You know how your phone can have a bunch of different applications. There’s Facebook, Instagram, Gmail, and youtube. They’re basically applications that run code that was created by the company so that you can communicate with their company.
Well, a dApp or decentralized application is very similar in how it works except instead of reporting back to TikTok servers or Facebook servers, this app reports back to the blockchain. You’re simply interacting with the blockchain through the application
Benefits of Dapps
The first thing you need to know is that dapps can only be built on smart contract networks. This means a blockchain like bitcoin cannot utilize dapps. Bitcoin was designed to only allow the sending of its native coin. Ethereum, however, can utilize something called smart contracts which is code that makes up a program so it can be run to do more complicated things. In short, they allow two people to make an agreement written in code so that they don’t have to trust a third party to follow through. They can simply just trust the code.
Another benefit is that since the code is out there to be run, it is what we call open source which means anyone can look at the code. This allows a lot more trust to be given to the application. We can't really look at Facebook recommends us friends to interact with or how google knows what we ate for dinner but with any smart contract, we can actually look at the code and see how it works. This is a big benefit over centralized applications.
Next dapps are also censorship-resistant. This is a fancy way of saying they don’t have to answer to governments or corporations or even specific people. If the smart contract is coded to do something and it's triggered nobody can stop it. Naturally, this is good and bad.
But it’s really important for financial applications. This way no one can control your money. In history, governments that have done a lot of bad things have had control of their citizen’s money. There have also been cases where Facebook and Twitter can actually ban or censor certain people based on their views or opinions. A decentralized application will not allow this unless it’s written to.
Another big benefit of decentralized applications is that they will essentially never go offline. Now there are times when we’ve seen Facebook or youtube down– maybe their servers have a bug or there’s an outage or they simply just do not work. Since dapps run on the blockchain, they will actually never go down because they are run by hundreds of thousands of computers all around the world. It would be infeasible to turn them all off if not impossible.
Examples of Dapps
1. DEFI Financial Dapps
There are actually several dapps that provide a way for people to invest in something called decentralized finance. DEFI is a new monetary protocol that uses blockchain to allow investors to do new things with their money with a ton of new benefits.
One of the ways a Dapp may use your money is borrowing and lending. So AAVE is a platform that allows its users to deposit their Ethereum or matic tokens to certain smart contracts. Whenever you deposit these coins and tokens you can actually receive an interest rate on them allowing you to basically invest with them. AAVE also lets you borrow tokens. Basically, if you have enough collateral already deposited, this allows you to borrow at different interest rates and even create specific margin positions.
2. Game Dapps
One example of game dapps is cryptokitties. It is a decentralized application that allows you to buy these little cute kittens. Technically what you are buying is the NFT data of rights to that certain token that represents the kitty. However, the fun part of this game is that you can actually collect a bunch of these kittens and even breed them to create more kittens.
In the community, the older generation kittens are usually the most valuable and you can actually sell them for a profit or maybe sometimes a loss if you play the game long enough. Even more so, you can rent out your kitten to breed with someone else’s kitten as a strange form of passive income on the blockchain.
3. Tracking apps
So there are actually many applications out there that read smart contract data and information from the blockchain to display it to you. Technically, these are decentralized applications but they’re usually centralized and hosted on a single web server and in most cases, don't require the blockchain-specific code to work. However, they do read the data from the blockchain.
Zapper.fi is actually an application that collects information about the wallets that you have and then displays it all on one page. Not only will it look at all the major dapps out there and find out how much money or coins you have, but it’ll also do it for many different networks as well. Zapper.fi is free to use and you can actually see a dashboard of your entire blockchain portfolio in one place.
Conclusion
This space is incredibly new and there are new dapps being built every day. In fact, blockchain developers are one of the highest-paying jobs simply because there is so much money being poured into this space. It has a lot of potential for positive growth.
Written by- Anika Sharma
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