in such networks and may be distributed and modified. It prevents DApp source code from alteration and modification, making it secure.
- Autonomous operation. dApps work autonomously, which means that they’re free to govern themselves.
- Runs on a public blockchain. dApps run on a public blockchain, meaning anyone can join such networks and participate. An example of a public blockchain is Ethereum where you can build any kind of dApp whether it is financial, collectible, gaming, or other.
- No centralization. There is no governing or central authority for dApps, making them decentralized applications.
- It uses tokens. dApps operate using tokens. Tokens are decentralized assets or smart contracts that are built using Ethereum virtual machines.
- Cryptographic algorithm. Tokens are generated with a cryptographic algorithm’s help. Cryptographic algorithms are programs that compile for dApp development.
How Does a dApp Work?
dApps are digital applications, which operate independently in the absence of a third party. They use the computing power of the network to work and they can’t be controlled by any single entity.
Decentralized applications are built on the blockchain ledger and distributed storage system. They are just like regular applications, the only difference is that they do not work from a server with local or cloud hosting. Instead, dApps run from the network of nodes — the blockchain’s public ledger — that also stores transaction histories and balances within each app.
Before Building a dApp, You Must Understand Ethereum Blockchain:
The blockchain is a decentralized database system based on the P2P (peer-to-peer) networking model. The blockchain is distributed across every computer on the network, meaning there isn’t a central server to hold all of the information. Instead, each node has a copy of the blockchain, making it harder to hack.
If a ledger system doesn’t support the dApp development, then the dApp would not be able to function and all of the related tokens would be deleted. With this, the developer will no longer be able to receive compensation, which translates into a higher level of security that lessens the probability of hacking and fraudulent activity. This leads to a more solid platform for developers, which in turn increases the chance of attracting users and investors.
This is why users need to have a wallet for dApps that contains blockchain tokens on which the application is built. Most dApps are built on Ethereum’s blockchain, so users will need to have Ether tokens.
The architecture of a DApp
With the advent of blockchain technology, we see the emergence of decentralized applications that give users a whole new level of control over their data. Decentralizing involves creating a robust system that must be constructed on top of an existing blockchain. Applications like these are unique in their approach to architecture — they can no longer rely on having all the hardware and software they need at their disposal.
The architecture of a decentralized application is pretty different from a traditional one. Developers must have to face an important trade-off: a Decentralized Application cannot be both secure, usable, and decentralized. They can only be two out of those three things.
Pure Transactional dApps
DApp differs from other applications in one major way: they exist on the blockchain. In simpler terms, blockchains have specific parts that make them unique to the traditional Web and mobile apps. These include smart contracts, which are pieces of computer code that execute automatically in response to a transaction or user action — examples include payments and transfers of NFTs.
Users can interact on the web or mobile with smart contracts and use familiar interfaces. It’s just one of many problems for customers when it comes to dApp development.
Oracles
Smart contracts are an innovative feature of the Ethereum blockchain, but they tend to come with some drawbacks. They’re expected to resolve any issues related to security, speed, and transparency of operations, but they may not be able to do this without oracles. Oracles are computer networks designed to pass information from external sources into smart contracts.
Decentralized oracles are a powerful tool that enables e-commerce businesses to connect with real-world external data. As they collect and share data, they provide valuable insights into consumer behavior, product performance, and financial health. E-commerce companies use decentralized oracles to build complex smart contracts and even entire applications. When it comes to delivering data to smart contracts, decentralized oracles are the most efficient and secure way to do it.
Centralized Servers
But, as exciting as dApps are, there’s still one crucial part that remains centralized: the backend system. dApps require the same type of back-end architecture as any other mobile application — with server support and databases, user information can’t be stored on a blockchain. It will be a part of my dApp, and it will be centralized.
Without the centralized backend and data storage, the app cannot function properly.
Key Features of a Decentralized Application
DApps have almost all of the same functions as normal apps, but with one big distinction: dApps run on a decentralized network, meaning there is no centralized server. dApp users use various blockchain nodes spread across the globe to interact with their decentralized applications. Because of their unique setup, dApps do not fall victim to the same vulnerabilities that centralized apps are prone to.
Transaction-Based Actions
The next generation of software applications is blockchain-based and decentralized, offering many benefits over standard applications. With their decentralized nature, these dApps have many advantages over traditional Web and mobile applications — no censorship and easier access, to name a few. This makes them ideal for adapting to market trends and demands!
The difference between a dApp and an app is that the former is based on blockchain technology, while the latter is not.
Crypto Wallets
Blockchain technology allows anyone to access an application from anywhere in the world. It’s an essential part of software application development. Cryptocurrency wallets are also a must-have for any software applications that interact with blockchain technology.
There are plenty of crypto wallets available but MetaMask is the most popular. It allows users to run Ethereum dApp on their browsers, without running a full Ethereum node. Since you can install MetaMask on Chrome, Firefox, Opera, and Android, you can use the Ethereum network via MetaMask in your browser whenever you need it.
Tokens
To develop a dApp on the Ethereum blockchain, you first need to learn about the tokens used on each platform. Each token is used differently depending on the DApp, but ERC20 tokens are the most popular. Ethereum’s platform is the most prominent blockchain for DApp development, so it helps to understand all of these terms before beginning a new project.
While learning about how to build a dApp, it is crucial to understand how cryptocurrencies can affect the overall application. For example, you will need some of its cryptocurrencies called ETH when you want to try Ethereum’s application. ETH, which is vital for transactions and smart contracts, acts as an incentive for miners to verify your transactions (when distributed to them as fees). It’s also a major part of Ethereum’s value.
ERC20 Tokens
There is no looking back for Ethereum since the first use case of the platform has been its token standard. ERC20 is a stable standard implemented upon smart contracts that enables various tokens to be built on top of Ethereum’s blockchain.
The ERC20 protocol is extremely effective and safe. There have been no reports of wrongdoing within the past year — it’s considered one of Ethereum’s most secure protocols.
Pros and Cons of dApps
Decentralized applications are a new way to run apps. They have certain advantages and disadvantages when compared to conventional apps.
Decentralized Application Benefits
No central authority
No intermediate authorities mean lower fees, and you can transact directly with one another. This quickly becomes clear when using such a platform — as there are no intermediaries, each and every user should pay transaction fees. Although these are usually very low, they add up when paying with cryptocurrencies several times a day.
The remaining benefits include the fact that truly decentralized applications can have multiple frontends.
Impressive uptime
Smart contracts powering dApps operate 24/7, and as long as a blockchain housing the contract lives, they will continue to function flawlessly. The nature of smart contracts makes them immune to downtime or corruption caused by external sources.
Smart contracts make possible many things that were never possible before in terms of creating trust between two unrelated people. If a transaction requires third-party input, a blockchain is there to provide it.
Utilizing a decentralized economy
People who work with decentralized applications typically do so because they’re seeking financial gain — and companies like ours can help them achieve their goals. Incentives are the driving force behind this niche, which can result in significant revenue growth.
Security and data integrity
With blockchain, your business is secure and safe from hacking, because there’s no central point of failure. The distributed nature of the blockchain means that it isn’t easy to take over an entire network (i.e. DDoS attacks aren’t as effective).
Privacy
The major appeal of the Ethereum blockchain is its privacy. All transactions can be traced on the blockchain; however, they can also be completely anonymous.
Drawbacks of a Decentralized Network
Transparency
While the overarching benefits of blockchain are excellent for many industries, it can be difficult to store and transfer data in the form of information. As a database technology, blockchain is the last option you want to use for storing large amounts of customer data.
The idea that information cannot be modified or deleted makes blockchain applications great for asset tracking — but less so for customer data.
Maintenance
Designing a decentralized application is challenging because it needs to account for blockchain specifics. For example, with a dApp, once it’s been deployed to a decentralized network, it’s very difficult to update. Traditional mobile apps get updates on average within two weeks.
Designing a decentralized application is challenging because it needs to account for blockchain specifics. Now let’s look at one example of how the platform operates.
Scalability
Ideally, you want to build a dApp that provides an exceptional user experience and can handle a large number of users.
When it comes to developing smart contracts, the most important aspect is to build a product, or a business model, that can handle large volumes of users without compromising on the UX.
Since the Ethereum blockchain is a public ledger, it can be analyzed at a later stage and the statistic for the transactions can be tracked by anyone. It is for this reason that network congestion brings transaction fees and confirmation fees along with it.
User-friendly interface
The Dapp community is far from being a large, cohesive bunch. And it’s not for lack of trying: many applications have attempted to solve the problem by providing tools for launching dApps — whether that’s on-chain, off-chain, or in a blockchain-less setting. Still, adoption has been slow.
There are plenty of dApps out there that have interfaces that are hard to use or understand. However, this should not detract businesses from adopting the technology. The power of blockchain solutions is clear: thanks to their transparency, decentralization, and security, businesses may make transactions with less risk and more benefits.
Potential Use Cases
The dApp development process has come a long way in its short history, and a number of different use cases have led to the rising popularity of a truly decentralized application.
Each dApp has its own methods for operating and uses an underlying cryptocurrency as a form of payment. While there are many types of DApps, many of them operate in the following ways:
- Cryptocurrency investment. Cryptocurrencies like Bitcoin and Ethereum are one of the most popular forms of digital currencies today. From a speculative standpoint, they are used for ICOs to fund new projects — these projects are built on top of the distributed ledger technology that powers the currencies themselves. Anywhere from a decentralized app to smart contracts, blockchains can be applied to every industry, making them a hot commodity.
- Blockchain-based application. Blockchain may be best known for its association with Bitcoin and other cryptocurrencies, but there’s more to blockchain than simply digital money. Blockchain has multiple platforms that can be used by both large companies and start-ups — it can be used for anything from supply chain management to land titles. The technology provides numerous benefits aside from security. It’s transparent, decentralized, and able to take on any kind of transaction from simple asset transfers to complex legal actions.
- Property registrations. The decentralized application provides a platform with no middlemen that deal in real estate and gain commission, providing the user with the ability to purchase housing without interference.
- Tether. Ethereum is one of the more popular cryptocurrencies and it’s built on the Ethereum blockchain. One of its unique features is that it accepts fiat currency. So, your currency will remain constant instead of increasing and decreasing like other cryptocurrencies.
- Gaming. Gaming DApp platforms are all the rage lately. They allow users to play games and earn money. Platforms like this are free to use up to a certain threshold, after which they require payment in order to continue playing. For example, one of these games is Splinterlands, which was built on the blockchain.
- Collectibles. Crypto-collectable DApps such as CryptoKitties is built on the Ethereum network and have a token that is similar in value to other tokens but differentiates based on visuals and uniqueness.
Examples of dApps
UNISWAP
UniSwap is one of the leading decentralized exchanges. This dApp allows for seamless exchange of ERC20 tokens on
Users can trade with each other directly through their Ethereum wallets without the need of a centralized exchange.
UniSwap has a decentralized pool of liquidity which allows users to trade tokens with low spreads and high liquidity. Low spreads are a result of the hedging mechanism which allows investors to get the direct price. The smart contract is totally transparent and the code is publicly available.
UniSwap provides a fully functional order book with advanced trading tools.
RARENOTE
Rarenote is a service for patients to help keep track of the medicines under development for their rare diseases. There are no advertisements.
Instead of offering personalized information, Rarenote provides you with a clinical trial or drug development news from clinical trial sites and academic journals.
OPENSEA
OpenSea is the largest peer-to-peer marketplace for NFTs, including gaming items, digital art, and other blockchain-based assets.
Monetizing dApps
Monetization is one of the most vital steps in developing dApps. Organizations need to figure out how they can turn a steady profit when they’ve already established a strong user base.
There are various ways to make money when you build decentralized applications.
1. ICO and Token Launch
Tokenization is a great way to incentivize users and generate revenue, but as a dApp developer, it is important to keep in mind the core functionality of your token during development. Tokens should coexist with your business model; in other words, there needs to be a good reason for your users to buy into the ecosystem you’ve created.
For example, if location-based services are your goal, the dApp will be useful to the consumer only if it is used by businesses (who have their own incentives to participate in the ecosystem).
2. Charging a Transaction Fee
When you’re building a DApp, choosing your transaction fee will be one of the most important decisions you make. You should be cautious about what amounts you set for your fees — both too high and too low could have devastating consequences for your dApp’s success. As a rule of thumb, on the Ethereum blockchain, it’s best to set your fees so that they’re high enough to keep users happy.
3. Charging for Premium Functionality
One of the most effective strategies for a dApp developer is to build a free-to-play game — you can generate revenue with ads, in-app purchases, and sponsorships. This model is typically used in apps and games; however, blockchain technology enables the same business model on decentralized platforms.
4. Membership/Subscription
Once you’ve built your Decentralized Application (DApp), consider adding a membership program or subscription to make money from it. You can make certain functionalities exclusive to premium members, incentivize current users to pay for access, or sell digital goods directly to people. Some DApps use a time-based model for their membership — for instance, you could have the DApp function for a certain number of days before requiring a subscription to continue using it.
5. Advertisement
Advertising can be an effective way to make money if you target the right people. If you are willing to put in the time and effort, you can use ads to grow your user base and achieve your monetization goals. In order to get the most out of advertising, like traditional apps, you should pay attention to your audience and optimize ads for conversions.
6. Donations
Try adding a donation button in your dApp that donates the proceeds from transactions to an established charity. This is a great way to give back to the community while also improving your brand’s reputation and encouraging the use of your crypto token.
Donating a set amount of money per transaction or requesting donations instead of transaction fees are both excellent options — they are like additional features that customers can choose instead of opting out of using the product.
Develop a dApp
When you’re creating a blockchain-based application, it’s vital to create smart contracts and frontends. Smart contracts are codes that run on the blockchain, automatically executing if certain conditions are met. You can think of them as the backend of your dApp. Frontends, or user interfaces, are essential for user interaction with smart contracts. They are typically web and mobile apps, most notably incorporating an attractive user experience.
Below are step-by-step instructions on how to develop a dApp without delving too much into technicality for better understanding.
STEP 1: Build Your First Smart Contract
The smart contract is used to store business logic by way of solidity programming language. When transactions need to be executed automatically, when data needs to be validated, or when users need to be notified in real-time, smart contract code can make all of this happen.
When making dApps, some developers choose to put their logic inside of centralized servers.
When creating a decentralized application, developers will need to pick a blockchain on which to build their product. There are a number of options available, but it’s generally recommended for dApps to launch on the Ethereum network — allowing for an easy onboarding process and the ability to connect with a large user base.
The Ethereum network is an easy pick because it has many users who already have crypto wallets and can onboard faster.
STEP 2: Build Front Ends
In the blockchain space, there is still a lot to be done when it comes to simplifying the development of dApps. For one thing, dApp developers need to learn new languages such as Solidity and gain expertise in the more obscure parts of the Ethereum Virtual Machine (EVM). In addition to this steep learning curve, dApp client-side interfaces are still extremely complicated.
The user experience should be as seamless and intuitive as possible — and a decentralized app isn’t any different from a web or mobile app. Take into account that smart contract calls from user-facing apps take some time to execute on the blockchain, so use animations or other visual cues to let users know when their action is still in progress.
In the same way that a dApp can use standard web technologies for its user-facing interface, it can also be built on standard cloud services. This allows a business to leverage existing infrastructure and focus on building its product.
In fact, the user-facing part of Metamask is simply an extension that is built on a scalable cloud service — Google’s Firebase.
STEP 3: Create a Centralized Backend
As your Ethereum dApp scales, you’ll need in-depth reporting, a user interface that allows customers to interact with your smart contracts, and user authentication features. These features are best implemented on a private server or “off-chain.” An admin portal (often referred to as a “backend”) is an essential part of the Ethereum developer stack and can be used to offer these functions to both you and your customers.
STEP 4: Test
Like with a lot of things in life, early testing is better than late testing. And considering how much time and effort goes into releasing a dApp, it makes sense to test every new build thoroughly before release. This way, you minimize the risk of bugs and other issues that could result in wasted resources and frustration for both your customers and your team.
Any large development project should be able to conduct some amount of user testing to ensure the project is bug-free.
STEP 5: Deploy and Maintain
Deploying a dApp involves more than just uploading apps to the app store. Deploying an app involves switching your back-end portal to a live production environment, uploading both mobile and web apps to appropriate stores, and adding smart contracts to the blockchain. But before you get started with any of this, check out new services like Infura that help you automate many of the DevOps steps required for deploying a dApp.
Conclusion
Many developers spend months attempting to understand how to effectively develop a dApp.
Hopefully, this detailed overview was simple yet in-depth enough to get you as a developer or even an enthusiast on the correct path to properly developing your own decentralized app or simply understanding and appreciating the process.
