By: Sameer Zubairi | 4 min read | 11/12/2018

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

  1. 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.
  2. 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.

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