What would you say if someone told you that blockchain, smart contracts and dApps can help your business grow, streamline the operations and bring added security, as well as convenience?
A few numbers to start with. According to analytics startup Alethio, more than 1,000 decentralized applications (dApps) have been deployed onto the Ethereum network since the beginning of 2017. More than 700 tokens were launched on the Ethereum network in 2017, and more than 1090 dApps are either live or in development. Approximately 100,000 new users join the network daily, around one million transactions are processed per day, and there are over 29.2 million unique Ethereum addresses. Among other developments, Ethereum’s meteoric rise in 2017 has facilitated a surge of new decentralized apps that use blockchain technology. If we take into account the fact thousands of dApps being built don’t qualify as a cryptocurrency, we get a clearer picture on the various and opportunities for an enterprising entrepreneur.
Given these numbers, it’s safe to say that dApps are a logical step in the evolution of blockchain, offering the optimum solution for taking this revolutionary technology to the next level. We are pretty sure that the future of dApps is bright and holds lots of possibilities. Even industry experts seem to agree on this. “Blockchain technology is interesting to many businesses because it can unlock tremendous operational improvements in their existing business”, explains Harry Lee, CEO of San Francisco-based CitrusBits. “For these businesses, building a dApp isn’t just about capitalizing on investor interest in anything associated with blockchain. They’re actually out to realize the substantial ROI building decentralized apps on a blockchain can provide.”
What are Decentralized Applications (dApps)?
Most people are familiar with ‘apps’ particularly with reference to software. Software applications are software that defines a particular goal. As opposed to the most widespread software models that are centralized (the server client model is centralized), dApps are apps whose server-client models are decentralized. Decentralized apps remain a space to watch for key disruptions in the technology industry. The key-advantage of dApps is the distribution of essential components, a move that improves fault tolerance and makes it practically impossible and expensive to attack such a network. The backbone of dApps — blockchain — ensures fast, reliable and secure applications to enhance the customer experience.
With increased volume as well as velocity of data from new sources like IoT and social media, blockchain and dApps provide a fast, efficient and affordable way of processing and storing big data. Additionally, decentralization acts as a barrier to collusion, a move that has often allowed corporations and governments to exploit others. Examples of dApps include, amongst others, a venue project which enables users to share videos of locations around the world or the KYC chain which helps maintain “private identity wallet” that can be used in authenticating identity in legal, finance or commerce settings.
Advantages of dApps
dApps established a way to reduce the impact of third parties on the functions of an application. dApps connect providers and users without the help of middlemen, contrary to regular applications. Blockchain-based dApps are immune to censorship, have no need for additional fees and are more likely to maintain operation during various attacks. Writing decentralized apps may be performed on various platforms. Today, most dApps are working on the Ethereum blockchain, but new dApps-oriented platforms are one of the main directions of blockchain development and new ones emerge pretty often. dApps are improving payment processes, user credentials and are trusted due to their open-source code and public records of transactions.
Classification of dApps, criteria they must meet
One of way of classifying dApps is by seeing whether they have their own blockchain or they rely on another dApps’ blockchain.
Type I — these are dApps which have their own blockchain. Examples include Bitcoins, Litecoins and other coins.
Type II — these dApps base their application on the block of Type I dApps. They are protocols and must have tokens to function. An example is the Omni protocol.
Type III — they use the protocol of type II dApps. They have protocols and tokens as a necessity for their functioning. An example is the SAFE network which uses the Omni protocol in their issuance of ‘safe coins’ which can be used to get distributed file storage.
For an application to be considered a dApp in the context of blockchain, it must meet the following criteria:
1. Application must be completely open-source. It must operate autonomously, and with no entity controlling the majority of its tokens. The application may adapt its protocol in response to proposed improvements and market feedback, but the consensus of its users must decide all changes.
2. Application’s data and records of operation must be cryptographically stored must be cryptographically stored in a public, decentralized blockchain in order to avoid any central points of failure.
3. Application must use a cryptographic token (Bitcoin or a token native to its system) which is necessary for access to the application and any contribution of value from (miners/farmers) should be rewarded with the application’s tokens.
4. Application must generate tokens according to a standard cryptographic algorithm acting as a proof of the value, nodes are contributing to the application (Bitcoin uses the Proof of Work Algorithm).
The difference between dApps and smart contracts
As blockchain technology grows and matures, we must now create a clear distinction between smart contracts and dApps. Smart contracts really should be how they sound, agreements between parties without the need for a third party. On the other hand, dApps should also be how they sound: decentralized applications that do not execute on any centralized machines. If you’re looking for a simple definition, this is it: a dApp is an application, a smart contract is the execution method. We can also say that smart contracts are pieces of code that compose dApps.
You don’t have to be a developer to know that most conventional web applications use HTML, CSS or Java script tools for page rendering, and API for displaying personal details on a webpage. From the front-end user’s perspective, the technology is almost the same. The critical difference between conventional technologies and blockchain technologies is the way the front-end connects to the database or the blockchain. If you deploy smart contract services, instead of API connections, you will be using smart contract connections. Another way to differentiate dApps and smart contracts is to use a word-character comparison. Using both lexicology and semantics, you can associate characters with smart contracts and words with dApps. Smart contracts don’t make sense unless they are executed in dApps. We know that contracts, like characters, have a role, but we cannot make much use of characters unless we arrange them into words to produce deeper meaning.
Developing a dApp
If you want to develop a dApp, you can engage a blockchain development company that provides smart contract services to develop the code. This will set the rules of the contract for all stakeholders, but the code will exist in a decentralized blockchain network. As stated before, dApps work on multiple platforms. They can run on a variety of smart contract platforms, which create a set of unique rules and have mobilized different technological alternatives. Any piece of information or data that can be shared across a decentralized blockchain network, meeting the rules set by smart contract service technology, can be used to improve your business, making it faster and more cost-effective. Depending on the industries they’re used in, dApps intend to apply blockchain technology to those segments, providing a clear advantage to adopters. Be it investment, technology or governance, blockchain technology will permeate markets and its presence will reshape the technological world we live in.
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