Decentralized Applications

DApp it up, bro!

Published in

CoinBundle

9 min readAug 21, 2018

You’ve heard of apps before, but what about DApps? This is an extremely valuable and important application of blockchain technology that everyone should be aware of, especially if you’re trying to learn more about cryptocurrency. Let’s take a closer look at what DApps are and what that means for the world of blockchain and cryptocurrency.

What Are DApps?

To fully wrap your head around what a DApp is and what that entails, you must first familiarize yourself with its underlying technology — blockchain. To keep this succinct, think of blockchain as a fully transparent and continuously updated record of the exchange of information through a network of personal computers, a system which nobody fully owns. This makes it decentralized and extremely difficult for anyone to single-handedly hack or corrupt, pretty much guaranteeing full validity and trust in each exchange of information.

To be more specific, the blockchain network utilizes cryptography to record each transaction in chronological “blocks” and ensure that it can’t be altered or corrupted. This way, everyone can track down the information on each exchange without gaining access to any personal information. By providing a platform for trust-less public exchanges to be recorded, the possibilities are endless for its applications and how they can impact today’s society — this is where DApps come into pay.

DApp is pronounced DEE-APP. DApps are applications that run on a peer-to-peer network of computers, as opposed to a single computer. The key benefit of this is that users of the network don’t have to depend on a central computer to send and receive information. These applications take advantage of the power of blockchain and, more specifically, use smart contracts to enforce each term of agreement between two parties. Instead of having to go through a centralized network, essentially a middleman, DApps rely on smart contracts to access the blockchain network and operate. However, in order to be considered a “decentralized” application, there are a few requirements which must be met.

Each application that is considered “decentralized” must be open-source, which refers to any program whose source code is made available for use or modification as users or other developers see fit. On top of that, each DApp has to be decentralized — surprisingly enough! As long as the data is stored on a decentralized blockchain network, it will suffice. Finally, each DApp must fuel its own activity through an incentivized system which generates tokens or other forms of digital assets, while also adhering to its own algorithm or consensus protocol. As long as these characteristics are present in a new DApp, it can operate on its own network and function without the need of a third-party central authority.

DApps are applications that run on a peer-to-peer network of computers, as opposed to a single computer. The key benefit of this is that users of the network don’t have to depend on a central computer to send and receive information, instead taking advantage of smart contracts to enforce each term of agreement between two parties.

DApp Terminology Explained

Before we dive into the specifics of how DApps function and which kinds currently exist, let’s quickly go over some important terminology to better understand how they work.

Smart Contract: A smart contract is a mechanism involving digital assets and two or more parties, where some or all of the parties put assets in and assets are automatically redistributed among those parties according to a formula based on certain data that is not known at the time the contract is initiated.

Autonomous Agents: An autonomous agent is a “smart” agent operating on an owner’s behalf but without any interference of that ownership entity. A thermostat is an example of a very simple autonomous agent in that it senses the environment and acts to change the heater. An autonomous agent has the capacity to process information within a restricted domain giving it autonomy and then take an action based upon the rules it has been given or learned.

Decentralized Applications: Decentralized applications (dApps) are digital applications or programs that exist and run on a blockchain or P2P network of computers instead of a single computer, and are outside the purview and control of a single authority.

Decentralized Organizations: The idea of a decentralized organization takes the same concept of an organization, and decentralizes it. Instead of a hierarchical structure managed by a set of humans interacting in person and controlling property via the legal system, a decentralized organization involves a set of humans interacting with each other according to a protocol specified in code, and enforced on the blockchain.

Decentralized Autonomous Organizations: A DAO (Decentralized Autonomous Organization) can be seen as the most complex form of a smart contract, where the bylaws of the decentralized organization are embedded into the code of the smart contract, using complex token governance rules. At today’s evolutionary stage, a DAO materializes as a smart contract executed on top of an increasingly opaque stack of distributed networking and consensus technology like the Ethereum blockchain or similar blockchains.

Decentralized Autonomous Corporations: Decentralized Autonomous corporations (DACs), represent one of the most interesting and potentially disruptive applications of blockchain technology. DACs contain the power to automate and organize complex processes, systems and organizations (e.g. corporations) that previously would have been impossible to move outside of a human control structure. Additionally, a DAC allows for some specific and valuable benefits when compared with a human controlled model in a number of categories (security, trust, protocol, resilience, consistency)

Before you can learn about the specifics of DApps, quickly read through the aforementioned terms to get a better idea of what these key terms entail.

Different Types of DApps

Not all DApps are the same and they can differ in several ways. Now that we have a good idea of how DApps function in general, let’s take a more in-depth look at the different types of DApps which currently exist.

One kind of DApp that exists is the automated agent. In an autonomous agent, there is no necessary specific human involvement at all; that is to say, while some degree of human effort might be necessary to build the hardware that the agent runs on, there is no need for any humans to exist that are aware of the agent’s existence. One example of an automated agent could be a computer virus. The virus can spread from network to network without any human interaction or direct control. In fact, it almost operates as its own entity, truly making it an automated agent.

Decentralized organizations, on the other hand, take the same concept of an actual organization, and essentially decentralizes it. Instead of a hierarchical structure managed by a set of humans interacting in person and controlling property via the legal system, a decentralized organization involves a set of humans interacting with each other according to a protocol specified in code, and enforced on the blockchain. Finally, what is considered to be the “holy grail” of DApps, we have decentralized autonomous organizations. This is an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that the automaton itself cannot do. Bitcoin would fall somewhere in between a DO and a DAO, as it shares some qualities from both classifications.

Within DApps themselves, there also three types which are commonly referred to when classifying a new DApp. Type I decentralized applications have their own blockchain. Bitcoin is the most famous example of a type I decentralized application, but Litecoin and other “alt-coins” are of the same type. Type II decentralized applications use the block chain of a type I decentralized application. Type II DApps are protocols and have tokens that are necessary for their function. The Omni Protocol is an example of a type II decentralized application. Type III decentralized applications use the protocol of a type II decentralized application. Type III decentralized applications are protocols and have tokens that are necessary for their function. For example, the SAFE Network that uses the Omni Protocol to issue “safecoins”that can be used to acquire distributed file storage is an example of a type III decentralized application.

Given how many different classification and types of DApps which currently exist, it’s most important to understand the key differences between them and what makes a DApp decentralized in the first place.

Not all DApps are the same and they can differ in several ways. There’s automated agents, which don’t require any human involvement at all, decentralized organization, and decentralized automated agents.

DApps VS. Smart Contracts

One of the biggest misconceptions that arises when learning about DApps is comparing it to smart contracts. Although the two have some similar concepts in terms of how they function, they are actually quite different and should not be mistakenly compared. Let’s break down the key differences between the two.

A smart contract is a mechanism involving digital assets and two or more parties, where some or all of the parties put assets in and assets are automatically redistributed among those parties according to a formula based on certain data that is not known at the time the contract is initiated. Smart contracts contain all the information regarding a transaction and only proceeds with the resulting actions once the requirements are met. What differentiates smart contracts from traditional paper contracts is that smart contracts are computer-generated.

A decentralized application is similar to a smart contract, but different in two key ways. First of all, a decentralized application has an unbounded number of participants on all sides of the market. Second, a decentralized application does not necessarily have to be financial or related to financial aspects. There are several DApp blockchain platforms available, including Ethereum, Cardano, NEO, and HashGraph. WIth numerous advantages and disadvantages between them, these platforms allow developers to easily program these new applications.

DApps are NOT the same as smart contracts. Although they’re similar in some senses, a decentralized application is different in two key ways. First of all, a decentralized application has an unbounded number of participants on all sides of the market. Second, a decentralized application does not necessarily have to be financial or related to financial aspects.

Benefits of DApps

So when it’s all said and done, DApps have the potential to be pretty revolutionary. Due to their decentralized structure, DApps have inherent security which, coupled with blockchain, allows for seamless integration with cryptocurrency applications. This is possible because a blockchain stores information in a way that cannot be changed unless all of its hosts agree that the change is valid, since each entry is incorporated into the hashed value of the subsequent entry.

Additionally, cryptocurrency plays a pivotal role in many DApps by rewarding content creators, and incentivizing certain users to host a “full node” — a copy of the DApp’s entire blockchain that accepts incoming transactions, and possibly verifies them through “mining.” A majority of DApps create an internal token unique to its platform,

Last and most importantly, the ability for DApps to essentially be unhackable allows for full resistance against outside interference, especially from large corporations. Most traditional applications depend on some kind of central authority to facilitate transactions and make decisions about the structure of the platform itself, but DApps operate entirely on their own once set into motion. This means that they’re free from any outside influence, whether it’s from the developers, a corporation, or a government. Overall, all these benefits give DApps the ability to truly revolutionize the world even though it’s still in a very early stage in its own evolution.

DApps are beneficial for several reasons, including security, accessibility, and cryptocurrency integration.

Conclusion

One of the most useful applications of blockchain technology is through DApps. In fact, a lot of people aren’t aware its revolutionary capabilities, especially those who aren’t well-versed with crypto. Looking towards the future, more and more DApps will emerge and everyone should be paying attention to how they impact our world.

What DApps do you know and like?
Let us know in the comments!