What are Decentralized Applications(Dapps)?

An application or application software is a computer program designed to carry a specific operation or to do a simple task. These applications use the hardware resources, such as memory and storage from the system where it is hosted.

But a web application is an application that is stored on a remote server and we use web browsers to interact with the web applications. The server handles the client's requests. A web application such as Facebook or Netflix runs on a server operated by the organization. They have full authority over the app and the data.

What are Decentralized Applications?

Decentralized applications or Dapps are applications that run on a blockchain network or peer-to-peer network of computers instead of relying on a single computer or a single server.

Decentralized applications are built on blockchain networks like Ethereum, Polygon, or Solana. The only question is how decentralized are these blockchain networks. Dapps are deployed on these blockchain networks and nodes of the blockchain process requests of the users. Nodes are the computers that are connected to the blockchain. Anyone can be a blockchain node and provide his hardware resources to the blockchain network and in turn, he can earn some rewards.

Dapps can be any application. If I build an application just like Twitter and put it on a blockchain network, then it can be a decentralized application. But in the case of Twitter, it can censor the tweets, destroy your account in some cases. But once some information is published on a Dapp, it is impossible to censor or delete anything even if the creators want to. Once the Dapp is deployed, the creators no more own it.

Bitcoin is the first decentralized application. Bitcoin is a payment network on which we transfer bitcoins. If you want to transfer some bitcoins to your friend, you need a bitcoin wallet, some bitcoins, and your friend's bitcoin wallet address. Once you initiate the bitcoin transaction, the nodes in the bitcoin blockchain network, verify and process your transaction. All this happens in a few minutes without any third party or intermediaries like a bank or financial institution with a minimal fee.

After Ethereum was created, many kinds of new Dapps were developed. There are social media dapps, gaming dapps, dapp marketplaces, and whatnot. We will learn more about Dapps as we proceed.

Why do we need Decentralized Applications?

They are Open-Source

All Dapps must be open-source. Their code must be available for everyone to view so that anybody with enough knowledge of programming must be able to find how the dapp works. And being open-source also ensures that there are no hidden scripts running or no data being tracked without your permission.

Decentralized

All the data is public and no central authority controls the Dapp. As these Dapps are run on a blockchain network that has many operating nodes, even if one node goes offline, there will be other nodes to provide the data. So these Dapps run 24x7, irrespective of which part of the world they are being used.

Tokenized

Every Dapp has its own cryptographic token. This token helps in the functioning and governance of the ecosystem. Token holders can be the decision-makers of the Dapps. Token rewards are also issued for the nodes to secure the network. Some Dapps have also rewarded their tokens to the early users of their platform.

Advantages of Decentralized Applications

Censorship Resistant

No government can ban a Dapp from anyone using it. As long there is the internet and a blockchain network with some nodes running in any part of the world, you will be able to use the Dapp

Zero Downtime

As there is no single point of failure for a Dapp, even if some of the nodes in the blockchain go offline, other nodes process your requests or transactions, and Dapps work 24x7, 365 days without ever being down at any moment. If it goes down, then it is definitely not a Dapp.

Privacy

You don't need to provide your SSN or your real-world identity to use or even to deploy a Dapp. You don't need to do KYC even on Dapps based on finance. You can remain completely anonymous.

Data integrity

You can share the data only you wish to. The smart contracts and programs in which Dapps are written can be analyzed for malicious activities. The data on the blockchain is immutable and no one can manipulate the data on the blockchain.

How to Use a Decentralized Application?

Just like we use web applications on a web browser, we use Dapp browsers to interact and use a Dapp. There are some browser extension wallets like Metamask, which you can use on your Chrome, Brave browser, and start interacting with the Dapps. You can check the full guide on how to download a Metamask wallet here.

Trust wallet and Metamask are some mobile Dapp browsers. They enable you to create an Ethereum wallet. Your wallet address is all you need to log in to a Dapp.

Dapps are just like normal websites. You have to type the website address in the Dapp browser and connect your wallet and start using it. You don't need to connect with Gmail, Facebook, etc. And Dapps won't ask you for any additional permissions.

To make any transaction on the Dapp, the browser prompts a window for you to accept or decline the transaction.

How does a Decentralized Application work?

Decentralized Applications are developed on blockchain networks like Ethereum, Solana, or Polygon. Ethereum is the most preferred blockchain for many developers. Dapps are developed on Ethereum Virtual Machine(EVM). EVM is a platform that developers use to develop and deploy dapps on Ethereum. Programming languages like Solidity, GoLang are used to develop dapps on Ethereum. EVM takes care of the functioning of the dapps using the computing power of the nodes/miners.

Ethereum Dapps List

Ethereum is still the number one blockchain network to develop Dapps. Ethereum provides enough decentralization, has a huge developer base and community. However, with a rapid increase in Dapps on Ethereum, the gas fee(transaction fees) has been on the higher side which had made Ethereum unusable for newcomers. It can cost up to $400 for a single transaction during peak times. Here are some most popular Ethereum dapps.

1. Opensea

Opensea is the largest NFT marketplace on Ethereum. About $2.1 billion worth of NFTs were traded in August 2021. Ether(ETH) is used to buy and sell NFTs on Opensea. PhantaBear NFT collection recorded a trading volume of 18,912 ETH($61 million) in the last week alone. Cryptopunks and Bored Ape Yacht Club are the most traded NFT collection on Opensea till date.

2. Axie Infinity

Axie Infinity is a pokemon inspired game on Ethereum where users collect AXIES. Players can collect, breed, raise, battle, and trade their AXIES for ETH. Players have to battle using their Axies to win SLP tokens which can be sold for ETH or USD. Axie Infinity has 2.8 million daily active players and also its own marketplace to trade Axies. In the last 24h, 36,364 axies were sold, with a total volume of 1400 ETH($4.5 million). AXS is the governance token of Axie Infinity.

3. Uniswap

Uniswap is the decentralized exchange on Ethereum. We have centralized exchanges like Binance and Coinbase where we can trade cryptocurrencies, Uniswap is a decentralized exchange(DEX), where you can buy cryptocurrencies with ETH. There are no order books on Uniswap. You can add liquidity to the liquidity pools on Uniswap and earn swap fees. Uniswap has had a trading volume of $1.6 billion in the last 24h. USDC/WETH is the most traded pair on Uniswap. UNI is the governance token of Uniswap.

4. DYDX

DYDX is a derivatives exchange on Ethereum. DYDX is on Ethereum layer 2 platform Starkware which enables low transaction fees and high speed. Perpetual contracts can be traded on dYdX. Perpetual contracts are similar to futures in traditional markets where traders will be able to speculate on the future price of the cryptocurrencies like Bitcoin, Ethereum, Dogecoin, etc. dYdX offers leverage up to 25x. About $1.2 billion were traded in the last 24h on dYdX. DYDX is the governance token of the platform. DYDX will be rewarded to users to incentivize trading on the platform.

5. Constitution DAO

A DAO(Decentralized Autonomous Organisation) is an organization that runs by the rules written in the smart contract. Members of the organization can make decisions based on their voting power.

Constitution DAO is a DAO formed in Nov 2021, to purchase an original copy of the US constitution. The members of the Constitution DAO raised $47 million in ETH but were outbid in the auction. Later, the funds were refunded back to the community

These are some of the many dapps on Ethereum. At this point, there are thousands of dapps on Ethereum. As the dapps are open-source, there are clones of some dapps. Some modify the functionality and interface of the dapp. And some developers innovate things and create new dapps.

Drawbacks of Decentralized Applications

Scalability

Dapps are scalable no more than the blockchain network. As the number of dapp users grow, the blockchain network should be able to cope with the increased load. Ethereum is not so scalable which has led to high transaction fees and network congestions. However, Layer 2 solutions like Arbitrum One, Optimism are aimed to solve Ethereum's scalability issues.

Immutable

Once the dapp is deployed on the blockchain, it is practically impossible to modify it. If there are any bugs found in the code, it is wise to abandon the dapp as the code cannot be changed and it can be prone to exploits.

Interface

Dapps require some additional knowledge and are not as friendly as centralized applications.

Dapps are still in the early stages just like mobile applications in 2010. We have a long way to go from here. Dapps definitely change the way we use the internet and obviously big corporations cannot continue what they do best.

Comment below your most favorite dapp.