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What are decentralised apps (dApps)?



SUMMARY


Decentralised applications (dApps) are applications that run on a blockchain network. They can be developed for various real-world use cases. Although dApps can look similar to web apps in terms of user experience (UX), their backend processes differ. Decentralised apps forgo central servers to perform distributed and peer-to-peer (P2P) transactions and do not communicate via the central HTTP protocol.



CONTENT


  • The blockchain makes dApps possible

  • Web apps vs. decentralised apps

  • Criteria for decentralised apps

  • The future of decentralised apps



THE BLOCKCHAIN MAKES DAPPS POSSIBLE


Since the launch of Bitcoin more than a decade ago, blockchain protocols have been constantly developed and refined to unlock new features and use cases. There is now a burgeoning industry of decentralised applications (dApps) based on the blockchain - from finance and gaming to web browsing and art collecting.


Even though most dApps are developed using Ethereum, all dApps are based on blockchain technology. These dApps rely on blockchains to process data across distributed networks and conduct transactions using smart contracts. Smart contracts are automated, self-executing agreements that make transactions between two parties seamless, fast and automatic. They are the key element of dApp technology and can be combined to create powerful software that can be used in different industries.


Just as developers create applications for mobile and desktop devices, dApp developers create applications that work on specific blockchain networks. The vast majority of dApp developments take place on the Ethereum blockchain. Consequently, the Ethereum blockchain supports the majority of activity in the dApp ecosystem.



WEB APPS VS. DECENTRALIZED APPS


Trello, Slack and Twitter are examples of companies that offer web apps. The usability of traditional web apps depends on two elements: the front-end and the back-end. Web apps use software that runs on central web servers rather than on a device's local operating system. Devices and servers communicate via coded messages using the Hypertext Transfer Protocol (HTTP). For example, when you open Twitter in your web browser, the feed you see (the front end) is pulled from data on the company's web server (the back end).


Whereas the internet channels massive amounts of data through huge, centralised servers, a blockchain represents hundreds or even thousands of computers sharing the transaction load across a distributed network. On the front end, decentralised apps and websites use the same technology to render a page on the internet. On the back end, however, dApps communicate with their respective blockchain networks via a wallet that serves as a bridge to the blockchain ecosystem.


Wallets manage your blockchain address and the cryptographic keys you need to identify and authenticate yourself. Instead of using the HTTP protocol to communicate with the blockchain, dApp wallets trigger smart contracts that interact with the blockchain and execute transactions. A dApp is thus the front-end user interface (UI) that communicates with the smart contracts that transact on the blockchain, after which the distributed network of nodes that make up the blockchain validates and confirms the dApp data. At first glance, a well-designed decentralised app is no different from a web app, but it differs from the latter in its lack of servers, HTTP and possible censorship.



CRITERIA FOR DECENTRALIZED APPS


Although it is obvious that the dApp architecture is different from traditional platforms, there is still a definition of what constitutes a dApp. In general, however, a dApp meets the following four main criteria:


A dApp is completely open source, meaning that no company owns the majority of the coins or tokens. Due to its open-source nature, changes to the protocol must be decided by the consensus of the network's users.


  • The data of a dApp must be stored on a decentralised blockchain.

  • A dApp must generate digital assets that serve as proof of value.

  • The assets of a dApp are distributed as rewards in the network.


By this definition, the Bitcoin blockchain is a dApp because it meets all four criteria. Let's look at the dApp criteria for Bitcoin:


Bitcoin is based on open source code, no single entity owns the majority of Bitcoin in circulation (BTC) and the Proof-of-Work (PoW) consensus mechanism controls its management.


  • Bitcoin and all its data live on the blockchain.

  • Bitcoin generates coins that serve as proof of value for the mining process.

  • Bitcoin distributes Bitcoin cryptocurrency to miners as a reward for mining.


By this definition, many cryptocurrencies can be considered rudimentary versions of dApps, even without smart contract features and web interfaces. A blockchain itself can also be classified as a dApp. Blockchains can host dApps that have their own blockchain, like Bitcoin. Or dApps that are not based on a blockchain can be built on top of an existing blockchain, as is the case with many dApps that run on Ethereum.



THE FUTURE OF DECENTRALIZED APPS


Although Bitcoin can arguably be considered the first dApp, Ethereum has since become the main growth driver of the dApp ecosystem. This is mainly due to its smart contracts, network effect and user base. As the decentralised finance (DeFi) market expands its use cases and adoption, dApps provide an important gateway to new audiences by providing user interfaces that resemble traditional web apps while accessing the new capabilities of the blockchain. In this way, dApps extend the functionality of the internet through blockchain in many ways.


Regardless of the underlying blockchain, interest in dApps is growing rapidly - and the movement has only just begun. As blockchain evolves at a rapid pace, it is likely that finance, gaming, online markets and social media will all become blockchain-based dApps.

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