Decentralized applications (DApps) are a variant of blockchain-based smart contract applications originally popularized by the Ethereum network. They behave very similarly to traditional apps without any differences – however, the list of features they offer is much larger.
DApps offer a better way to connect personal finances. When people think about traditional money, loans, borrowings, savings, and similar elements often come to mind. Perhaps, each is controlled by a central authority such as a bank or financial institution.
Regardless, when it comes to the ultimate future of money, many believe that digital currencies and blockchain represent it. Assuming that this is the case, how do basic monetary tasks like credit work in a decentralized state?
The evolution of DApps
While Bitcoin (BTC) was the first blockchain network, the innovation has evolved far beyond ephemeral financial transactions. When Vitalik Buterin and his partners came up with Ethereum (ETH) in 2013, they focused on something much broader – a decentralized way of life. Buterin envisions a blockchain-based network where users have control rather than a partnership. To this end, Ethereum will control basically automated operations in case of assertions called smart contracts. These contracts are permanent because the rules and restrictions are written into their code. This means that any party can perform without a middleman, eliminating the need for a centralized platform.
In 2014, the report “General Theory of Decentralized Applications, Dapps” was released. Many authors have written about the experiences of people such as David Johnston and Sean Wilkinson.
The paper describes DApps as substances with the following properties:
DApps should have open source code and function without third-party intermediaries. It should be controlled by the users as they propose and decide on the changes that are subsequently implemented.
All data should be kept on an open blockchain network. Decentralization is crucial because there cannot be a primary attack problem.
DApps should have a cryptographic token for access, and they should reward contributors (miners and stakeholders) in that token in some way.
DApps should have a consensus method for creating tokens, such as Proof of Work (PoW) or Proof of Stake (PoS).
Since then, this article has ranked DApps into three “types” or “tiers” based on how clients interact with them.
The existence of the first layer DApp does not require the help of anyone else and relies entirely on the blockchain. For example, the most famous projects are such DApps, such as Bitcoin. For example, they require consensus algorithms and are prepared in rules.
The second layer of DApps is largely based on the first layer and assumes the power of the blockchain. Often considered protocols, they use tokens for association. The scaling arrangement based on Ethereum is a simple description of the second layer DApp. Exchanges may process subsequent layers before focusing on the main layer, removing some heaps from the base chain.
The third layer DApp is based on the second layer and often saves the data required for collaboration between the other two layers. It can store the application programming interface (API) and basic content for first- and second-layer operations. For example, the third layer protocol can accommodate different second layer DApps and use them to improve user experience.
The report describes DApps as distinct applications controlled by the core blockchain. Some may expand on top of the underlying layer. However, assuming they meet the previously cited criteria, they are fully considered DApps.
Advantages of DApps
Decentralization offers different advantages compared to applications running on a centralized network. Essentially no third parties thanks to imaginative smart contracts. Apps like Venmo allow people to send cash to anyone; there are fees for moving those assets to the ledger anyway. Additionally, regular transfers of fiat currency take days to appear.
Still, sending cash through a decentralized app means paying no or very little fees. This gets a huge discount on cost, and considering that decentralized exchanges are actually important, it also saves them time.
Obviously, the DApp does not run on a central server. One benefit of decentralized platforms is that they are less susceptible to widespread attacks because there is no actual target device. Not only does this make the organization more secure, but it also means there is downtime. Accessing these applications is always conceivable.
DApp can be used in almost any industry, such as gaming, management, medical care, and even file storage. Therefore, the usage rate of DApps is almost the same as that of traditional applications. While users benefit from every advancement on the backend, the actual experience should be very similar. This method of interacting with applications is considered Web 3.0 and also alludes to the decentralization of data.
When the web came along, it was a space filled with data that anyone could access. In the long run, large organizations solved this problem, or centralized it. At the same time, these organizations provide this information “for free” at the expense of us providing information, which they then sell for profit.
Organizations then have control over the data and know what their users like to buy, how much cash they have and who they know. This control also means they can delete it. Entering Web 3.0, the use of DApps will not come at the expense of privacy.
Users can decide to share only the data needed for a medical exam or loan application, and choose who can see it and for how long. Organizations can also pay this entry fee to ensure customers benefit from it. There is also the issue of trust. In fact, as we know that large organizations with high security are leaking usernames, messages and passwords, it is not easy to completely trust anyone.
Disadvantages of DApps
While decentralized applications may usher in a future free of partnerships, there are currently some big issues that businesses are trying to identify.
For one’s purposes, the lack of a central authority may mean slower updates and phased changes. All things considered, a party can refresh their application as they see fit. Regardless, the DApp needs a more significant part of the protocol from the interim government – in order to fix minor bugs, anyway. This can take weeks or even a long time as users scoff at the pros and cons of any improvements.
Additionally, DApps require a reasonably sized customer base to function properly. They need a hub, management, and clients to connect to. Still, using DApps at this beginning stage can be very difficult, and many people don’t see the help they need.
Later, the DApp may be available simply by downloading it. For now, however, customers should download the DApp-supported program, send the desired cryptocurrency to that wallet, and then connect from that point. While educated customers should generally agree on this, by far most don’t know where to start.
DApps are everywhere!
DApps in the financial world may seem like an easy decision; however, they can truly advance in all businesses. Here are some of the advantages of businesses in finance, social media, gaming, etc. The future is endless.
finance
Money lenders and borrowers can use DApps to conduct business. Through the bank, the loan specialist gets a specific financing cost based on the cash saved. The more funds an individual holds, the more funds banks can lend, and the greater the premium both players receive. Still, the bank, which operates as a unified entity, charges a higher discount than moneylenders might want simply to provide space to store reserves.
On a DApp, moneylenders receive 100% of the premium because there is no principal to pay it. They have more control over their credit while receiving tokens from the platform they decide to lend to.
For borrowers, they have more say in the interest they pay, just as they have the opportunity to pay the interest. Of course, some stages allow borrowers to take months or even longer to repay the interest in order to reach the basic installment limit. Borrowers can also discuss interest rates with banks to ensure a reasonable choice between the two players included.
Regardless, thanks to the innovation of smart contracts, rewards can be realized quickly. There is no compelling reason to involve lawyers and other outsiders, making the confirmation cycle longer and more glaring for both players.
social media
Users can still benefit greatly from online media DApps. Best of all, no one controls the posts, which means free speech. However, if certain posts become problematic, the community can vote to remove them.
Strong countries can also purchase more. On traditional platforms like Twitter, organizations benefit most from well-known tweets. It earns notification revenue from all website visits, and creators also earn revenue. In fact, it has nothing to do with finances.
A web or social media based DApp may have an inherent tipping framework utilizing its tokens. Users can participate in promotions and receive full installment payments instead of commission.
gamble
Gaming has always been a fascinating use case for DApps. Currently, games require a lot of time and resources to develop – and they may have invested real cash – only for the resources to stay there and disappear as players continue to play.
In terms of significant value, DApps offer a very interesting solution. Take a game like CryptoKitties for example. Players receive a tokenized resource, in this case, a car. By that time, that car will have evolved over time and, if properly improved, its reputation will have grown. The user can then sell that cat for any price they want and accept the buyer’s payment.
Additionally, several cats may be bred with different cats, producing even more extraordinary and perhaps more important cats. Players can trade or collect cats and do whatever they need with these tokenized pets. As it turns out, their time adventure is quite impressive indeed. However, some currently envision incorporating the idea into a more comprehensive exploration game with long periods of interactivity. Full-time gaming could be our future.
Voting and governance
Voting in general is a problematic cycle. It often involves different approval steps – some not available to residents without appropriate accommodations or individuals with different issues. It is also illegal to change and compare.
Democratic DApps can open their methodology to everyone, thanks to smart contracts. Essentially, the community gets to decide the abstract of the proposal. They can then set a period of time, such as 24 hours, for customers to “stake” their votes using tokens. This opens support to everyone, allowing anyone to vote anonymously at the time.
Ballots are stored in a decentralized organization, making them permanent and immutable. Additionally, smart contracts can reward voters with appropriate tokens for their efforts, thus attracting more people to vote than ever before.
Fundraising and Advertising
Many users utilize ad blockers when browsing the web. This is obviously a pain for sites trying to generate revenue, but is sometimes justified as promotions have become quite annoying in many ways. Programming DApps can solve this problem.
As users browse the web, they do so using programs that include promotion and tracking blockers, earning cryptocurrency along the way. Currently, when customers view a designer and website they want help with, they have the option to make a licensing commitment. This means that the longer users browse, the more they pay the website in the long run. Users can even offer promotions for these specific destinations, helping them more in the long run. For privacy reasons, users choose who can follow them, protect their profiles and add to stages that require cash. This is a mutually beneficial arrangement.
