In 2022, decentralized applications are heralded as a new digital economy of peer-to-peer services that dethrones centralized entities. The discussions about dApp popularity have been doing rounds, yet the surge is evident. Today, State of Dapps reports over 3900 decentralized applications with over 2.7 million unique active wallets. Compared to 200,000 UAWs in 2020, this is a huge leap forward.
But what makes dApps so popular? And why do an increasing number of companies invest in these apps? We’re about to find out.
The Basics of Decentralized Applications
In 2020, UniSwap made the waves in the market by solidifying the concept of decentralized exchanges. Its counterpart, CryptoKitties also blew away the crypto community by allowing users to breed and trade digital cats, represented in the form of NFTs. For the unaware, the phenomenon of dApps seems dubious. So what is a dApp?
A dApp is a distributed open source solution that relies on a blockchain network. A dApp uses a consensus mechanism and is not controlled by any single party. In the case of dApps built on blockchain technology, the app software runs as part of a peer-to-peer network in which users are also nodes (i.e., they run the app code themselves and validate new blocks).
How is dApp Different from Traditional Mobile Applications?
For the end-user, both dApps and traditional solutions seem almost identical. However, it’s the filling that makes them different.
Unlike traditional solutions, dApps do not rely on a centralized server. Instead, they are premised on blockchain, which means that they are distributed across the network of computers on the blockchain.
Although dApps can be built on EOS, Tron and other platforms, Ethereum is the go-to option for hosting decentralized solutions. Ethereum smart contracts, in turn, power the back-end of dApps and automate transactions within dApps.
As such, smart contracts are the main differentiator of dApps that account for their decentralized nature. These are digital contracts that execute themselves based on their conditions being met, with no need for human intervention. This is made possible by blockchain technology which allows transactions to be verified and executed without any third parties involved.
As for the front end, there are no dApp-specific technologies that enable user interface. Therefore, the client-side can be enabled with a traditional combination of HTML and CSS.
To demonstrate how dApps work, let’s imagine a bowling game on Ethereum. To play, you send crypto (ETH) to a smart contract. The latter keeps your bet if you lose or pays you the prize if you win. Moreover, the open-source nature of dApps allows you to check its transparency and impartiality.
What are The Benefits of dApps?
Over the last two years, decentralized apps have been gaining in popularity. The main advantage of DApps is that they bypass centralized servers, so there is no single point of failure.
Other benefits that businesses can gain from building an Ethereum-based solution include:
- Zero downtime – dApps are user-centric solutions that aim to work on a stable and unfalliable basis. Therefore, once you deploy the solution on the mainnet, it will serve the user and is insensible to denial-of-service attacks.
- Added privacy – these applications run on a blockchain and distributed computing systems, hence the stored data is immune to one single point of failure.
- Security – all dApp data is also subject to cryptographic verification.
- Censorship-resistant – decentralized applications allow users to store anything on a chain without seeking third-party permission, while no single party can block users from participating in transactions.
- Visibility – since dApps run on publicly available and transparent blockchains, all data, including dApp source code and all incoming and outgoing transactions, is transparent and publicly available.
What Can you Build with dApps?
The first dApp was created in 2015, and the number of dapps has been growing rapidly since then. Although these solutions are typically associated with crypto, their adoption doesn’t boil to that only.
There are a wide variety of dapps, ranging from games to financial applications to social networks. Some of the most popular dapps include Ethereum-based games like CryptoKitties and Fishbank.
With that said, let’s see what you can wrap into the dApp functionality and which business ideas global companies invest into.
Decentralized finance, or DeFi for short, is an umbrella term used to describe financial applications that run on a decentralized network. This can include anything from lending and borrowing to asset management and trading. DeFi applications allow users to create contracts and agreements without the need for a third party. This allows for more trustless and secure transactions.
According to DappRadar, despite its young age, the DeFi sector is providing rates as high as 8% for deposits. At the same time, the leading DeFi app – MakerDAO – has a median of more than 350 daily active unique wallets and is the most high-ranking loan contract platform in the crypto landscape. Therefore, DeFi projects are gaining traction and becoming viable digital products.
Non-Fungible tokens or NFTs are digital assets that are unique and cannot be replicated. Premised on blockchain platforms, NFTs can represent a variety of things – from virtual goods in video games to real estate. In the context of online marketplaces, NFTs can be used to represent digital products, services, or experiences.
NFT marketplaces have become especially popular over the last few years as the NFT craze continues to increase. According to NonFungible.com, NFT sales currently account for anywhere from 15,000 to 50,000 per week.
Decentralized gaming is another lucrative dApp application that went from a niche phenomenon to a salient part of the blockchain market.
As such, dApps games are a new type of game that is being developed for use on the blockchain. They are different from traditional games in a few key ways. First, they are decentralized, meaning that there is no central authority controlling them. Second, they use blockchain technology to manage the game economy and ensure fairness. And third, they often use cryptocurrency as their in-game currency. This makes them a perfect fit for the blockchain gaming market, which is expected to reach $24 billion by 2025.
Communication and social media
Decentralized social media is a long-awaited player in the centralized landscape. Unlike traditional networks, dApp social media grants users with more autonomy and allows them to partake in network development. Thereby, an emerging trend of decentralization is aiming to minimize or eliminate the downsides of centralized media, thus adding more user privacy, eliminating bias, and guarding user data.
Steem is a prominent example of a blockchain network that pays its users for sharing, publishing, and curating valuable content.
What Does The Future Hold for dApps?
As the world becomes more and more digitized, the applications of blockchain technology are becoming more apparent. Decentralized applications, or dApps, are on the rise as businesses and individuals alike seek to take advantage of the security and transparency that blockchain technology provides. But what does the future hold for dApps?
Upward tendency hints that dApps have a lot of potential that goes beyond 2022. They can provide a more secure and transparent way of doing business, as well as can help to build trust between brands and consumers. Overall, the future of dApps seems bright as we’re leaping to a more decentralized digital world.