Numerous decentralized application projects (DApps) have emerged over the last two years. Thus, the creation of DApps is one of the most widespread use cases of blockchains and leads us to reflect, beyond the technical aspects, on the potential of an economy without trusted third parties. To better understand the potential of DApps, it is important to understand how they work and their added value.
Definition of a DApp
A decentralized application, or “DApp” (pronounced Dee-app), is an application developed according to the standards of distributed consensus protocols, such as Bitcoin, Ethereum, EOS, or even Stellar, NEO or Cardano. As a result, these applications are deployed on blockchains and shared across large global peer-to-peer networks. Unlike traditional applications running on a central unit, local or remote, DApps are both more transparent in their operation, more robust and above all impossible to stop or censor. DApps aim to eliminate the intermediaries who are omnipresent in our “intermediated” economy, and to improve the traceability and transparency of the information collected.
There are many different DApps, but we can distinguish 4 main characteristics of DApps:
- They are open source.
- They work autonomously, without the help of a central entity, thanks to a consensus mechanism providing the proof of the value exchanged on the network. Consensus also allows each application change to be decided by consulting all the nodes in the network.
- They operate on a blockchain or any other decentralized public register in order to make the history of transactions accessible to all.
- They are designed around incentive-based crypto-economic models, most often through the creation and exchange of a cryptocurrency. This crypto currency is generally necessary to use the services of the application, but also and above all to reward all the people contributing to the security and development of the DApp. It is this alignment of the economic interests of all the DApp’s users around a cryptocurrency that allows the DApp to function autonomously and decentralized. This may seem incredible, or incomprehensible, yet it is the case. At the end of this article, we give some concrete examples of DApps to shed some light on this.
The creation of a DApp usually follows several steps. After several months or years of work, a team usually publishes a white paper describing all the characteristics of the project: concept of the application, added value, technical characteristics, governance model, compensation criteria, marketing strategy…
The white paper includes the business plan, but also the business model of the DApp. The purpose of the whitepaper is to present the project to the whole community, but also to convince potential investors to participate in the fundraising to plan the launch of the application (ICO, or Initial Coin Offering). However, the ICO is not a mandatory step in the launch of a DApp, and a team can just as easily have a finished product without needing the cash from an ICO.
After the DApp has been launched, valuable tokens specific to the application are distributed according to the degree of contribution of the ICO participants (if there was an ICO) and then exchanged by the DApp users according to the terms of the DApp.
The different types of DApp
From a technical point of view, even if any categorization exercise is always arbitrary, we can consider that there are three types of DApp:
- Those that have their own blockchain (type 1). We can thus consider that Bitcoin is a form of decentralized application, even if it is more correct to speak of a decentralized monetary protocol. The same is true of the various alternatives to Bitcoin that have their own mainnet. Examples include TRON, a decentralized entertainment platform, and the blockchain-based Steemit, a decentralized social network.
- Decentralized applications using the blockchain of a Type 1 DApp (Type 2):
- This can be a protocol. These protocols use tokens for their operation. One thinks in particular of the Omni protocol on the Bitcoin blockchain, or 0x on the Ethereum platform.
- It can also be decentralized exchange platforms using smart contract technology, such as the Ethereum-based platforms, or side chain technology, such as the future applications on Lisk or Ark.
- Applications at an even higher level of development that use type 2 DApp protocols.
From a functional point of view, we can think of other categorizations:
- Many decentralized applications consist of pure asset value exchange (monetary or financial): Bitcoin, Litecoin, Decred…
- Other DApps use oracles to operate with data outside the chain evolving in real time: this is for example the case of smart grids to allow the exchange of energy resources.
- Finally, others are true DAOs (Decentralized Autonomous Organizations), and function like companies without any leader needing to intervene: “Code is Law”, and the DAO automatically takes the decisions provided for in its code.
What is the purpose of a DApp?
The main added value of a DApp is to provide a service to its users without ever having to go through a trusted third party. The banking sector was the first to be targeted when Bitcoin was created in 2008, in a context of general mistrust of banks.
A fortiori, the desire to eliminate intermediaries has spread to other economic actors. Uber, Deliveroo, Airbnb and Amazon have shown the ethical limits of a platform economy that claims to be collaborative while considerably limiting the sharing of wealth in their organizational model.
Fairer, but also much more transparent, the decentralized platform connects the different users of a network willing to operate in peer-to-peer, removing not only the commission fees of the trusted third party, but also confiscating its power and putting it in the hands of the users.
Examples of DApps
There are many examples of decentralized applications in various fields:
- Payment DApps: OmiseGo
- Decentralized cloud platforms: Storj, iExec, Siacoin
- Decentralized exchange platforms: Bancor, EtherDelta, iDex
- Predictive market platforms: Augur, Stox
- Decentralized online voting DApps: Followmyvote, Boulé
- Social networking or entertainment platforms: TRON, Decent, Steemit
- Games on blockchain: CryptoKitties, Etheremon
- Crowdfunding platforms: KickICO, Weifund
- Decentralized marketplaces: OpenBazaar
- You will find an extensive list, although not exhaustive, of existing DApps on Stateofthedapps.
- Enkronos DApps: Smart Contract & Enkronos dApps
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