What are DApps (Decentralized Applications)? – The Beginner’s Guide

What are DApps

A new breed of applications is being discussed across the world. These types of applications are not owned by anyone, can’t be shut down, and cannot have downtime.

Does this sound crazy?

Such new breeds of applications are named DApps (Decentralized Applications).

But before we discuss DApps, let’s talk about the technology underlying DApps, which is called a “blockchain“.

Bitcoin – the first cryptocurrency – introduced blockchain technology to the world. Bitcoin’s blockchain is a globally distributed ledger which records transactions and is secured cryptographically via a robust consensus mechanism.

But digital currency like Bitcoin, which has decentralized all aspects of money, is only one example of a DApp.

Similarly, other DApps built on blockchain technology have opened up the possibility of a newer and more exciting world.

You might be thinking about what this new world is all about…

Well, this new world is about making everything as decentralized as Bitcoin’s blockchain did for money.

What are DApps?

What are DApps

DApps is pronounced in the same way that Email is, where the ‘D’ in DApps means decentralized (i.e. D-Apps).

It is difficult to summarize DApps in a 1-2 line definition, as an application needs to have a specific set of characteristics in order to qualify as a DApp.

If an app doesn’t meet all of these criteria, then it is not a DApp:

  1. Open Source – Source code of app is available to all.
  2. Decentralized – Uses a blockchain-like cryptographic technology.
  3. Incentive – App has crypto-tokens/digital assets for fueling itself.
  4. Algorithm/Protocol – Generates tokens and has an inbuilt consensus mechanism.

DApps Classification

Based on which blockchain model these DApps use, they are classified into three categories:

Type IType IIType III
These types of DApps have their own blockchain (like Bitcoin).

Other altcoins also fall under this category as well.

These types of DApps use the blockchain of Type I DApps.

 

Type II decentralized applications are protocols and have tokens that are necessary for their function.

The Omni Protocol is an example of Type II decentralized application.

These types of DApps use the protocol of a Type II DApp.

For example, the SAFE network uses the Omni Protocol for issuing SafeCoins that are then used to build distributed file storage.

Now that you know the different classifications, you might start realizing that many of the crypto-projects that out now fall under one of these classifications.

And you are absolutely correct to think so!!

DApps Projects

As you probably know, the world’s two biggest blockchain platforms at present are Bitcoin and Ethereum. Several current apps are built on top of these chains.

On the other hand, some apps choose to build their own blockchain.

Here’s a list of some DApps and what “type” they are:

DApps in ActionDescriptionType of DAppTokenBlockchain
The SAFE
Network
A decentralized data storage and communications networkType IIISafeCoin (SFE)Bitcoin’s Blockchain
AugurA fully open-source and decentralized prediction market platform.Type IIAugur (REP)Ethereum’s Blockchain
FactomA decentralized, unalterable record-keeping systemType IFactom (FCT)Private Blockchain
GolemA decentralized application to make the first global market for idle computer powerType IIGolem (GNT)Ethereum’s Blockchain
SiacoinA fully open-source and decentralized private cloudType ISiacoin (SC)Private Blockchain
StorjA decentralized peer-to-peer protocol to provide the most secure, private, and encrypted cloud storageType IIStorjcoin X (SJCX)Ethereum’s Blockchain
CounterpartyA decentralized financial platform for creating peer-to-peer financial applicationsType IICounterparty (XCP)Bitcoin’s Blockchain

Check out more DApps on Ethereum

How Does A DApp Function?

DApps function by implementing all the four criterion which we discussed in the first section. This means that a DApp is an open-source software platform implemented on decentralized blockchains and are fueled using tokens which are generated using a protocol/algorithm.

Being an open-source application makes it truly decentralized as anyone can see and contribute to the code. It also fastens the process for scalability of product development in terms of both quality and quantity.

Decentralizing the app by using a blockchain is the next step. The blockchain serves as a permanent ledger of records/transactions which anyone can refer to at any time.

And finally, to add records/transactions to such ledgers, tokens are used which are mined or pre-mined using different algorithms/protocols.

At present, popular protocols which are used are proof-of-work (which Bitcoin users) or proof-of-stake (which Dash uses). They are used to reach a consensus or agreement between all the users of that particular DApp.

  • Proof-of-work (POW) entails miners to mine blocks and receive rewards. Because mining blocks and adding them to the chain is an energy consumptive process, this also keeps the blockchain secure.
  • Proof-of-stake (POS) requires holding and staking of tokens in order to become an eligible masternode. This also secures the blockchain and helps in processing transactions.

How To Build A DApp

The process of building decentralized apps is not as straightforward as developing any centralized application or software. It has its sequential steps and time frames.

Step 1: Publish a white paper on the DApp with a “roadmap”.

Publishing a white paper explaining the concept, features, and technicalities of the DApp is important, and is also the very first step. This process will allow feedback to come in from the community, thus making it a true DApp.

If you add the DApp’s “roadmap”, or plan, it becomes a positive selling point. DApps with solid roadmaps are ahead of their peers. That’s why it is essential that if you want your DApp to succeed, you must have a solid roadmap in place in front of the open market.

Also, highlight the capabilities and history of top developers and ideators in your project in order to build trust and reliability among the community.

Step 2: Launch an ICO.

ICOs (initial coin offerings) are the starting points of modern day startups or DApps. In a coin offering, you sell your crypto-coins which will fuel your DApp. These crypto-coins also serve as a way to gather crowdfunding for your project.

Initially, you should announce and explain the aspects of how the ICO of your DApp is going to be. Also, share with the interested community members whether the DApp will be having pre-mined tokens or a mining mechanism in place.

And for building trust, you should highlight how much percentage will go to the development budget, the marketing budget, and other essential allocations. It is important to be transparent with allocations of tokens because most of the DApps projects in the past have ruined their reputation by being not transparent enough.

Step 3: Begin development.

When all is said and done, after procuring the funds and fine-tuning the concept, it’s time to begin development. And once you have begun, it becomes important to share weekly or monthly updates about the development progress to build an inclusive environment for community members.

Step 4: Launch the product.

Launch the product with its detailed release notes and maintenance plans to keep the community involved.

Keep maintaining and modifying it as needed to suit your roadmap, your vision, and your community.

The Essentials Of DApps

Now that you know how to launch a DApp, you can give it a shot.

But what if you’re not a creative genius with a brilliant DApp idea? How can you still participate?

Well, the answer is you can participate in the ICOs of DApps.

What are DApps’ ICOs and Tokens?

Again, ICO means “initial coin offering”. This is where the DApp’s tokens are sold for the very first time in exchange for other currencies (BTC, LTC, ETH, fiat money, etc.).

DApp tokens are crypto-coins made for the purpose of selling in an ICO to fund the product’s development and also for fueling operations of the DApp.

For example, ETH is the “crypto fuel” for running smart contracts on the Ethereum platform.

These tokens are not pegged to any underlying asset, but they are still valuable because of the unique concept and technology backing them. Moreover, the value of the tokens keeps fluctuating based on how much people value the application.

How To Participate In ICOs

If you want to try your hands early on the DApps token, get into an ICO.

Follow the steps below:

  1. Stay Updated – Follow popular crypto and DApps news. Join Slack or Telegram channels of certain ICOs and follow them on Twitter and other social media sites.
  2. Prepare a Wallet – Thoroughly read the ICO details and other technical requirements like which wallet should be used for the ICO. And also check out which currency to buy your tokens in (BTC, ETH, USD, etc.).
  3. Time Factor – Different ICOs list different timings according to different time zones. Check your time zone and be on time. Some ICOs in the past have finished in less than a few minutes, so you have to be really quick and punctual.

But a thing to note is that not all ICOs are worth it. Some ICOs are just scams which only look good on paper.

Analyzing ICOs

So how do you judge whether a DApp’s ICO is a scam or not? Here are a few suggestions:

  • Check whether the DApp is solving some real-life problem.
  • Check the portfolio and history of the development team.
  • Check the whitepaper and look at its technical feasibility.
  • Join forums to check what the technical experts think about the DApp.
  • Check their development roadmap.
  • See if they have a working prototype demo of the DApp.

These are only a few of the preconditions; we suggest you do your research and due diligence before getting into any ICO for a DApp.

Future of DApps

What we are experiencing now is like a sneak peek to a decentralized world which is about to come in full swing.

Even David Johnston, CEO of the DApp Fund, predicts this in his white paper:

“These decentralized applications will someday surpass the world’s largest software corporations in utility, user-base, and network valuation due to their superior incentivization structure, flexibility, transparency, resiliency, and distributed nature.”

To quote “Johnston’s Law”:

Everything that can be decentralized, will be decentralized.

-David A. Johnston

A decentralized future awaits us.

What do you think about the decentralization of applications? Is DApps the future of everything as David Johnston predicts? Let me hear your thoughts in the comments below!

Like this post? Don’t forget to share it!

Further Suggested Readings:

12 thoughts on “What are DApps (Decentralized Applications)? – The Beginner’s Guide”

  1. Great intro to DApps Sudhir. Thanks!
    So if I understand your article correctly, will ripple XRP be the ICO used to fund the application being built to transfer currencies around the world (competition for Western Union and RIO, etc.)?
    Then would it be correct to call ripple the DApp?

  2. Hi, can you develop a DApp that runs on a private environment of ethereum and does not use cryptos, that is, for example, a DApp that stores data in the blockchain and then queries it without spending ethers or whatever it was from crypto-tandem ??
    Thank you, sorry for my spanglish

    1. I don’t think so…You will need Ether to do anything on EThereum. Try HyperLEdger tech if you want such DApps.

    2. @MAXI

      The way you need fuel (Petrol/Diesel/Gas) to run your car, Ethereum also needs fuel (termed Gas) to execute transactions. The amount of fuel required depends on the complexity of Transaction (or distance you drive in the analogy of car).

      Now, you pay for the fuel for your car using Fiat Currency (USD, GBP etc). Similarly, you need something to pay for ‘Gas’ used for every transaction in Ethereum, and the way it’s done is using Ethers (Tokens).

      In a Private/Enterprise Use case, if main purpose/focus is not crypto-currency (and therefore not the crypto-wealthiness), you can always setup a Blockchain network with unlimited Tokens (Ethers). That way you focus on achieving a value of something as single-source of truth, than worrying about generating/mining Ethers/Token.

      So, Ethers in Ethereum can be used as Crypto-currency to buy/sell/ exchange things or it can be used as a Token to Pay for Gas used for your DApps transactions (depending on Blockchain use case).

      Btw, ‘Queries’ in dApps usually are not counted as Payable Transactions, so ‘queries’ generally do not consume any Gas, and hence in no need of spending any Ethers for ‘Queries’.

  3. Thanks for your shared
    Can you teach me step by step which how to hand on build Smart Contracts or DAPPs for Real estate? Have you proof ò concept about it?
    Thansks again

  4. I am really new to the topic, so please bear with me. I really don’t understand ‘… use the blockchain of Type I DApps’. For instance ‘The SAFE Network’ uses Bitcoin’s Blockchain. Does that mean it uses the protocol of Bitcoin’s Blockchain with a new chain and new genesis block, or does it mean it actually minds bitcoin and add blocks to Bitcoin’s Blockchain? if it minds Bitcoin where does the Bitcoin goes?

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