In the DeFi space, we have different types of applications on the blockchain which is also known as DApps. DApps is short for decentralized applications, and in this article, we will be going through what Dapps are, the good, the bad, and the ugly.
TL;DR
- DApps are Applications that run on a blockchain like UniSwap and SushiSwap.
- Being decentralized means that anyone with a Web 3.0 wallet can participate, there's no single authority and these applications are constantly being developed
- But being decentralized has its risk like being exposed to hacks and exploits, applications in the experimental phase and users requiring some knowledge to start using DApps
What are DApps?
Decentralized Applications (DApps) exist and run on a blockchain or on a peer-to-peer computer network instead of a single computer. This allows the application to be decentralized which means it is not controlled by a single source of authority.
Think of it like Instagram, none of us have access to the source codes of Instagram unless you are an employee of Meta. In the case of DApps, their source codes are open sources which mean anyone is able to access these codes and verify if the Dapp does what it’s supposed to do.
At the same time, DApps are governed by users and not one single entity. When there is a change that needs to be made, proposals will be put up for users to vote. However, to vote for these changes, users will have to own or hold the native token of the DApp.
Different blockchains, different DApps
Most DApps were built on the Ethereum blockchain because of the characteristics of Ethereum which is the blockchain for smart contracts. And because of technological advance
For a simpler idea of what DApps are, think of blockchains as your mobile phone, like how we got iOS and Android operating systems, the blockchain is the operating system and DApps are like the applications you have on your mobile like Instagram, Telegram, Twitter, etc.
There are different DApps with a variety of purposes like gaming, finance, and even social media.
Difference between Web 2.0 and Web 3.0 Apps?
If we look at a standard application, it will be something like YouTube and Twitter. These apps are Web 2.0 applications. Conversely, decentralized applications like Odysee and Diamond are the Web 3 equivalent of said Web 2 applications.
With Web 2.0 applications, we have users who are providing information to a company. On Twitter's backend, their codes are controlled, which means only a select group of people have access to them and these codes control the algorithm of what we see on Twitter, who we connect with, what features are available for us, and sometimes they might even control who has access to the application.
In contrast to a DApp, the source codes are open-source meaning, the code is freely available for other Dapp developers to use. Users, on the other hand, are not required to provide information about themselves, all they require is a Web 3.0 wallet which will enable them to access these DApps.
Advantages of DApps
Like everything else, there are pros and cons to using DApps which can ultimately be a deciding factor as to whether or not you will be using DApps or staying with Web 2.0 applications.
Resistant to a single point of failure
Being decentralized in nature, DApps are not controlled by a single entity and run on a network of P2P computers. This means that there is no single point of failure or outage.
As compared to an application like Facebook, if their server goes down or is in maintenance, this might mean an outage on other applications that they own like Whatsapp, Instagram, and Messenger.
Resistant to censorship
When we sign up for accounts with Web 2.0 applications, we are required to provide information like our names, date of birth, national identification number and etc. However, with a DApp, all you need is a Web 3.0 wallet like MetaMask to start accessing the different DApps that are made available on the internet, without you giving up any information about yourself.
With most Web 2.0 applications, there might be certain users who are not able to access some functions or services, worst still, there is also the possibility of users getting banned or restricted in using the application. As compared with DApps, being decentralized makes it resistant to censorship.
Constant Developments
Since the codes of the DApps are open-sourced, this encourages faster and more secure development of the current DApps that we have in the market. Like how yield-farming has grown from just native farms to vaults and now there are yield aggregators that help you compound your yields automatically all through smart contracts.
Disadvantages of DApps
With the advantages, there are also disadvantages that come with such developments in technology.
Prone to exploits and hack
Since the codes of the application are open-sourced, bad actors can and will sift through the codes looking for loopholes or possible weaknesses that they can exploit to drain funds from these DApps. It’s still recommended to have the majority of your crypto stored in a cold wallet where it is not connected to the internet.
DApps are in an experimental phase
Since DApps are constantly being developed by different developers, the user interface might not be as good as compared to a standard application where there are many developers working together to ensure there are no errors in the code.
With codes being open source, there are other developers who are looking to build the next better version of SushiSwap, PancakeSwap, and other DApps that are available in the market. With this, there might be unforeseen problems like scalability issues which happen when the DApps have a huge sudden influx of users, which is undesirable as it makes the DApp unstable, causing them to lose users who are an important part of the ecosystem.
Knowledge requirement to use DApps
Like any application that we have, the more users there are the higher chances of success. However, as we went through, User Interface might not be a strong suite for developers which can make some DApps unappealing. On top of that, moving from a centralized app like an exchange to a decentralized exchange poses its challenges as well. Users need to have the know-how of transferring assets, knowing what functionalities are available, and learning to navigate through DApps, which requires time to learn and get familiar with.
However, as technology progresses and develops, we might start seeing more and more DApps that are catered to users with limited knowledge but will serve as a starting point to more advanced DApps with much more capabilities.
Disclaimer: The information and publications in this article are not intended to be and do not constitute financial advice, investment advice, trading advice, or any other advice or recommendation offered or endorsed by Coins.
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