Decentralized Applications (DApp’s)

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Decentralized Applications (DApp’s)

WHAT’S A DApp?

On the surface, decentralized applications or DApps (pronounced “Dee-Apps”) are similar to any web-based application. The major difference is that DApps run on a blockchain network.

To realize the full capabilities of decentralized applications, it’s crucial to understand how blockchain technology functions. Briefly, a blockchain is a transparent, unalterable and continuously updated record of transactions that are stored on numerous devices connected to the network. Every time a new exchange occurs, it must be verified by all participants before it is added to the blockchain. This creates what is known as a decentralized network.

In a decentralized network, no central authority is needed to facilitate the transfer of digital assets or information. In contrast, any app, from your banking app to Facebook, requires a central administrator to grant special access and act as custodian to everyone’s personal information. It means that the same services that are provided in a centralized manner can now be run on a decentralized blockchain network. These are known as decentralized applications or DApps.

The implications of the “decentralized” aspect of these applications are vast. DApps allow people the ability to anonymously exchange information or digital assets with each other in a trust-less way. Imagine the complex services and functions of apps like Uber or Spotify being decentralized. In this case, the driver and rider, or listener and musician can exchange with each other directly, rather than paying fees to intermediaries for facilitating the transaction.

The distributed network is what establishes trust between these parties and mandates the transaction so that both parties are protected. Thus, in broader terms, DApps provide a way to unlock the real potential of blockchain technology.

DApp FEATURES

There are some very important features of DApps that make them revolutionary:

All DApps are open source, meaning anyone can view and contribute to the underlying code. This allows DApps to adopt an ever-evolving characteristic, where common shortfalls or issues with the code can be fixed or changed accordingly.
The decentralized aspect of DApps allows them to be used in a wide range of applications like monetizing the items in a video game or renting a house.
Using a decentralized network also makes DApps very robust against hacking attempts.

It is important to note that the showcased features of DApps are primarily due to the underlying blockchain technology.

The power of the blockchain creates an opportunity for users of DApps to exchange information securely. The distributed and immutable aspects of blockchain alone make DApps a possibility for securely exchanging information.
Cryptographically masking personal information makes it possible to verify transactions in a secure way through network consensus. This allows for the complex exchange of personal information, since the sensitive content is encrypted as it gets verified over the network.

WEB Apps VS. DApps

Comparing DApps to traditional web-based applications that we use daily can help us understand the real potential of DApps. For web apps, a sign-up or registration is often required for special access to the services. Then a central administrator validates transactions and acts as custodian to every participant’s personal information. It is a real dilemma of web-based applications — the fact that all the data is being held at a single point, or in the case of giants like Google or Amazon, across a few servers. This single point of authorization can also be a single point of failure.

This is where the beauty of decentralized applications comes in. When it comes to DApps, from the user’s perspective, all aspects of the application look very similar to a web-based application. While even the functionality of the app will feel the same, the back-end network that supports the information exchange required for the app to function is very different. The back-end network, or distributed blockchain network as we have learned, allows all information to be transferred over a secure network that has no single point of failure, making it virtually unhackable.

DApp EXAMPLES

There are many exciting examples of DApps that use the invaluable security features of blockchain technology. This includes games, such as EOS Knights, where items earned in the game can be traded for EOS on a marketplace. With the demand for and volume of in-game purchases breaking records each year, it’s no wonder that the secure exchange of valuable crypto can allow for a much more immersive experience. Items and digital assets earned in games can have direct real-world implications.

Besides recreational applications, this technology has been put towards a lot of different uses. For instance, applications, like Golem, have launched projects to allow sharing and purchasing of the pooled excess computing power of its users. DApps, like Augur, are also worth mentioning, as they use a decentralized network to produce forecasting results for different events. Tokens earned on such apps can then be taken to an exchange such as Radex to exchange for a more transferable currency, like Ethereum.

SUMMARY

Ultimately, DApps are a way to unlock the potential behind the security and distributed nature of blockchain ledgers. By facilitating the transfer of information over a decentralized network, these applications cut out the middlemen. It is notably beneficial regarding user privacy, decreased transaction costs and overcoming legal obstacles. Not only can two parties settle on complex terms without the need of lawyers, but with the power of DApps, they can also send information without their data being collected by a conspicuous middleman like Facebook.

4 min read

Decentralized Applications (DApp’s)

DECENTRALIZED APPLICATIONS EXPLAINED

DApps or decentralized applications are a revolutionary use of blockchain technology. Essentially, Dapps utilize a peer to peer (p2p) distributed ledger network to establish a decentralized exchange of digital assets and information. How this function is entirely dependent on the blockchain.

Consider the implications of this distributed ledger technology for a moment: it’s transparent, distributed and extremely secure. These are all issues that web-based applications regularly face.

The nature of web-based applications requires a central administrator to authorize users to access different tools and services. Consider apps like Tinder or even Skip The Dishes, which need the user to forfeit some personal information which is then used to participate in the service.

DApps offer an alternative, where all front-end features of an application like Tinder would remain the same, but the exchange of information from participant to participant would be decentralized, meaning no one person owns it on their server. Your personal information could always be cryptographically masked unless you wanted to reveal it to someone in particular.

TOKENS GALORE!

The role of the blockchain network in decentralized applications is to run a reliable consensus protocol to process the exchange of information or rare digital goods securely.

Essentially, a DApp establishes a computer protocol which creates a coin or deploys a unique token used to fuel the underlying blockchain network.
These tokens can then be used to account for specific processes within the DApp and can also be used to reward miners for validating transactions on the network. For example, a financial forecasting DApp called Augur uses Ethereum to run its trading platform but also rewards users for providing accurate forecast reports with a unique token called Reputation (REP).

Beware, the value of tokens released by DApps really depends on its transferability to a coin like Bitcoin or Ethereum, which are easy to exchange. The purpose of deploying tokens can significantly vary, from getting users to complete certain tasks in the DApp, like liking a page, to distributing the equity stake of the project in the form of security tokens. To read more about tokens, please read our article, “What’s the difference between Tokens and Coins”.

TYPES OF DApps

The classification of DApps can vary based on different factors, but one major way of categorizing these applications is by the type of blockchain network they are utilizing.

Type 1 DApps are projects that have deployed their own blockchain networks, like Ethereum or Bitcoin.
Type 2 DApps use the blockchain network of a Type 1 DApp
Type 3 DApps use the blockchain network of Type 2 DApps*.

*It means that Types 2 and 3 are both separate protocols on the initial blockchain network which usually require the establishment of a token that’s necessary for its function.

Separating these DApps regarding the type of blockchain network can be informative when it comes to an understanding of more complex decentralized applications. For example, the OMNI protocol is a Type 2 DApp built on the Bitcoin blockchain network, which allows the creation of custom cryptocurrencies and digital assets.

The SAFE Network is a Type 3 DApp which is created on the OMNI protocol and uses it to replace data centers and servers with its participants’ spare computing power. This type of DApp requires the advanced functionality offered by the Type 2 DApp which further relies on the stability of the Bitcoin blockchain network. It is a complex set of interweaving code that must be understood in layers.

PEER TO PEER NETWORKS

The groundbreaking implications of decentralized applications are hard to fully grasp by simply discussing the technical jargon and underlying complexities. Looking at the broader picture is essential too. To understand the transformational aspect of DApps, it is also important to compare them to traditional web-based applications.

Basically, every app that we currently use, from Gmail to Wish, are all structured around a central administrator. This central authority is responsible for collecting necessary information from users and providing them with special access to the underlying services offered by the app. Furthermore, this central admin assumes the custodianship of all of this personal data collected by from its users. It is clear that with such authority comes a tremendous amount of power and control in this hierarchical structure.

On the other hand, in a decentralized structure, no node is granted higher access over another. Everyone can participate equally while keeping sensitive personal information to themselves. If it’s not yet apparent what makes this beneficial, then consider the case of Facebook.

The data farm their users and then turns this information over to advertisers and political interest groups for the sake of profit. Also considering the many hacking scandals that have put its sensitive user information in Jeopardy, Facebook becomes a great example of the pitfalls of a centralized network. The security and privacy offered by a decentralized network helps address such problems.

EMPLOYING DApps

In recent years, DApps have stretched the boundaries of blockchain technology. It can be easy to understand how these applications function, but it can be difficult to realize their creative potential. The most prominent use of DApps has been in launching Autonomous Agents on the blockchain network. These are “smart” agents which are deployed on a network and continuously process information until a specific action is triggered based on encoded rules. This means that the DApp will be triggered when certain conditions are met in the data that the agent is continuously analyzing. This is similar to a thermostat constantly measuring the temperature in a house and adjusting it accordingly when it gets too hot or too cold.
The more complex uses of these applications are starting to emerge in the form of Decentralized Organizations (DO’s) and Decentralized Autonomous Organizations (DAO’s).
- DO’s are just DApps that follow a more complex protocol of functions and triggers. These define the way in which two people on a network may interact with each other. DO’s offer an excellent way to take one aspect of an organization and decentralize it for the sake of a trust-less exchange.
- Going further, you get DAO’s which are DApps deployed to be completely autonomous organizations. There is very little human intervention required to allow the members of such an organization to interact with each other based on preset rules and conditions. A great application of this technology would be to run NGO’s or non-profit organizations, where a complex trustworthy code can be used to hold all parties accountable and ensure the funds are allocated honestly.

All in all, the DApps currently circulating the internet have just scratched the surface of what this exciting new technology may have in store. This new type of technology will continue to evolve as blockchain adoption grows and is adapted to everyday use.

6 min read

Decentralized Applications (DApp’s)

UNLOCKING THE POTENTIAL OF BLOCKCHAIN TECHNOLOGY

Blockchain has become a new buzzword for the technologically curious to throw around, but few people can truly recognize the aspects that make it transformational. Decentralized applications, or DApps, are now emerging as the key to unlocking the capabilities of blockchain technology. These are applications which facilitate the transfer of information or digital assets on a decentralized network.

The primary qualities of a blockchain network that make it such an appealing concept are its peer to peer transactional interface and distributed record keeping. These two attributes provide the groundwork for building decentralized applications.

To elaborate, the fact that a blockchain network allows for two anonymous parties to conduct transactions with each other without the need of a central facilitator to establish trust has enormous implications. The cost and timing of processing transactions using today’s method generally have legal obstacles and charges involved, which can be significantly reduced.

THE ESSENTIAL CHARACTERISTICS OF DApp INCLUDE:

Having an open source code, which can be continuously improved
Running on a decentralized network without a hierarchy
Fueling its transactions by offering a unique token or digital asset
Providing its own consensus algorithm and protocols.

These features are essential for setting up a successful decentralized application. Moving past the most obvious traits, like being open source and decentralized, the use of tokens and unique protocols is what makes DApps so variable. These tokens can be used for a variety of things like in-app purchases, or they can even represent company equity. Whereas, manipulating the underlying algorithms and consensus protocols can allow for better transaction speeds, scalability or decentralization.

WHY DApp’s ARE AN IMPROVEMENT TO WEB APPS:

It is clear that there is untapped potential in the DApp world, but it can be challenging to recognize which fields would benefit from implementing a decentralized structure and which would be resistant to change. A good method to test the impact of a decentralized model is to compare it to a similar centralized application. Primarily, a web-based application is constructed with two components: a front-end user interface and a back-end stored on a centralized server.

These elements interact with each other via coded messages through the HTTP protocol. Similarly, the front-end stays the same in decentralized applications. However, the back-end is supported on a blockchain network, rather than a centralized server. This can have a wide range of effects.

The blockchain network is a secure way of storing and processing information. Since all sensitive data can be encrypted, transactions can be presented to anonymous nodes throughout the network for validation. This must be processed through a pre-established protocol. If the back-end of a DApp relies on this type of network, it must utilize tokens to process transactions that occur on this distributed ledger. The benefit of this process is the avoidance of a centralized authority that generally facilitates the transfer of information.

Since traditional web applications like Facebook or Twitter require these entities to collect and store personal information from its users, this can put a tremendous amount of control in the hands of a single point. This single point of authority also acts as a single point of failure. Successful hacking attempts need only bypass one line of control, whereas a decentralized network has multiple nodes without any hierarchical authority. In this case, a hacker must be able to fool all nodes of the network simultaneously.

AUTONOMOUS AGENTS AND ORGANIZATIONS

What is the real benefit of a decentralized structure? What can be accomplished with such a network? The answer is automation to an unprecedented level. DApps can deploy Autonomous Agents, which operate as a “smart” agent responsible for constantly processing a certain range of data and reacting when a certain set of conditions is met.

These lines of code operate on the rules established by the initial coder, but once they are deployed on the blockchain network, nobody can interfere with the encoded instructions. It creates an artificial intelligence that is completely trustworthy, as long as the code has been democratically established.

The fact that autonomous agents can follow a complex set of instructions has sparked many radical ideas. Once such idea being Decentralized Organizations (DO’s); which establish a protocol for people to interact within an organization. Different aspects of an organization, like payroll or even bonuses, can be completely decentralized to establish a trust-less method of processing. A DO protocol can be developed for people in a company to interact peer to peer instead of through the regular hierarchical structure with all stages of bureaucracy.
The idea of Decentralized Autonomous Organization (DAO’s) is also being explored nowadays. Theoretically, DAO’s can be completely self-sustaining organizations with minimal human interference required. It should be comprehensive enough to automatically conduct menial tasks and take on management responsibilities as well as all aspects of corporate governance that lie in between. These could have groundbreaking implications on processes like taxation, where millions of people must adhere to pre-established tax brackets. In many cases around the world, taxation schemes can be riddled with corruption, but with an autonomous agent carrying out this complex undertaking, a lot of these middleman issues can be eliminated.

DApp’s AND SMART CONTRACTS

Making use of blockchain technology can be a challenging undertaking if you start from scratch. Starting your own network can take an extensive amount of resources, contacts, and in-depth knowledge of cryptography, mathematics and computer science. This has led to the establishment of blockchain frameworks like Ethereum, EOS, and POA, which provide a platform for developers to run their own protocols to create DApps.

Therefore, three types of DApps exist:

Type 1 DApps have their own blockchain
Type 2 DApps run on a Type 1 blockchain
Type 3 DApps run on a Type 2 blockchain

For example, Ethereum is a Type 1 blockchain and has its own coin to run transactions. EOS, on the other hand, runs on the Ethereum blockchain as a token, thus making it a Type 2 DApp. The protocol on the Ethereum blockchain that allows for the establishment of EOS is called ERC-20. These tokens are essential to fuel the ongoing transactions that occur in Type 2 and 3 DApps.

It is very important to understand the relationship that DApps have with their underlying blockchain networks. Decentralized applications interact with the blockchain network in the form of Smart Contracts. These are small lines of code that execute based on a certain set of conditions. Many different Smart Contracts that execute under a variety of conditions can form a DApp. Moreover, Smart Contracts, in the blockchain space, do not have to be financially motivated. Also, one particular Smart Contract may involve a set number of parties, but by incorporating many Smart Contracts into a single application, an unbound number of participants can exist on all sides of the market.

Therefore, to be able to code a decentralized application, one must learn to code Smart Contracts. To learn more about Smart Contracts, please read our article “What Are Smart Contracts?”.

DApping OUTSIDE THE BOX

We have covered many benefits of decentralized applications, some of which became more obvious when the underlying technology became less mysterious. However, there are uses of DApps that continue to question the limitations of blockchain technology. For example, a game called Cryptokitties allows users to collect, trade, and breed unique, non-replicable cats. The different traits and characteristics of each cat are cryptographically stored on the blockchain network.

Although it is difficult to take cute little digital cats on the internet too seriously, this project has revealed the capacity for blockchain technology to maintain the value of rare digital assets. This game was established on the Ethereum protocol ERC-721, which could be used to tokenize digital assets like photographs and music. Another project, called Aragon is exploring the implementation of decentralized organizations (DO’s). These emulate productivity applications that allow for different organizational aspects of a company to be decentralized. This establishes a trust free manner of conducting corporate governance.

Technology like this can broaden the horizon for increasingly complex tasks to be implemented in a peer to peer fashion, and the nonstop surge in DApp development is a resonance of this sentiment. So far, DApps only limitation is the human imagination.

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