What Are Decentralised Applications?
Decentralised applications form an exciting new part of the growing blockchain-based ecosystem which explores how decentralisation can alter existing power structures. They are built on a peer-to-peer (P2P) network (like a blockchain network) which means the control is distributed across multiple devices instead of being held by one single server or entity.
DApps are typically developed on Ethereum, a blockchain that allows developers to build decentralised apps using smart contracts. A smart contract is an agreement between two people in the form of computer code that executes automatically when the conditions are met. Smart contracts are stored across the distributed, decentralised blockchain network and play an important role in other moves towards decentralisation, like Decentralised Autonomous Organisations. DApps are not limited to Ethereum though, and we're seeing many DApps being developed on other level one blockchains such as Solana and Binance Smart Chain.
Ethereum has been instrumental in the widespread growth of dApps, along with other platforms like Tron, EOS, and NEO. Right now DApps are mostly being applied to a select group of fields, like gaming, finance, and social media, but that field has been expanding to areas like property management, health, and insurance. While DApp development is still in its infancy it’s already brought about exciting innovations. A key part of this development is the P2P networks on which this technology is built.
Why dApps Need a Peer-to-Peer Network, Like Blockchain
On the surface, decentralised applications (dApps) can seem almost identical to the many apps available in your phone’s app store. The key difference is that dApps are decentralised and run on a peer-to-peer (P2P) network, like a blockchain, instead of on one or more central servers.
With a P2P network, each device is equal to another and provides access to resources and data. They also don’t rely on a central server. For instance, if you and your friends wanted to share photographs from a recent holiday together, you could use a P2P network to access the photos on each of your computers directly. You could do this without having to send them to every person individually AND without having to use a file-sharing application like Dropbox or Google Drive.
Difference Between Centralised Apps and Decentralised Apps
We use any number of centralised apps on a daily basis, from YouTube to Google Maps, and if their servers are down, there’s a good chance you’ll notice it. That’s because centralised apps reside on one or more servers — all controlled by the companies that own them — and when they fail you have no way of accessing their product.
Because decentralised apps are spread out over a network of devices owned by different people, you’re unlikely to ever experience any downtime. If one node is unable to offer up the data you’re looking for, then you can seamlessly access it via a different one.
Centralised and decentralised apps may feel similar to one another, but as a user, you access them in very different ways. With a centralised version, you’ll get to use it by downloading a copy of the app, from your chosen app store, after which you’ll send and receive data from the company’s server. In the case of a dApp, you pay the developer in cryptocurrency to use the program’s source code, rather than acquiring a copy. This source code is also known as a smart contract. These allow users to complete transactions without divulging personal information, whereas traditional apps often require some level of data from their users.
5 Advantages that dApps Provide
dApps come with compelling features that set them apart from regular apps. The blockchain technology that supports it, along with its ethos of being open-source opens up a host of exciting new possibilities.
1. Blockchain, Smart Contracts, and Cryptocurrency
Because they are built using smart contracts, it’s easy to integrate cryptocurrencies into a dApps' core functions.
2. Zero Downtime
By relying on P2P network dApps can continue to function even when individual computers are down or if parts of the network go offline.
3. Resistant to Censorship
Blockchain technology allows dApp users to bypass a central authority when they make transactions. Consequently, governments and powerful companies can’t easily control or censor this type of network.
4. Open Source and Democratic
Being open-source has a democratising effect and encourages contribution from anywhere. This is a great source of innovation since it enables developers to improve their apps with new and interesting functions.
dApps are built on a shared database, with data being copied and stored across many different nodes. Therefore, if a data breach should occur (which is highly unlikely) then a single corrupted node won’t take down the entire system, since it still allows the company to access its critical data.
4 Disadvantages of dApps
While dApps offer an exciting alternative to centralised apps, they also have distinct downsides. It’s important to remember that the technology is relatively new and there are bound to be some teething problems.
1. The Network Effect
DApps typically operate at their best when they reach a certain user threshold. The more users they have, the more effective the network will be at delivering its services. You may have heard this referred to as the network effect. When dApps have a low user count, it affects their interactivity. It also risks making them less secure, since a dApp’s security usually relies on the number of users it has.
2. User Interface and Usability
Many dApps suffer from poor usability, which can be pretty disheartening for its users. However, there are some encouraging signs that this will improve as the technology evolves. Teams behind DApps are putting considerable effort into user experience as well as the user's journey on the app.
3. Code Modifications Can Be Challenging
After a dApp is launched, it will still need ongoing changes and modifications to address things like security risks, bugs in the system, and making general enhancements. According to Ethereum however, data and code published to the blockchain are difficult to modify, which makes it tough for developers to do necessary updates.
4. Potential Scaling problems
DApps are still in the early use stages. It’s experimental and prone to particular issues and unknown scenarios. We currently aren’t sure whether dApps will be able to scale well, especially in situations where the network could get overloaded and cause network congestion.
A Hybrid Approach to Apps
Many "DApps" will take a hybrid approach. This is where there is still some form of centralisation within the platform. There are numerous benefits to this and we're seeing more hybrid approaches rather than full-on decentralised approaches.
The centralised part is the interface provided by the company behind the application. The company provides a server that is almost a translator between the client and the blockchain itself. It's centralised because the company essentially provides and builds the platform whereby transactions and actions are linked to the blockchain - making it easier for those interested to use blockchain technology.
The decentralised part is the platform/interface that is provided by the blockchain itself.
For example, Momint makes use of a hybrid system, and here's why:
- The blockchain is the transactional database for digital assets
- Momint as a platform protects newer users from private key theft and have the power to refund buyers who purchased fraudulent work
- There is higher accountability when things don't work
- Decision-making can be made faster
What Kind of DApps Are Out There?
If you're interested in exploring this growing world, then you should check out State Of The Dapps. It’s a website that features over 2,000 dApps that are built on networks like Ethereum, Tron, EOS, and NEO. It will give you a good overview of the types of dApps being developed, along with what is doing well on the market.
Currently, some of the most popular dApps are decentralised crypto exchanges like MakerDAO and Uniswap — two of the most highly rated dApps out there. Other examples include dApps that are focused on open worlds and property sales, like Decentraland, or NFT play-to-earn games like dAppy Doge, or CryptoKitties, a dApp game that allows users to buy and sell virtual cats.
Since dApps are built on smart contracts, it’s easier to integrate cryptocurrencies into its core functions than with regular apps, making it a natural choice for crypto-based projects.
The Future of DApps
The dApp market is expected to grow exponentially in the coming years. In 2019 the dApp market size was valued at USD 10.52 Billion. In 2027 the market is expected to reach a staggering USD 368.25 Billion. We already saw a huge uptick in 2020 when a wave of new decentralised apps led to the broader adoption of blockchain technology in a variety of sectors.
As blockchain technology continues to make advancements, dApps are expected to play a larger role in daily living, like reducing costs and eliminating third parties from our business transactions.
Historically people have often reacted to new technology with skepticism, but we shouldn’t make the mistake of comparing a new technology with something that’s been developed and fine-tuned for decades. We’ve only begun to see the many ways that people can use dApps. And while the technology is still in its infancy, it’s already proven its usefulness.
dApps might not be expected to replace centralised apps entirely, but they have the potential to transform how we use the internet while also co-existing with the traditional apps that have populated our smartphones for years. We’re excited to see how dApps will shape the online landscape in the coming years.