Fact: the majority of modern services rely on a centralized authority. From online games, social networks, banks, and emails; everything traces back to centralized servers and single organizations or companies. But what if it didn’t need to be that way?

Enter the decentralized application, which gets its name from the idea of giving potential users control and ownership over their actions. But what exactly is a decentralized app, and how does it work in real-world contexts? Keep reading to find out.

What Are Decentralized Applications (dApps)?

A decentralized app, or dApp for short, is almost exactly like a regular application on the surface. However, the main difference is that a dApp is built on a peer-to-peer network or a blockchain network(like Ethereum). The main appeal of blockchain technology is that it’s completely decentralized, secure, and transparent, which means everyone has access to transaction records and source code.

This is combined with the familiar user interfaces of a typical mobile application, making it easy for even the most casual users to get into –⁠ all thanks to smart contract functions for Ethereum dApps in particular.

In short, no centralized entity owns or controls a dApp, so users make decisions for themselves.

Smart Contracts

Without complicating things too much, smart contract logic basically allows users to interact with “immutable” data on the blockchain based on specific rule sets that are also defined by eligible users. The result is a community-powered user experience that harnesses the power of a blockchain platform.

How Do dApps Work?

We know that traditional applications usually run on central servers owned by a single entity, company, or organization. In contrast, a dApp has its backend code running on a decentralized blockchain. But what does that mean, exactly?

The truth is that there is no single answer that encompasses every dApp on a blockchain platform like Ethereum. That’s because these apps are built for different purposes. However, every single open-source dApp shares four specific traits that allow them to function correctly:

1. Decentralized: dApps must operate on decentralized storage networks like Ethereum. This is to prevent a single authority from taking control.
2. Turing-equivalent: An app on the blockchain can provide a complete solution for any task required by its users without human intervention. However, the action must abide by specific rules while having enough resources to execute it.
3. Isolated: Unlike traditional applications, all dApps are hosted in “isolated” environments called EVMs or Ethereum Virtual Machines. As a result, any issues with a single smart contract will not impact user actions.
4. Immutable: Ethereum dApps will execute pre-programmed actions regardless of their environment because of smart contract functions.

Advantages And Disadvantages Of dApps

While dApps empower users and create a more transparent experience, they aren’t a complete solution or replacement for the tried-and-tested mobile application. That’s because they come with their own set of advantages and disadvantages. Here are a few.

Advantages

• User actions and data are private: Unlike a regular application, users aren’t required to provide any real-life identifiers to participate. That means your data is confidential and autonomous organizations can’t force you to disclose anything.

• Open to all: An app on blockchain technology is entirely open-source, including its backend code. As a result, anybody can build on top of these digital applications or participate in existing ones.

• Completely verifiable: As we mentioned before, using a smart contract on a decentralized network means that everyone can see the application’s inner workings. As a result, there are no secret mechanisms that users are unaware of, unlike traditional institutions like banks and corporations.

Disadvantages

• Complicated maintenance: Because dApps use smart contract technology, bug fixes and code errors can take a while to correct. All token holders need to vote on a change before it can actually be executed.

• Scalability issues: dApps have a lot of overhead, which means scaling to meet demand is complicated. Between proof-of-work and managing the many processes that help dApps achieve their unique level of transparency, developers may need external tools to achieve their goals.

dApps In dAction: Real-World Uses For Decentralized Apps

While many people think that dApps are only used in the world of cryptocurrency, there are actually quite a few use cases for it. Below are just a few industries that can benefit from dApps:

Finance

The vast majority of modern financial services operate on the idea of a central authority. Banks, lending agencies, and even intermediaries like PayPal and Cash App rely on the widely-accepted convention of having a single entity in control. dApps could provide a decentralized credit service that connects individual lenders with users, cutting the middleman altogether.

Social Media Platforms

Social media can benefit significantly from dApps in a few ways. Namely, no censorship (which can be a double-edged sword) and more opportunities for social media creators to monetize their work. This is in direct contrast with existing social media websites where a company or single authority makes the most money.

Online Gaming

Gaming is a relatively new use case for dApps, but it has potential. Traditionally, gamers will move from game to game once they’ve finished all the content or had their fill –⁠ leaving their characters and hard work to sit inactively. However, dApps can enable gamers to sell accounts, assets, or even characters to other players using internal currency.

Final Thoughts On Decentralized Applications

Decentralized applications take the confusing (and often intimidating) world of blockchain technology and turn it into something anyone can interact with. On top of this, dApps create a more user-focused experience by being staunchly open-source, which provides a flexible platform for constant development and improvement.

As a result, dApps have become increasingly popular over the last few years. So if you’re looking to start your own dApp or simply participate in one, all you need to do is search!