Decentralized apps are the building blocks of the cryptocurrency industry. They offer various use cases from gaming to decentralized finance (DeFi). That is why it’s imperative to understand this novel technology.
In this article, I will be covering all aspects of decentralized applications. So without further ado, let’s jump right in.
Decentralized apps are digital applications built on the blockchain. They combine smart contracts with a user interface. Moreover, these applications are secured by a decentralized network of computers known as nodes.
What are decentralized apps (DApps)?
Decentralized apps or DApps for short, are a type of open source software that is secured by a decentralized network of computers.
Essentially, Dapps facilitate the interaction between users and the blockchain. This is done automatically via smart contracts and the process is completely transparent.
Thanks to blockchain technology anyone can verify the DApp information including the code and transaction history. Moreover, they are permissionless meaning anyone can access and utilize them.
Benefits of Dapps
Decentralization – as DApps are secured by a vast network of computers they are free from the control of intermediaries. Ultimately, there is not a single point of failure and it also makes them censorship resistant. Moreover, they are permissionless which allows anyone to interact with them.
Distributed ownership & control – in most cases ownership of the decentralized applications is dispersed within the community via tokens. These tokens allow users to vote on proposals that shape the development of the project. This creates a more democratic system when compared to centralized applications.
Transparency – as mentioned previously, the use of blockchain technology creates a completely transparent system. In essence, blockchains are distributed ledgers. You can think of them as online databases that store all the smart contract information.
This includes wallet addresses, timestamps, and transaction history to name a few. This has several benefits including the ability to verify the information and check for any malicious activity.
Data integrity – one of the key benefits of blockchain technology is that transactions cannot be deleted or changed. The system is immutable which leads to complete data integrity. In other words, it creates an honest system that is free from manipulation.
Privacy – private information is not required to interact with decentralized applications. Unlike traditional applications, there is no application process and KYC requirements.
Disadvantages of Dapps
Slow upgrades – as updates are determined by community votes and majority consensus this slows the process down considerably. With traditional centralized applications, companies can update them at a moment’s notice. However, with DApps they require a voting process for each upgrade.
Network congestion – blockchain technology is difficult to scale. Querying the data slows down the network considerably.
For instance, Ethereum handles just 14 transactions per second, while Twitter can handle over 140,000 tweets per second. Consequently, unconfirmed transactions can add up considerably if they exceed the capacity of the blockchain.
Usability – the user interface of DApps is considerably worse than its centralized counterparts. Engineering the UI for decentralized applications is considerably harder.
Moreover, there are considerable hurdles to interacting with them on the user side. For instance, hardware wallets are often required with complex alphanumeric addresses. This creates a more arduous experience for users.
Security – there is no denying that DApp security is one of its greatest detriments. For instance, the network can be taken down by a DDoS attack.
In essence, this method involves spamming the network with a large number of transactions. This causes overwhelming congestion that the network cannot handle.
Not to mention the unprecedented amount of hacks. From phishing scams to smart contract exploits they are endless. This is why it’s imperative to use a cold wallet to protect against them. The cold wallet I recommend is the ledger nano X. You can check out my review by clicking here.
DApp use cases
Decentralized finance – this is the most popular use case for DApps and rightfully so. In essence, decentralized finance applications offer various financial services, from lending and borrowing to margin trading.
Similar to other Dapps, this is done in a decentralized fashion. Anyone can participate and there is no middleman. This creates a system with lower fees, self-custody and it removes the application process for financial services.
Gaming – although in its infancy, gaming DApps have become increasingly prominent in recent years. The main benefit of this novel technology is the incorporation of NFTs. This allows users to have full control of their digital assets.
For instance, they can be traded on the open market and transferred from one game to another. Moreover, they can act as digital passports granting access to exclusive metaverses. The possibilities of DApps in the gaming sphere are limitless.
How do centralized apps differ?
Simply put, centralized applications are controlled by a single entity. They are secured by servers operated by a company. For instance, the app Twitter is owned and operated by Twitter inc. They have complete control of the backend operations and the rules that govern the platform.
Best DApp browsers
So now that you understand some of the benefits that DApps offer, you are probably wondering how to access them. This is where DApp browsers come into play. They act as a bridge between users and decentralized applications. In this section I will be going over the best DApp browsers:
Metamask – this is the one of most popular DApp browsers with over 25 million monthly users. It features an intuitive wallet that allows users to send and receive various cryptocurrencies.
It is also available on google chrome and Firefox as an extension allowing easy access. Moreover, all of the major NFT marketplaces and DeFi applications support Metamask. If you are looking for a reputable crypto wallet then Metmask is your bet.
Brave – this DApp is an open-source search engine. With over 20 million monthly users it is a major player in the space. The main benefits of this browser are the built-in ad blocker and advanced privacy features.
Not to mention, it features decentralized file storage that minimizes data exploitation by dispersing the data over a vast network.
Lastly, with Brave browser users get paid in the Brave token as compensation for viewing ads. Therefore, Brave browser is a great choice for users looking for security and a passive income stream.
Coinbase wallet – similar to Metamask this is another great DApp wallet. Coinbase wallet has institutional backing with enhanced security features in the form of AES-256 military-grade encryption.
Not only that, but it has a built-in DApp browser so that you can interact with applications directly from the wallet. With support for over 450 tokens its compatible with all of the major DApp applications
Lastly, users who want a centralized alternative can delegate custody to Coinbase. This comes with the added benefit of insurance and removes the need for managing private keys.
Overall, Decentralized applications are a key component of the cryptocurrency space. They allow complete control of assets while being secure with great data integrity. However, they are not without their challenges. DApps are notoriously hard to develop on and hacks are rife in the space.
But despite all of this I am optimistic about the space. The technology continues to develop with the likes of DeFi and this will only get better in the future. I hope you found this article useful and thanks for reading.
Want to learn about crypto index funds? Click here to read my previous article.