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6 minutes read

Decentralized Applications (dApps) Explained

By Jonathan Tarud
By Jonathan Tarud
6 minutes read

Just like Blockchain technology, decentralized applications might be the next big thing in tech. As a matter of fact, they are already changing numerous industries, revolutionizing different business models along the way thanks to new computing power methods and unique features. 

Like many other times in the past, when a new technology arrives, there is a great opportunity for many companies to benefit from the first-mover advantage. Decentralized apps literally have the power to disrupt entire industries, and this comes with both benefits and risks.

If you are wondering what exactly a decentralized app is and how it works, look no further. This post explains this and additionally discusses some of the opportunities that these apps allow.

What Is a Decentralized App?

A decentralized application, also known as a dApp, is a type of app that runs on a Blockchain network or a P2P network. This means there isn’t a single centralized place where the code lies. In terms of how it operates, this has important implications. A decentralized app is not owned by a single company or authority. Instead, its program runs on a distributed ledger of numerous users. Because of this, they are usually considered to be open-source.

In terms of app development, this offers many different possibilities in terms of the types of products and services that can be built. Although decentralizing how the program runs sounds like a minor thing, it is a powerful disruptive force.

The Difference Between Decentralized and Centralized Apps

Contrary to a decentralized app, a traditional centralized app is owned by a company, and this means they can charge for its use. A centralized app runs on a set of servers that are usually owned or commissioned by whoever owns the backend code. 

Ultimately, having ownership over the backend code guarantees that traditional business models work. Users are requested to pay a fee in order to use them, as there is an owner-client relationship between the parties involved, so transactions are pretty straightforward.

However, when it comes to decentralized apps, things do not work in the same way. This does not mean that doing business on a dApp becomes impossible. On the contrary, it opens up new possibilities, which in turn allows for new business models. 

dApps for Business

The most important quality of using a dApp for business is the fact that it removes the need for an intermediary. This means that, for example, there would not be any need for a Uber, an Airbnb, or a PayPal. Users would be able to access the platform freely, without the need to pay intermediary transaction fees, paying only for the end service, not the use of the platform itself. This will definitely be a game-changer for the platform industry.

Decentralized Apps, Blockchain Technology, and Cryptocurrencies

In principle, dApps operate similarly to a Blockchain network. That is why their development has often been linked to cryptocurrency Blockchains. As a matter of fact, many decentralized apps operate on the Ethereum Blockchain and other similar networks. Thanks to its characteristics, like its protection against data being altered, Blockchain has become the standard technology used by many decentralized apps. 

Decentralized apps have an important political component that is inherently linked to their operating philosophy. As a community, many members want to bypass traditional institutions that have long maintained the status quo. This is best seen in the case of DeFi apps, or decentralized finance apps, where the community looks forward to leaving aside the traditional banking system. 

Some of the benefits of using dApps with the Blockchain technology are:

  • No ownership
  • Avoid censorship
  • Built-in payments
  • No transaction fees
  • Anonymity
  • No downtime
  • Encrypted

Whether these apps actually evolve to achieve what the community strives for is yet to be seen.

Decentralized P2P Networks

P2P networks, known as Peer-to-Peer, are often confused with Blockchain networks. However, both technologies are two different things. P2P networks are also used for distributed data sharing, but they are just one of the many technologies used in Blockchain, just like cryptography and consensus algorithms. 

Although P2P technologies are not going to disappear anytime soon, it is expected that dApps evolve more towards the side of Blockchain technologies

Examples of Decentralized Apps

There are many different types of decentralized apps. Some of the most popular ones operate in the token economy, for borrowing and lending, investments, insurance, and even crowdfunding.

These are some of the most popular dApps that run on a P2P network:

  • Popcorn Time
  • Tor
  • BitTorrent
  • BitMessage

These are some of the most popular dApps that run on a Blockchain network:

  • PancakeSwap
  • Gitcoin Grants
  • Alien Worlds
  • Uniswap

Smart Contracts

One of the most important use cases of Blockchain technologies are Smart Contracts. This is a way for Blockchain networks to execute commands according to information registered on external sensors. Information is processed in a way that, when a certain event occurs, the Smart Contract will trigger a specific action based on whatever protocols are in place. This can be used as a consensus mechanism.

This is one of the most innovative ways in which dApps are expected to disrupt entire industries. It has already been implemented for insurance and finance, and it is expected to have important developments in eGovernance.

Decentralized Web Applications 

Decentralized apps offer users, developers, and companies new and innovative ways to offer products and services. For these different stakeholders, one of the most important features of dApps is their computing power. As mentioned earlier, the app’s code is not centralized in a group of servers but on a distributed ledger. This means that it ultimately rests on users’ devices, so an app’s computing power, in a way, is also distributed across a number of devices. 

Making this technology work correctly is a great engineering feat, but it is also a new way to allocate resources that may help companies move away from traditional server architecture. In the near future, we might expect companies to come up with new ways to optimize their resources by using the computing power of existing devices on the network instead of centralized servers.

To reap the power of servers in a decentralized way, one of the best alternatives is a web app. Web applications offer great flexibility in terms of what can be done with Blockchain, and they use the same technology that a dApp does to render a page. This makes them a great fit. Additionally, web applications are a great way to deliver users an outstanding app experience. For this and other reasons, web development seems the way to go for decentralized apps.

To make the most out of decentralized technologies, no matter what your project is, the best alternative is to work with a qualified app development partner. There are many things to consider, and technology moves pretty fast. Before you notice it, decentralization may be the next big thing. 

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