What are dApps (decentralized applications): advantages, disadvantages and features
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Decentralized applications, or dApps for short These are applications based on blockchain and allow financial transactions to be carried out without intermediaries. In terms of functionality, they are similar to regular applications and offer similar functions, but they have one key difference: they are launched on a peer-to-peer network. There are several other requirements for dApps: transparency and public availability of all transactions, open source code, and the use of a cryptocurrency token to guarantee the security of the network. However, there are applications that do not meet all the requirements or even none of them.
The editors of cryptomais.com will tell you what DApps, or decentralized applications, are and how they work.
How Decentralized Applications Are Built
To understand how dApps work, you need to understand the basic principles of blockchain and smart contracts. Most often, decentralized applications are launched on the Ethereum or Binance Smart Chain blockchains. These are network protocols that allow users to generate and use smart contracts. Such a contract is programmed to perform certain functions when predetermined conditions are met.
Blockchain and smart contracts eliminate the need for third parties to process transactions between counterparties. This saves time and money and also helps increase transaction confidentiality.
Smart contracts are not hosted on a single server, but are supported by thousands of computer nodes around the world. Each node contains all the information about them and what transactions interact with them. The information is always updated to ensure that everyone has the same copy. This ensures decentralization. Removing a node from the network will not affect the overall operation.
So, smart contracts are the main component of dApps. Visually, the application can be anything – a mobile service, a website, etc., but the backend is entirely or partially built on the blockchain. So, in the case of Ethereum, a peculiar programming language called Solidity is used; there are also Vyper and Serpent languages. For the frontend, you can use absolutely any language and other tools.
Advantages and disadvantages of dApps
Examples of the best dApps
We will talk about several truly revolutionary applications that have brought huge benefits to both businesses and ordinary people. This list includes the most popular protocols and the most innovative and interesting solutions.
You can use aggregators to track currently popular dApps Dapp Radar or similar.
1. Basic
Functionality: browser and advertising management system
Token: BAT
Market cap: $1,019,034,205
Release year: 2017
Brave is a browser with a built-in decentralized ad buying prototype. It puts the consumer first and creates a new indicator of value in the world of advertising – “consumer attention”. This is more efficient than views or clicks, which are difficult to verify. Brave is co-founded by Brendan Eich, the inventor of JavaScript and founder of Mozilla Firefox. The digital blockchain advertising platform allows ecosystem participants (namely advertisers, publishers and users) to participate in a new business prototype that eliminates redundant intermediation by rewarding users with BAT tokens.
A simple standard for decentralized data ingress from an oracle system that verifies information from external channels. Chainlink provides any smart contract with secure access to data feeds, APIs, and payment transactions. The oracle can be a database or other source, and Chainlink provides data transfer to smart contracts. This feature is essential for enabling contracts to automatically respond to changing external circumstances.
A decentralized service that runs on the Ethereum blockchain. MakerDAO is responsible for issuing Dai tokens, a stablecoin whose value is pegged to the US dollar. Anyone can use the protocol to drill a collateralized debt position (CDP), lock up ETH as collateral, and mint Dai against that collateral. The LTV ratio is 150%. This means that users can receive up to 66% Dai of the value of their collateral. Positions that fall below this rate are at risk of penalties and liquidation. Liquidated collateral is sold on the open market at a 3% discount.
The US-based Uniswap project acts as an exchange tool for Ethereum cryptocurrencies and ERC-20 tokens, and also functions as a pool. Users deposit tokens into a smart contract, providing liquidity for trading and earning rewards on exchange. Uniswap is popular for reasons such as low trading fees, a non-custodial storage approach (users control the security of their funds), and a wide range of tokens available for trading.
The Polkadot protocol allows multiple blockchains to be connected into a single network, allowing a client to send data or assets to the blockchain of their choice. The network is based on supporting two types of blockchains: the main network, called the relay blockchain, and user-created blockchains. The system provides unprecedented economic scalability by allowing a common set of validators to secure multiple chains. Transaction scalability is achieved, in particular, by distributing transactions across multiple parallel blockchains.
This is an application based on a blockchain network and smart contracts.
What functions do dApps perform?
Absolutely any of those presented in traditional systems – from games to finance.
Which blockchains are most sought after for building such applications?
Ethereum is considered the most popular option, but it is subordinate to the Binance Smart Chain. In general, any blockchain network that supports smart contracts can be used.
How are decentralized applications created?
Smart contracts are written in a programming language supported by the selected blockchain (for example, Solidity in Ethereum), and the outer shell is created using any convenient tool from the classical arsenal.
What are the advantages of dApps?
Firstly, it is the lack of intermediaries, and also the anonymity and independence, the lack of need to entrust your funds to someone.
What are the disadvantages of dApps?
They are a bit more complex than traditional apps and are also occasionally subject to hacking.
Conclusion
Compared to traditional applications, decentralized applications are still in the early stages of development. However, there are already thousands of such services that offer a variety of services. This is a huge step forward since the creation of Bitcoin, when the cryptocurrency was seen as a means of exchange only. Smart contracts, which gained popularity with the advent of Ethereum, have truly changed the industry and shown the future path of development. Using these tools, developers are creating applications with a variety of different use cases, from games and prediction markets to financial and investment portfolio planning.
