An introduction to dapps and how they work
Dapps are fundamental for many functions of decentralization on the blockchain. These applications on the blockchain cut out the middleman, and empower users. But what is a dapp? What are smart contracts? What is a blockchain?
The word dapp is an abbreviation for decentralized application, and these only exist because of blockchain technology. These decentralized applications don’t rely on centralized servers or services. Instead, these dapps use the computers or nodes of a blockchain. However, to understand a dapp fully, we also need to understand blockchain technology and smart contracts.
In short: a dapp is an application on the blockchain that’s censorship-resistant, always online, works without a middleman, while users maintain full control over their wallet.
What is a blockchain?
A blockchain is a digital logbook of transactions, verified and maintained by a network of computers. Each individual set of records is a block, which links to the previous block, and thus becomes a chain of blocks. That’s why it’s called a blockchain. Every node or computer in the network confirms the correctness of newly added data. As a result, the blockchain knows how many tokens are in a certain wallet at any given time, making tampering impossible.
Nodes or computers that maintain the blockchain, are rewarded through a certain mechanism. The type of mechanism depends on the type of blockchain. This can either by mining rewards, staking rewards or for example rewards based on transaction fees. A blockchain is considered optimal when it’s decentralized and everybody’s free to participate.
What are smart contracts?
A blockchain isn’t only used for keeping track of token transactions. Blockchains like Ethereum allow users to launch a computer program onto the blockchain. Smart contracts are protocols on the blockchain that offer a service and execute that service without the need of third parties. For example, a smart contract could allow for a token swap between two different tokens. In simple terms the smart contract would state something like: if you give me token A, I will give you token B. This particular action doesn’t need a middleman. Or, to think of it another way, the middleman has been replaced by an algorithm.
However, does the technical mumbo jumbo really matter? Most people won’t care, they just want to know how the technology benefits them. Even though we believe knowledge is an important foundation for adoption, creating a smooth user experience and real utility is far more fundamental for mainstream adoption.
What are the benefits of dapps?
Dapps allow users to create wealth through decentralized finance, have digital ownership through non-fungible tokens, and participate in virtual economies with real-world impact.
A dapp allows users to utilize their assets on the blockchain without the need to use a centralized party. Users don’t need to put their tokens on an exchange, which means they lose full control over their assets. In addition, a dapp is not hampered by service outages or censorship. The blockchain never goes down. Governments can block a website URL, but they can’t deny access to a smart contract or dapp.
What are use cases for dapps?
Developers can use dapps in all kinds of products. Think about categories like finance, trading, games, digital collectibles, gambling, art, marketplaces, and so on. A decentralized exchange uses dapps to allow users to swap tokens, while certain games use dapps to set their rules on the blockchain. This makes gaming provably fair. In addition, gaming tournament organizers could automatically pay out earnings to tournament winners, while other dapps generate artworks based on on-chain data from the buyer.
Dapps are available in many categories, and more utility will be added in the years come:
- Some dapps are integrated into games, creating a fair in-game economy
- Other dapps create NFT collections
- There are also dapps that allow you to trade tokens with other people
- Or swap tokens for something else
- Lending, borrowing, confirming your identity, setting up memberships, tracing the origins of goods. Dapps have a wide range of utilities among all kinds of industries.
How to get started using dapps?
To use a dapp, you will need a wallet. When using your desktop browser, we advise you to install Metamask. This web3 wallet can be connected to a variety of blockchain services, including Ethereum, Binance Smart Chain, and Polygon.
- Download Metamask here
- Learn how to use Metamask here
- How to connect Binance Smart Chain to Metamask
- How to connect Polygon to Metamask
Once you’ve done that, you’d need to go to DappRadar and find the dapp you’re looking for. Perhaps you want to start earning more interest on your tokens, or you’re looking for a cool game to play.