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What is DApp? Decentralized applications explained

Sanmi Adeagbo | Apr. 23, 2019
What is DApp? Decentralized applications explained

What is a decentralized application (DApp)? The following explains extensively what DApps means; their types, examples and applications.

April 23, 2019. AtoZ Markets - Decentralized applications (DApps) are applications run on blockchain technology to transform the way of business operations. DApps are decentralized. This means they are not controlled by any authority. They are open-source and transparent yet secure. They run on a peer-to-peer (P2P) network of computers. They are self-sustaining and connect users to providers who could initiate and complete transactions without intermediaries. Going by this definition, we could say Bitcoin is a DApp and so are many other cryptocurrencies like Ethereum, EOS and NEO. What are the main features of DApps?

1. They are decentralized: No single entity controls the majority of the tokens

2. They are open-source: Data and records are stored on a public blockchain. Changes are decided through the consensus of users

3. They are incentivized: Digital tokens are awarded to network miners as a reward for their activities.

4. They make use of cryptographic protocols like Proof of Work(POW) used by Bitcoin and Proof of Stake (POS) used by Ethereum. There are ongoing plans to form a hybrid PoW/PoS in the future.

Bitcoin and Ethereum DApps

Bitcoin is the first DApp and one of the groundbreaking innovations in the last 20 years. Bitcoin's main purpose is to solve problems without any third parties. After Bitcoin, thousands of DApps have been created in the last ten years. Currently, the Ethereum blockchain supports over 2000 DApps making it the most popular platform for building DApps. Ethereum was created to power smart contracts. Smart contracts are used exclusively to exchange digital assets and most often, a digital currency. One of the most important uses of DApps is to power smart contracts so it makes sense that Ethereum power most DApps. Some of the most used Ethereum DApps include Idex, Cryptokitties, LocalEthereum and ForkDelta.

Processes of DApp development

The following look at the basic things needed to develop a decentralized application.

  • Whitepaper: A whitepaper describing the DApp and its features is published. This will include the goals of the DApp and the problem it was created to solve. 
  • Token sale: An initial token sale is established and a token reward system is introduced.
  • ICO: The ownership of the DApp is spread through an initial coin offering (ICO).
  • Launch and Implementation: The funds realized from the ICO will be used to build the DApp and implementing it.

Types of DApps

According to the Ethereum white paper, DApps are split into three categories:

  1. Financial applications: They allow users to carry out transactions and contracts with their money. These apps only manage money. 
  2. Semi-financial applications: These applications involve both money and information. There is a big non-monetary side of the contract involved.
  3. Governance/Political applications: These applications do not solve financial problems. They are used in political/governance activities such as voting, population census etc.

DApps solving real-life problems

DApps are limitless in their potential usefulness. They can do almost anything. They can solve many problems in almost every field of human endeavour. They can be useful to the governments for tax collection, identity authentification, housing units distribution, elections, population census etc. They can also be applied in food delivery services, entertainment industry, games, supply chain management and many others. The possibilities are endless. Industries can benefit greatly from the security, cryptocurrency integration and privacy offered by DApps. 

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Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ, nor should they be attributed to AtoZMarkets.