What is a DApp? How Does It Work?

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DApp (pronounced Dee-App) is a Decentralized Application. A DApp is very similar to a traditional web application like Gmail or Uber. The front end uses the exact same technology to render the page, but the backend is based on different technology than internet-based apps. Instead of an API connecting to a database, there is a Smart Contract connecting to the Ethereum Blockchain. Also, like its name suggests, they don’t require human intervention, or a centralized database, to function or to manage user data.

DApp technology allows the participation of a limitless number of participants in any area of the market.  DApps connect users and providers directly. DApps can also take advantage of Ethereum’s Blockchain capabilities for different purposes, not just financial ones. According to “The General Theory of DApps” a decentralized application must meet the following criteria:

  • The application must be completely open-source, operate autonomously, and with no entity controlling the token majority. Changes to the application must be adopted by consensus.
  • Data must be cryptographically stored in a distributed Blockchain to avoid central failure points.
  • The application must use a cryptographic token for access to the application and as a reward to network supporters.
  • The application must generate tokens according to an algorithm that values contributions to the system.

What are the Types of DApp?

DApps are classified based on whether they have their own Blockchain or they use the Blockchain of another DApp. Based on this criteria, there are three types:

  • Type I DApps have their own Blockchain, like Bitcoin.
  • Type II DApps use the Blockchain of type I DApp, but implement protocols and have tokens that are necessary for their function, like the Omni Protocol.
  • Type III DApps use the protocol of a type II DApp and are protocols and have tokens that are necessary for their function, such as the SAFE Network that uses the Omni Protocol to issue ‘safecoins’.

In this view, DApps operate as an operating system like Windows, with a Type I classification. The programs on these systems, such as Dropbox, would be Type II. A Type III example would then be a blogging platform that integrates Dropbox.

Regarding privacy and identity, there are two main types of DApps. Fully Anonymous and Reputation-Based DApps:

  • Fully anonymous DApps allow every participant to remain anonymous, and all interactions take place automatically and instantly, like the Torrent peer-to-peer transfer protocol.
  • Reputation-Based DApps consist of an ecosystem in which nodes are tracked and maintain status inside the apps. Ensuring trust is the most important thing in this type of DApp. There is no way to attach a monetary value to one’s trust level, nor can it be transferred to anyone else.

Finally, the Ethereum White paper splits DApps into three types according to their functions: apps that manage money, apps where money is involved (but also requires another piece), and apps in the “other” category, which includes voting and governance systems.

Examples of Working DApps

Everex is a platform for sending cross-border instant payments with very low fees. Everex positions itself as a financial inclusion Blockchain development company. They propose putting fiat currencies, equities, commodities, and their non-financial assets on the Ethereum Blockchain to facilitate global P2P remittance. The company offers a mobile app for Android and iOS.

The SafeEther DApp focuses on letting users store personal information on the Ethereum Blockchain. This is an example of how powerful Blockchain technology can be when it comes to securing data. This platform is not free of charge. All information and transactions are handled through smart contracts. It takes a setup fee of 0.05 ETH to link an Ethereum wallet address with one’s email address (to verify one’s identity).

CoString offers a simple concept: anyone in the world can upload an image, which will be embedded into the Ethereum Blockchain. Every upload will require a small amount of Ether to be paid, depending on how large the image in question is. Once the payment is made to the destination address, the image file is submitted to the Blockchain. A simple website that provides a valuable service that creates a distributed and decentralized image hosting.

Still, in their first years, DApps are still not being used worldwide and only a few have appeared on mainstream media. However, there are various interesting and successful DApp initiatives worth looking at and there is a whole universe of applications to be discovered.

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