What Are DApps? Everything About Decentralized Applications

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Senior Writer

Published Mar 15, 2023 at 1:13 PM
Last updated May 18, 2023 at 5:49 PM

Have you ever wondered “what are DApps?” 

In our guide to DApps, we’re going to explain everything you need to know about these applications, including:

  • What is a DApp?
  • A brief history of DApps
  • DApps uses in today’s world 
  • Pros and cons of DApps 

So while the name DApps might sound a little silly, these clever little beasts are anything but. 
 

What is a DApp?

On the face of it, DApps are simply mobile applications. Similar to apps you probably already use, like Instagram and Facebook, a DApp lets you access your crypto via your smartphone or tablet.

DApps are smart contract-powered versions of apps that use blockchain technology to run. This means, just like all decentralized systems, there isn’t a single person, company or entity that governs them.

Originally conceived and popularized by the Ethereum network, today’s DApps have many uses, from moving your crypto around to playing games, fundraising and advertising. 

To understand how DApps work properly, you must first understand how they came about and  moved into the mainstream.

What are DApps
 

A Brief History of DApps

Let’s take a quick trip back to 2008, to the inception of Bitcoin, the world’s first digital currency. 

Bitcoin revolutionized the way we think of money.  Following the launch of this primary crypto, the possibility of using digital currencies online without the need for a bank or government body sparked curiosity and ingenuity. 
 

Buterin and His Buddies Come For Bitcoin  

Whereas Bitcoin may have ignited the fire, it wasn't until Vitalik Buterin and his colleagues created Ethereum in 2013 that we moved into the realm of truly decentralized finance.

Buterin and his team envisaged a much more extensive range of uses for decentralized finance (DeFi), and to this end created smart contracts. 

Smart contracts are simply pieces of code, also called “if-then contracts”, whereby if the first half of the contract is satisfied, the second part is automatically performed. 

For example, I lend my friend Dave $20 and I tell him that if he gives me my 20 bucks back by January 31, I’ll buy him a beer. With a smart contract, if Dave gives me back the $20 before the end of January, he will automatically receive a beer.

Even if Dave runs over my cat and burns down my house, and I never want to see him again, it doesn’t matter. Dave will get that beer because it’s been written in the smart contract and absolutely nobody can change it - not even me; his homeless, catless ex-friend. 

Smart contracts expanded how we use cryptocurrencies and DeFi, as they perform their duties in a “trustless” system. That means no room for negotiation, no pleading, bargaining or promises of fluffy new kittens. 

Smart contracts don’t care about you or your cat, which means they will perform their tasks without interference from us pesky humans. 
 

Centralized vs Decentralized Apps

As they run on the blockchain, use smart contracts and don’t require a governing body, DApps are truly decentralized. 

The opposite of this would be a centralized app, such as YouTube, which is run by one company on one server. 

Because centralized apps run on only one server, this leaves them vulnerable to going offline. 

We've all experienced brief periods where apps like WhatsApp, Instagram and Facebook go down for some time. Although it is usually a very short period, it can still play havoc with your day. 

On the flip side, because decentralized apps do not need a central server to operate, it means they will never go offline. Each computer on the network is called a node, and there are hundreds of thousands of nodes operating at any one time. 

Even if by some weird miracle 99% of the nodes all lost power at the same time, it would only take one solitary computer to keep the DApp running.

Another huge benefit that DApps have over their centralized counterparts is that they do not collect information like the big boys do. 

Every time you go into something like YouTube, your search data and other information is stored. That is how we get all those videos that cater to our tastes. While very convenient, we’ve all shuddered at some point at the creepy accuracy of our smartphone’s suggestions.

DApps, on the other hand, do not store such information. Therefore, why you might not be recommended any funny cat videos to watch on your DApp, you can relax in the knowledge that nobody else is sticking their nose into your search history and/or business.
 

What Makes a DApp?

The word “DApp” is simply the term we use for a decentralized application. However, a report called “The General Theory of Decentralized Applications, Dapps” published in 2014 outlines the specifics of what these apps must contain in order to be truly called a DApp:

  1. DApps must have open-source code and work without any third-party intervention. They must be user-controlled, and these users have the power to propose and vote on changes that are automatically implemented
  2. All information must be held in a publicly accessible blockchain network.
  3. DApps must have a form of cryptographic token for access, and will reward contributors in the said token, such as miners and stakers
  4. DApps must have a consensus method that generates tokens, such as proof-of-work (PoW) or proof-of-stake (PoW)

DApps Structure

As you can see from the four points listed in the report, the main purpose of DApps is to move away from the centralized, strictly governed and highly intrusive apps run by centralized organizations. 

What we can take away from this is that DApps are transparent, rewarding and 100% democratic, in that users can implement changes they want to see.
 

What are DApps Used For?

Now that you know all about how and why DApps were created, it's time to take a look at how we use DApps today. 
 

Finance 

Unsurprisingly, the primary use of a DApp is to buy, sell and trade crypto currencies. 

You can lend and borrow currency using a DApp, which comes with many benefits that you won’t find with your bank.

For instance, banks tend to take a large commission on money transfers, especially international ones. On the other hand, DApp users can earn 100% interest on anything they lend, as there is no bank or governing body to pay a commission to. 

This is also good news for borrowers, as the interest rates will typically be lower. This is because they also cut out the middleman and do not need to pay a bank to borrow funds. 

Through the use of smart contracts, all transactions are fair and transparent. As we've seen, if-then contracts eliminate any misunderstandings and the contract is satisfied if both parties fulfill their obligations.
 

Gaming

The online gaming arena is a fascinating industry, and now gamification has moved into the cryptosphere. 

Using games like CryptoKitties, for example, players can acquire an asset that is tokenized. As you can probably guess, in CryptoKitties this asset is a cat. 

You just can sell your cat, as well as breed it to make a rare and potentially more valuable kitty as well. 

This marriage of tokens and games is a very interesting space and we predict huge growth in the coming years.

Use of DApps
 

Social Media 

With controversial figures such as Donald Trump, Kanye West and Andrew Tate having their Twitter accounts deleted and then reinstated on what seems to be a daily basis, free speech on social media is a hot topic at present. 

This is because Twitter and other centralized apps have moderators and all feed back to the same server and parent company. Thus, anything you say online can be scrutinized, vetted and, if the Twitter gods deem it a violation of their guidelines, deleted.  

At the other end of the scale, social media DApps have no such restrictions in place, meaning that users can speak freely about anything they wish. 

While this might be considered potentially dangerous, and a breeding ground for shady individuals and organizations, keep in mind that users can vote to take down posts. 

This democratic system makes social media DApps far more diverse than centralized apps like Twitter, Facebook and Instagram. 

Furthermore, monetizing posts on DApps is more beneficial for influencers. Without the need to pay a central party, advertising on social media DApps generates a far higher revenue.
 

Governance of the Network 

Using smart contracts, DApp users can vote and implement changes more quickly than going through a centralized system. 

The community can set up lists of proposals, and use tokens to “stake” their vote. 

This is all done anonymously, with the smart contract guaranteeing action if a certain amount of votes are cast. 

The result is changes are automatic and generally quicker and easier to implement, and don’t usually end in trolling and celebrity feuds with Greta Thunberg. 
 

Popular DApps Examples

These days, there are many DApps available, with many more coming to market every year. 

Here, we've listed just a handful of our favorites, covering finance, games and even fitness. 
 

PancakeSwap 

A great example of a decentralized exchange (DEX), PancakeSwap is built on the Binance Smart Chain, and allows users to swap crypto tokens. 

Using smart contracts, users can trade PancakeSwap’s native utility token, CAKE. This includes  staking, yield farming, lottery participation and using your tokens for governance voting.
 

Compound

Another finance DApp, Compound is built on the Ethereum network and allows users to borrow, lend and earn interest on a variety of cryptocurrencies. 

To use this platform, you'll need to connect a digital wallet that is supported by the Compound platform. These include Metamask, Ledger, Coinbase Wallet and Tally.
 

Splinterlands

Splinterlands is an exciting example of how gaming has merged with the world of crypto. 

Players can choose from hundreds of digital card games run with blockchain technology that reward players with NFTs and Splinterlands’ in-game governance token, Splintershards. 

DApps Examples

 

Step App

A logical marriage of gamification and fitness, but with crypto thrown into the mix, Step App rewards users for taking part in physical exercise. 

You can walk, jog or run, and update your fellow users on your progress, as well as help others  to reach their goals through a great community spirit. 

The augmented reality feature also helps you envisage your fitness goals more vividly. And you can combine social media, fitness and token rewards all on one DApp.
 

Pros and Cons of DApps

  • DApps let you send money without the need for an intermediary, such as a bank
  • DApps never go “down”, as they are run by hundreds of thousands of computers 
  • Finance DApps offer faster speeds and lower withdrawal fees than centralized systems  
  • DApps provide anonymity
  • Users can get rewarded for governance of the network

Cons of DApps

  • It’s harder to settle disputes with DApps because there is no official governing body
  • DApps are slow to update/fix, as there’s no central authority to report to
  • You need to download special software to support a DApp, as it can’t be downloaded from Google/iOS Stores 

Conclusion

It's becoming clear that DApps are here to plug a gap in the market. 

We all love our apps, with the majority of us using banking, social media and gaming apps on our smartphones every single day of the week. 

But with lower fees, quicker speeds, the possibility of more free speech and rewards for taking part in games and activities, DApps offer a wide range of benefits that are desperately lacking from our current run-of-the-mill applications. 

So the next time you consider installing an app, stop and think: is there a DApp for that? 

Written by

Alyx is a sports writer, casino enthusiast and wannabe crypto queen! If she’s not writing about her beloved Arsenal, you’ll find her stalking Lewis Hamilton and other F1 drivers on social media and finding new ways to invest and bet with crypto.