The concept of the decentralized application is still in its fancy, so there might not be a single definition for it, but you can familiarize yourself with DApps in different ways.
Decentralized applications have been in existence since the advent of P2P networks. The idea behind designing DApps was to have a software program available on the internet that would not be controlled by any single entity.
These apps run on a P2P network of computers, instead of a single computer. These are designed to exist on the internet in a way that is not controlled by a separate entity. The traditional DApps like BitTorrent, Tor, Bitmessage and many others did not run on top of a blockchain network but required a specific kind of P2P network. However, today, the decentralized applications work like a blockchain enabled website, where Smart Contract allows it to connect to the blockchain.
Features of DApps
An application can be considered as a DApp in context to blockchain only if it meets the following criteria.
- An app must be able to operate independently, and no entity should control the majority of its feature/tokens. It should be able to acclimate its protocol as per market feedback and suggested improvements. At the same time, the consensus of its users must decide all the changes, thus making it open source.
- According to a standard cryptographic algorithm, the application must generate tokens as a proof of value. For instance, bitcoin uses proof-of-work algorithm.
- The application should use cryptographic tokens only. This is essential for gaining access to the application. In addition to this, any value added by the miners should be rewarded in the form of application tokens.
- All the data and records of the application must be stored cryptographically in a decentralized & public blockchain to avoid any failures or tampering.
Difference between Traditional Apps Vs. Decentralized Apps
A traditional web application utilizes Java, CSS, and HTML for rendering a page and grabs details from a database using an API. If a user opens a Facebook page, it calls an API to get all the personal data and makes it visible to the user. So, for a traditional website, front end connects API and API connects Database.
Front End → API → Database
In a DApp enabled web application, front end uses the same technology for rendering the page. However, instead of an API, Smart Contracts comes into the picture and connects to a blockchain. So, for a DApp enabled website front end connects Smart Contracts, and Smart Contracts connect Blockchain.
Front End → Smart Contract → Blockchain
DApps can be classified into three types:
- Type 1: Just like Bitcoin, type 1 DApps have their blockchain. For example, Factom and Siacoin are both private blockchains and type 1 DApps.
- Type 2: Type 2 DApps are protocols and need tokens, to function correctly. These DApps use the blockchain of type 1 DApps. For example, Omni protocol, Augur, Golem, Storj, and Counterparty. Augur, Golem, and Storj are Ethereum’s blockchain, and Counterparty is a Bitcoin’s blockchain.
- Type 3: These DApps use the blockchain of type 2 DApps. For example, SAFE Network is a decentralized data storage, communications network, and Bitcoin’s blockchain. It uses Omni protocol for issuing SAFEcoins that help build distributed file storage.
Ethereum creates a protocol for developing decentralized applications. It provides a blockchain with a built-in Turing programming language called Solidity that allows any developer to write Smart Contracts with ease. Ethereum also offers decentralized applications where developers can create their own rules and transaction formats. There are three types of applications on top of Ethereum, namely governance apps, financial apps and semi-financial apps.
Examples of Ethereum based DApps
Ethereum based DApps have colossal popularity and have already reached a million-dollar market cap, including Augur, Golems, and Melonport. These projects aspire to rewire the economy using blockchain technology, thus moving a step closer to the decentralized world.
Augur: This project combines the decentralized network with the prediction market and creates a forecasting tool for trading gains. It stands on the market cap of $200 million but is currently under beta test.
Golem: This is the first global project for idle computer power, which stands at a massive market cap of $220 million. Its first version, Brass Golem is awaiting its release and will be tested on its capability to tackle CGI rendering. If this project becomes a success, frictionless sharing and pooling of resources will create a sensation in the digital space.
Melonport: This is a blockchain protocol for digital asset management. It allows people to invest in digital asset management strategies competitively and openly. Blockchain technology helps reduce time and cost drastically in Melonport. The auditable and transparent track record enables a never-seen-before competitive environment in asset management.
DApps are successfully applying blockchain technology to its niche, thus making it a massive revolution in the digital space. You can also become a part of it. All you need to do is create a whitepaper, gain a following, initiate a crowd sale and welcome new developers to begin development.