Decentralized applications (DApps) are basically blockchain-based smart contract-powered versions of apps made popular by the Ethereum network.
They function just like traditional apps only that they offer more in terms of a feature set.
DApps represents a new way of interacting with personal finance.
When you think of traditional finance, activities such as lending, borrowing, and saving are all powered by a central authority such as banks.
However, when it comes to the future of finance, many think of blockchains and cryptocurrencies.
Origin of DApps
Bitcoin was the first blockchain network. The technology has so far evolved from a simple financial transaction. When Vitalik Buterin and his colleagues proposed Ethereum in 2013, they had something border in mind. Something about a decentralized way of life.
Buterin envisioned a blockchain-based internet where users had control instead of central authorities, hence decentralization. For this to happen, Ethereum would power what are essentially automated statements known as smart contracts.
These contracts are immutable as rules are put into their code. This means any party can transact without an intermediary, hence removing the need for centralized platforms.
Characteristics of DApps
A DApp must have open-source code and work without third-party interventions. Instead, it is controlled by the users who propose and vote on changes.
All information must be held in a public blockchain network that can be easily accessed. This is the whole point of decentralization.
DApp must have a consensus method that generates tokens such as proof-of-work or proof-of-stake.
DApps must have some sort of cryptographic token for access and must reward contributors in the said tokens such as miners and stakers.
Types of DApps
There are three types or layers of DApps based on the way users interact with them.
1. Layer One
These DApps exist by themselves on their own blockchain. The most popular projects of layer one DApss are like Bitcoin. They require a consensus algorithm and baked-in rules.
2. Layer Two
These DApps are built on top of layer one to harness the power of the blockchain. They are often considered protocols and they use tokens for interactions.
A scaling solution on the Ethereum blockchain is an example of a layer-two DApp.
Transactions can be processed on this second layer before they are sent to the first. Essentially, they are meant to take the load off the main chain.
3. Layer Three
Layer three DApps are built on top of layer two. Basically, they hold the information required for the other two to work together.
It stores the programming interfaces of the application and the scripts necessary for the other two layers to operate.
Why Use DApps?
DApps are decentralized therefore, the biggest advantage is that there is no need for a third party. DApps function using smart contracts.
Moreover, sending money over a DApp is cheaper and faster. Also, the fact that they are not controlled by a centralized authority makes them much more secure and invulnerable to all types of attacks.
DApps can apply to almost any industry including medicine, governance, gaming, and file storage. There is really no difference between a decentralized application and a traditional application.
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