What are dApps (decentralized apps)
Decentralized applications, or dApps for short, are blockchain-based applications that allow you to carry out financial transactions without intermediaries. Their functionality is similar to ordinary applications and offers similar functions, but they have a key difference – they run in a peer-to-peer network. There are a few more requirements for dApps: transparency and public availability of all transactions, open source code, and using a cryptographic token to ensure network security. However, some applications do not meet all the requirements or even none.
How decentralized applications are created
Decentralized applications (dApps) have come a long way and have become an essential part of the blockchain industry. Created initially to eliminate intermediaries from financial transactions, dApps have found applications in various areas, from cryptocurrencies, identity, gaming, and prediction markets to asset tracking and the implementation of advanced business models.
dApps based on a peer-to-peer (P2P) blockchain network have the main advantages of the technology – data immutability, transparency, security, and reliability. Unlike typical applications, dApps do not depend on a single centralized server but use the redundant power of thousands of computers worldwide to store data, create smart contracts, or work with derivative tokens.
According to Dapp.com, by the end of 2019, about 3,000 decentralized applications were released on different platforms, which more than 150,000 people used daily, making more than 2 million transactions. Thanks to the innovative open source dApp software ecosystem, developers have created secure and sustainable online tools in high demand in global business markets.
The first implementation of a decentralized application was bitcoin, allowing any user to download a piece of network code to connect to the blockchain and mine cryptocurrency. The main feature of dApp is a distributed structure that provides flexibility and stability. As with RAID arrays, if one of the computers (nodes) fails, the others immediately resume the task.
Another advantage of dApps is the interaction with smart contracts, which allows you to automate many business processes and significantly reduce administrative costs. While blockchain provides immutable data storage and transaction verification, intelligent contracts perform predetermined functions.
The scope of decentralized applications is almost limitless. These include digital asset exchange (LBank), gambling (PokerKing), online games (Cryptokitties), auctions (Auctionity), and prediction markets (Betfair). Also, dApps are used by small and large businesses to track product supply chains and carry out international financial transactions without intermediaries such as central banks or clearing houses.
- No downtime in work, even if some of the nodes fail
- High resistance to censorship
- Open source, which helps developers create new and better applications based on the code of existing ones
- The functionality is not inferior to conventional applications, but all actions have a decentralized basis
- Easy integration of cryptocurrencies into protocols
- A beginner needs time to get comfortable using dApps, and you need to select and create a cryptocurrency wallet, then connect using it. There is no regular registration process
- Frequent hacks are a weakness of open source. Hackers have the opportunity to examine the code in detail and look for vulnerabilities
Top 10 Blockchain-based decentralized apps
SmartContract, the developer of ChainLink, initially focused on optimizing smart contracts. Considering that the scope of their application has long gone beyond the cryptocurrency industry, the problem of the technical compatibility of blockchain technology with the data transfer methods used by modern organizations has become especially relevant.
ChainLink is a secure middleware or so-called “oracles” that enable decentralized data exchange between contracting parties. Simply put, ChainLink technology allows you to implement specific smart contracts with access to third-party data sources, including APIs, financial transactions, asset prices, loan or interest information, insurance terms, GPS data, and more. The application is so promising that Google has begun testing it as a proxy for its BigQuery platform data store.
Oracle can be used as a database or other source that feeds traditional business information into a smart contract running on a blockchain ledger. Chainlink is also responsible for selecting oracles that meet the contract’s requirements, relying on the same consensus algorithms used in blockchains to reach an agreement on the validity of transactions.
The work of smart contracts is based on the processing and analysis of several input data. Chainlink can connect to any API to verify money transfers from a bank or other financial market participants, such as Visa or PayPal. The advantage of oracles is that they allow smart contracts to interact directly with any systems outside the blockchain (or DLT) they run on.
Brave has abandoned the user activity tracking mechanism and intrusive targeted advertising, unlike other browsers. The open-source dApp allows key players in the advertising ecosystem, such as publishers, advertisers, and readers, to participate directly in the new business model. Users decide what sensitive data they are willing to disclose. In addition, for viewing ads, readers are rewarded in BAT functional tokens or bitcoins. Brave uses the “Brave Payments” system to encourage publishers, where users can set the number of donations to support the sites they visit.
A list of the best dApps would be incomplete without a gaming app. This time, the choice fell on EOS Dynasty, which boasts around 12,000 unique daily users and claims to be the first blockchain-based player-versus-player (PvP) RPG.
EOS Dynasty is a remake of the famous game EOS Knights with a new storyline. Users can create up to three warriors and fight in battles, increasing their strength and abilities by collecting various items and selecting equipment and animals for movements, such as horses, tigers, turtles, and others.
Players receive limited-edition Three Kingdoms (TKT) tokens based on smart contracts for specific achievements. TKT is awarded for trading items, winning on the battlefield, completing various tasks, and fighting in PvP.
MakerDAO is one of the most popular decentralized applications and an established lending platform in the crypto space. It runs on the Ethereum blockchain and uses the Dai stablecoin, which is pegged to the US dollar. In addition, the company provides the stability of its cryptocurrency with ETH and uses it as collateral for a loan.
Users of the MakerDAO platform can apply for a loan by locking a certain amount of ETH as collateral and, in return, receive Dai and dispose of it at their discretion.
The maximum loan amount is calculated considering the collateral’s value. Users have access to 66% of the ETH market price. MakerDAO takes a percentage for its services – the so-called stability fee, which is charged in MKR tokens.
In the event of a default or non-repayment of the loan after the due date, ETH collateral is sold at a public auction at a 3% discount.
Chainyard, a blockchain consulting company, aims to solve the problems of supplier data management systems, such as slow speed, inefficiency, and inability to adapt to new requirements. In collaboration with IBM, the company has created a new Trust Your Supplier (TYS) blockchain network designed to register suppliers, improve the quality of their verification and manage the data lifecycle. In addition, the service allows you to reduce the time and material costs of these operations significantly.
Most existing management systems use manual labor and outdated technologies and tools. Email, spreadsheets, and text documents are still used to verify identity and track ISO certificates, bank account information, and tax and insurance records.
In TYS, each supplier’s digital passport is created for identification in the blockchain. Through the app, eligible buyers can access verified supplier information and include them in their supply chain.
Regarding fundraising for charity, the first questions are transparency and traceability. Startup AID:Tech has partnered with the Irish Red Cross to develop the TRACEDonate app for distributing international aid via the blockchain.
The platform allows you to directly connect charitable organizations and individuals with beneficiaries, ensuring the security and transparency of cross-border transfers. Users of the application have access to complete information about what their donations are used for and can also track the history of their contributions. The developers hope that thanks to TRACEDonate, philanthropists will be sure that their funds are used for their intended purpose by those who need them.
The blockchain is used to identify the charitable organization and individuals to whom the donation is intended. The registry also stores information about all transactions and amounts. Moreover, donors can indicate where the money should go, whether it be medical care, food, or the purchase of basic necessities.
Like other similar applications, Circulor is designed to track the supply chain. In this case, dApp allows you to control the quality of the sources of raw materials used in the production of electronics and electric vehicles.
The Circulor blockchain platform enables all participants in the chain to receive data on the origin of raw materials, manage payments, and exchange reliable information. In addition, the company offers many additional features that make Circulor promising for other applications.
Cipher, created by Avanza Innovations, is a middleware that powers four blockchain applications for government agencies and regulators worldwide, including a reconciliation and settlement network, loyalty program tokenization, a purchase payment network, and a document exchange and compliance network for banks. And their clients.
The main areas of Cipher blockchain solutions are the transformation of digital government services, financial regulation, and supervision. The company works with Dubai law firms, including Smart Dubai, the Ministry of Finance, the Electricity and Water Authority, the Knowledge and Human Development Authority, Emirates NBD Bank, and Network International.
The KYC-Chain application is used by businesses to verify the identity of the customer and simplify the onboarding process for Know Your Customer (KYC) compliance. The app allows you to check individuals and corporate and institutional business customers for illegal activity in real-time using a partner database of sanctions and lists of suspicious persons, covering more than 240 countries.
KYC-Chain uses an independent dApp from partner company SelfKey, which allows users to store their own certified identities on the blockchain and control access using public keys.
Also, with the help of KYC-Chain, users can pay for ten services, such as checks of accredited investors, verification of cryptocurrency funds, identification data, and authentication of documents. In addition, the service allows you to check the clients’ spending on cryptocurrencies and the presence of known risk indicators.
Based on the Hyperledger Fabric business platform, DLT.sg includes a series of enterprise-grade blockchain dApp modules focused on supply chain and counterfeit recognition technologies. DLT.sg is designed to be shared between large organizations in the e-commerce sector. The app provides trade finance, traces product supply chains, and provides a model for unlocking inventory and freeing up cash.
For example, the SKR module aims to eliminate Pharma counterfeiting by tracking the origin of products throughout the manufacturing process. Another SmartFIN module is an application that helps finance trade between multinational corporations, commodity traders, and banks. It creates an online permission ledger through which corporations can securely interact with their financial institutions in negotiations on trade finance, bonds, guarantees, and risk mitigation.
Compared to traditional ones, decentralized applications are still in the early stages of development. However, there are already thousands of such services offering many services. This has been a significant breakthrough since the inception of Bitcoin when the cryptocurrency was perceived only as a medium of exchange. Smart contracts, which gained popularity with the advent of Ethereum, really changed the industry and pointed the way forward. Using these tools, developers create applications with various use cases, from games and prediction markets to financial and investment portfolio planning.