Over a decade ago, when Bitcoin was created, people were amazed by blockchain-based virtual money that allowed you greater control over your own finances. When Ethereum came along, a yet more wonderful concept came into play- that of a decentralized application.
So what are decentralized applications? DApps are software programs that exist and run on blockchain networks. They provide a range of financial and other products and services without any central authorities watching over them.
If you are new to the blockchain space, ‘what are decentralized applications?’ is a question you still may have. Let’s find what are DApps in blockchain, types of DApps, and yet more in this post, shall we?
What are DApps in Blockchain?
‘DApp’ stands for decentralized application, as we know. It’s a type of software that runs on a blockchain network instead of a single computer server. This means that a DApp has its own code, data, and storage that’s not controlled by any central authority.
Decentralized apps are a relatively new concept that is based on blockchain technology. Blockchain is a digital ledger that records and stores transactions in “blocks” that are linked together through cryptography, creating a secure and tamper-proof chain of records.
The concept of DApps is still in its early stages and it is not yet clear what the full potential of this technology is. DApps also have the ability to create trustless environments, meaning that the participants in the DApp do not need to trust each other to use the application. Additionally, DApps are transparent, meaning that all transactions and interactions are recorded on the blockchain and can be viewed by anyone.
Furthermore, types of DApps can be used in various industries and fields, such as finance, gaming, social media, and more. They have the potential to disrupt traditional business models and enable new ways of working and interacting.
Following the rule of blockchains, DApps run on many different computers worldwide, making a DApp harder to hack or shut down than traditional apps. The main difference between DApps and traditional applications is that they can run without any third parties involved! This means very low fees, no censorship, no central point of failure, and more flexibility than you can imagine.
However, it is important to note that the development and adoption of DApps is still in its early stages and there are still many challenges to be addressed before they become mainstream.
How Does a DApp Work?
Now that we know ‘what are decentralized applications?’, let’s find out how the many types of DApps work. DApps work by using blockchain technology, and therefore they follow a blockchain’s way of functioning. For the uninitiated, a blockchain is an encrypted database that stores information about transactions. Each transaction is stored in blocks linked together chronologically in a chain (hence the name). This creates an immutable ledger of all transactions on the platform, meaning that no one can tamper with any part of it without leaving evidence behind.
A DApp has specific characteristics that define its functionality. These include being open source, decentralized, utilizing rewards, and having a specific protocol.
Open source means that the code base of the DApp is available for anyone to review and that changes to the application are determined by the consensus of the majority of users.
Decentralization means that all operational records of the DApp are stored on a public and decentralized ledger, such as a blockchain, to ensure that control does not fall into the hands of a centralized authority.
Rewards are given to validators within the blockchain who invest work, such as computing power and electricity, to verify transactions and add blocks to the chain. These rewards are usually in the form of cryptographic tokens.
A specific protocol is also necessary, where the community around the DApp agrees on a cryptographic algorithm to achieve consensus. Examples of this include Bitcoin and Ethereum, which use Proof of Work and Proof of Stake.
Bitcoin is often considered as the first decentralized app as it implements all of these characteristics. It is an open-source software that runs on a decentralized blockchain and utilizes tokens that are generated using a specific protocol. This allows for efficient transactions without intermediaries and a centralized controlling entity.
Whatever services a DApp provides, it does so by facilitating P2P (peer-to-peer) communications between service providers and users through blockchains.