By: Sameer Zubairi | 6 min read | 11/12/2018

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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