Decentralized Applications (Dapps) were the defining feature that separated the second generation blockchains from the first. They now have become an integral part of the ecosystem. Any project launching in 2020 without decentralized applications support would not be taken seriously by the community.
The first generation Blockchains such as Bitcoin, Litecoin, and others were pure payment networks. The original decentralized ledger was meant only to record transactions of amounts sent and received using the native coins of the protocol. The simplicity of their design was meant to increase the security of the network and prevent attacks by malicious actors. This blockchain as conceived originally by Satoshi Nakamoto was a great success, and to this day Bitcoin remains the most valuable crypto asset.
In those early days of the blockchain, few imagined that this decentralized network could do other things. Sure, the BTC network was and can execute rudimentary scripts, but nothing complicated. All the limitations were placed so that the protocol could have the least amount of exploits that could be used for attacks. It worked, and the BTC blockchain has never been hacked.
The next innovation is blockchain came with the introduction of smart contracts by the Ethereum protocol. These are short self-verifying programs written in a high-level computer language. The most popular language right now is Solidity, but there are other options such as Vyper. These smart contracts are deployed directly on top of the blockchain and can execute the business logic to transfer value.
Of course, smart contracts on their own are not very useful. They are rather abstract pieces of media, and to use them one needs to interact with a command line. This is a tall order for most users, so a better way had to be designed. This resulted in the Dapp and it has become the most used feature of the blockchain since 2015. Let's take a closer look.
What are Decentralized applications (Dapps)? How do they work?
Source: HackerNoon
In short Decentralized Applications (Dapps) are applications that run on top of a distributed network. In most cases, this network is using the blockchain as a data structure. As we said before, the smart contract is a rather difficult thing to use by itself. So, it needs to connect to some sort of front end. At this level, the front end will call functions in the contract and interact with the blockchain.
The front end could be a web or mobile interface designed to be easy to use by the general public. From there, a person would have access to the different properties of the smart contract. This way a person without too much knowledge of programming or blockchain can use it without too much new information.
The feature of a Dapp is that it exists on top of the blockchain, once deployed, no one owns the Dapp. For example, I can access Facebook from my PC, tablet, phone, etc. all these devices are using an application controlled by a single authority on a server. A Dapp, when used, is interacting with the distributed network, where each node is equal, and no one has total control over it. The only thing that dictates the behavior of the Dapp is the logic programmed onto the smart contract.
In conclusion, a Dapp is the marriage of the smart contract, a front end, and sometimes a backend connected to a server to store large sets of data. Once deployed, the Dapp exists on top of the distributed network, and no single party has control over it.
What are some general uses of Dapps:
Management and transfer of cryptocurrencies
The fist Dapps as such were the crypto wallets that allowed users to see their balance and make transactions. A wallet doesn't hold the crypto coins, it is just displaying the balance of the account as written in a block of the blockchain. The wallet is a convenient way to keep track of the money and send it to another address. It is possible to send funds by directly interacting with the blockchain network without using a wallet, but it is not very user-friendly, or intuitive.
Management of business logic
Most smart contracts are the computer language form of a business model. By extension, most Dapps are user-friendly interfaces for the use of said smart contracts. A clear example is Uniswap. The Decentralized Exchange is completely run using smart contracts, but most of us use the front end of the web application when swapping crypto in it.
Dapps are the premier way developers have to bring onboard users for their projects. This is why a good smart contract doesn't always translate to a good product. The user interface and user experience are more crucial to success than the raw code.
What are the most popular Dapps?
To anyone closely following the world of blockchain, it will come as no surprise that the top Dapps are from the DeFi world.
Read DeFi Apps: What you Need to Know (2020) for more detailed explanation about Decentralized Finance.
First and at the top, we have Uniswap on Ethereum. The biggest Decentralized Exchange on the planet is also the most used Dapp out there. It has a daily average of 40 thousand users conducting 200 thousand transactions. There is no sign that this Dapp will slow its growth, so for the foreseabñe future, Uniswap is the champion of blockchain.
Second, we have another DeFi Dapp, Curve Finance, also on Ethereum. No surprise, it is also a Decentralized Exchange, with 2000 users per day, and 10 thousand transactions on average.
Third, and finally a non DeFi Dapp, Crypto Dynasty EOS is a game running on the EOS blockchain. On a daily basis, it has around 2000 users and an impressive 30 thousand transactions.
Dapps have emerged as the key union between the smart contract and user interface. They are bringing thousands of new people into the world of blockchain. In some cases, these newcomers are not even aware they are using the blockchain. The future of the industry lies in the design and deployment of better Dapps.
