What are DApps, and what are they used for?

What are DApps?

Most apps today run on centralized networks, operated by a controlling authority. For example, social media networks, banks, and streaming services hold your data on centralized servers. When you access these apps, a request is sent to their servers, and the result is sent back to you, assuming your credentials (username & password) are valid. While this centralization is efficient, it generates huge amounts of user data. And that means unwanted exposure to hacks, creepy advertising, and Big Tech companies like Google and Amazon profiting off your data.

Fortunately, these shortcomings have raised data security awareness, generating more interest in privacy-preserving solutions like blockchain technology. Blockchain networks are decentralized, eliminating the need for Big Tech intermediaries. Both shared consensus and automated smart contracts make this functionality possible. For example, let’s say you want to send some crypto to a friend:

  • With DApps, you simply log in into your crypto wallet, select the amount you want to send and confirm the transaction; a smart contract takes over to complete the exchange. At the same time, blockchain validators work together to verify your transaction, generating a permanent record on a blockchain.

  • With web2 (centralized tech), by contrast, the process of sending US dollars to your friend occurs on a centralized network. This means a bank handles every component of your transaction. They own the data, and they decide if the transaction is valid or not.

Decentralized apps (DApps) are the blockchain-based equivalent of these traditional apps. DApps are a collection of interconnected smart contracts. Behind the scenes, each smart contract performs a specific function within the application. It’s important to note that DApps often look like conventional apps, only built on blockchain technology. As a result, DApps share common attributes not found across centralized platforms:

  • No single point of failure: Unlike traditional apps, DApps are more reliable because blockchain networks span multiple nodes. If Instagram crashes, all users lose access to the app because there are centralized servers. It’s much less likely a DApp will go offline because each node needs to fail simultaneously.

  • Open source: The decentralized nature of blockchain technology requires source code accessible to all network members. In an ecosystem without intermediaries, users must identify and verify each app to avoid scams and exploitative malware.

  • Decentralized consensus mechanism: Without a central authority, blockchains must utilize consensus mechanisms to ensure the validity of all transactions. Whenever a DApp transaction occurs, the entire network is responsible for verification.

  • Utility tokens: Like how you pay to access traditional apps, many DApps integrate a utility token that guides platform economics. For example, many utility tokens enable DApp governance, in-app transactions, and reward programs, among other use cases.

Now that we’ve defined what a DApp is and how they work, we can start to explore the different types of DApps and their role in the broader blockchain ecosystem.

Types of DApps

Although all DApps function similarly, we can classify them into three categories depending on their specific use case and protocol layer. You can think of a protocol layer as a tier on a wedding cake, where multiple layers (or tiers) can be stacked, one atop the other.

  • Type 1: These DApps have their own blockchain network; many consider Bitcoin the first DApp.

  • Type 2: These DApps leverage Type 1 DApps and integrate a utility token necessary for them to function. For example, the Omni Protocol is built on the Bitcoin blockchain, operating as a distributed trading platform.

  • Type 3: These DApps utilize the protocol of a Type 2 DApp to function. For example, the SAFE (Secure Access for Everyone) Network is a decentralized data storage and communications network that enables the creation of censorship-resistance websites and apps. The SAFE Network leverages the Omni Protocol to issue SafeCoins.

If DApp types are still a bit unclear, drawing parallels to more familiar platforms might be helpful.

  • Type 1: The macOS Monterey Operating System on your Mac

  • Type 2: The Brave browser application on your Mac

  • Type 3: The Honey plugin that runs within the Brave browser application on your Mac

While all DApps fall into three categories, each adheres to a unique use case or application. Below, we break down some of the most popular DApps and their role in reimagining the online experience.

What are DApps used for?

Today’s DApps serve as a bridge between current Web 2.0 systems and Web3, the decentralized web of the future. In many cases, this means DApps are accessible through conventional web browsers such as Google Chrome or Firefox but communicate with underlying blockchain networks using smart contracts. In other words, while DApps look familiar on the front end, the back end exists on a decentralized database instead of a centralized server.

Given the more recent introduction of blockchain technology, there are fewer DApps than traditional applications. However, ongoing innovation has begun to diversify the ecosystem, with many of the most popular DApps represented in the following categories:

  • Crypto wallets: Within the decentralized ecosystem, crypto wallet DApps are crucial. Crypto wallets are necessary to buy, sell, and trade cryptocurrencies and can be custodial or non-custodial. Custodial wallets, such as those on centralized crypto exchanges (CEXs), are custodial because the platform holds your private keys, the equivalent of your account PIN. Non-custodial wallets are under your control, meaning no one else has access to your private keys.

  • Decentralized exchanges (DEXs): Users often access these DApps using a web browser. After navigating to the DEX web address (URL), you’ll see an interface that allows you to connect a crypto wallet. Once this is complete, you can start interacting with the DEX DApp, participating in supported functions like liquidity pools, lotteries, NFT marketplaces, and more.

  • Social media: Similar to social media platforms like Facebook and Instagram, social media DApps like Steemit facilitate online connection. However, social media DApps reverse the flow of value and reward you for participating in the network instead of storing your data and monetizing it.

  • Games: Decentralized gaming is one of the most popular segments of the blockchain ecosystem. Popular gaming DApps like Axie Infinity, Splinterlands, and My DeFi Pet integrate non-fungible tokens (NFTs) to ensure users retain the value they generate in the metaverse.

Using Brave to access DApps

To sum up, DApps are built on decentralized networks, while traditional apps live on centralized networks. These DApps play a crucial role in bridging the current Web 2.0 experience and Web3 functionality. For example, the Brave browser offers an experience similar to Google Chrome and Firefox while supporting a built-in crypto wallet that can interact with DApps. Unlike crypto wallet plugins, the Brave wallet is browser-native, adding another layer of security.

In addition, the Brave browser supports privacy features that align with the ethos of decentralization. For example, it prevents data collection by blocking ads and trackers. This feature lets you control your data and how it’s used, rather than Big Tech intermediaries that aim to monetize it. Together, Brave’s built-in crypto wallet and privacy-preserving functions provide a secure, convenient way to navigate the web, whether centralized or decentralized.

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