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What are Decentralized Applications, DApps?

What are Decentralized Applications? — Image Source: EngineerBabu

Decentralized Applications Introduction

DApps (decentralized applications) is one of the most intriguing terms used in the blockchain space currently. The term DApp is coined by combining two words- decentralized applications. In simple terms, DApps can be considered as applications, tools or programs that work on the decentralized Ethereum Blockchain.

DApps — Image Source: EngineerBabu

DApp Features

Though DApps are recently introduced with these many use cases, they have become popular and are in demand too. Some common features that make decentralized applications noticeable are:

DApp Features — Image Source: EngineerBabu

Open Source

In closed-source applications, the end users need to trust the developers of the applications in terms of decentralization as they can’t directly access their data via any central source. Thus, closed-source applications are always subjected to risks for users when it comes to adopting them. DApps, on the other hand, is decentralized and open source applications. A DApp creates a new structure for business practices as it allows all the network participants to keep track of the happenings rather than one person. They are governed through autonomy and any changes in the DApp are decided through the consensus (the majority of users) The code base of a DApp should be available for scrutiny.

Decentralized Consensus

Before the introduction of Bitcoin, the validity of any transaction would always need some kind of centralization. In order to make a payment, the transaction was pushed ahead through a clearinghouse that monitored it. Decentralized applications work on a peer to peer (P2P) model, meaning that the nodes are able to connect with each other directly. In a DApp, a transaction is processed through a consensus mechanism. When the majority of the nodes approve the transaction, it goes ahead and gets processed. Also, the validators of the network are incentivized by rewarding them in the form of cryptographic tokens.

No Central Point of Failure

Since DApps are distributed and they don’t rely on one single server, there is no central point of failure. DApps allow the data stored in them to be decentralized across all its nodes. These nodes are independent of each other. In case of failure of one node, the other nodes won’t get affected and will run on the network accordingly. Different decentralized database systems like IPFS (Interplanetary File System), BitTorrent, and independent DHTs can be used to create DApps with this feature.

DApps Classification

DApps can be classified into three different types according to the Ethereum white paper. Let us understand them one-by-one here:

Financial Blockchain Applications-

As the name suggests, this category will have Dapps that will provide users with methods of managing their finances and money. One example of this category is the Bitcoin which provides users with a distributed and decentralized system of monetization.

Semi-financial Blockchain Applications-

This category is a mix of money and information that resides outside the blockchain. An example in this category is the insurance applications that allows money returns for flights in case of delay in arrival. Another example of this category is the ICO (Initial Coin Offerings). An ICO is nothing but a fundraising mechanism similar to the IPO with the only difference being the involvement of cryptocurrencies in place of fiat money.

Fully Functioning Decentralized Applications-

This third category of DApps utilizes all the features of the decentralized and distributed systems. These kind of applications are the most popular kind of DApps and they do not need to be financial at any level. For example- Applications for online voting or decentralized governance. Countries like Dubai have already set their pace towards utilizing blockchain and building the first blockchain-run government.

Types of DApps — Image Source

The Essentials Of DApps

In order to consider an application a DApp, the following criterion needs to be met:

  • The data and records of the application’s functioning should be kept on a public and decentralized blockchain. Also, all the information stored on the blockchain must be cryptographically encrypted.
  • The application must use a crypto token such as Bitcoin or any native token of its own. This token should be used for rewarding miners and farmers according to their contribution in the system
  • The DApp must use a standard cryptographic algorithm in order to generate token and have a fixed consensus mechanism similar to Bitcoin which uses Proof of Work algorithm for rewarding purposes.

Consensus Establishing Mechanisms

DApps use two common mechanisms in order to establish consensus namely, proof-of-work (PoW) and proof-of-Stake (POS). As the name suggests, the proof-of-work mechanism is used as a consensus mechanism in blockchain and the reward distribution in this is done through based on the amount of work that each stakeholder contributes to the network or the DApp. The PoW mechanism is used in the Bitcoin blockchain and the consensus through which people are rewarded is termed as mining.

Token Distribution Mechanisms

In order to distribute their own tokens in the markets, DApps follow three common mechanisms namely mining, fundraising, and development. The mining mechanism, as we discussed earlier, works on the PoW principle and it allows the maximum number of tokens to be distributed to the people who contribute the most of their work to the operation of the application. For example, Bitcoin allows token distribution in the form of rewards when miners solve a mathematical problem by using their computing power to verify a transaction and maintain the Bitcoin blockchain.

Example — Image Source: Github

How Does A DApp Function?

In order for a DApp to function, the four essentials covered in the previous section need to to be implemented. This makes the DApp an open-source application which is implemented on decentralized blockchains. These apps are fueled with the tokens that are generated using a protocol.

Popular Ethereum-based DApps


Golem is a DApp project that aims to create a global market for utilizing idle computing power. The concept of the project is to utilize the power of PCs and data centers to create a rentable supercomputer that can be used by anyone across the world.


Augur — Image Source


Status — Image Source


Gnosis — Image Source


Prism is an Ethereum-hosted project by ShapeShift. It provides a trustless and decentralized asset portfolio market. It utilizes EDCCs, executable distributed code contracts, in order to generate custom management tools for market portfolios. With the aid of Prism, anyone can invest ether in different cryptos and specify the holding percentage they want.


Aragon — Image Source


Dapps have evolved with exceptional features which gives them the potential of becoming self-sustaining resources as they provide their stakeholders with the ability to invest in Dapp development. Observing their popularity, it can be established that in the coming days, DApps for multiple purposes such as payments, storage, cloud computing etc. will soon surpass the currently available traditional applications.

Read My Other Related Articles

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Blockchain in Healthcare: Opportunities, Challenges, and Applications, Also on Hackernoon
How is Blockchain Disrupting the Supply Chain Industry?, Also on Hackernoon
Everything You Need to Know About Smart Contracts: A Beginner’s Guide, Also on Hackernoon
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Mayank Pratap

Co-founder of supersourcing.com | Writer at Entrepreneur| Co-founder @ Supersourcing ! Featured in Forbes, Fortune Magazine. ! Future of Works ! FirstchequeVC