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What is a decentralized application (dapp)?

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DappRadar

Tired of big corporations selling your data? Decentralized apps can help.

Much has been said about blockchain and the derivatives that were borne from this disruptive tech. Yes, there are tons in the tunnel, but perhaps the most outstanding development is the concept of decentralized applications (dapps).

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In every dapp, there is an element of decentralization (not just distribution). A characteristic that gives applications that operate from an ideal blockchain its edge. 

In simple terms, and if I explain this like you are five. A dapp is but an ordinary application that runs, not from a single server like in traditional architecture. But from thousands of computers, called nodes, that undergirds the blockchain. To further explain a dapp operates from a peer-to-peer network and not from a single server. Meaning no one entity has control over it. 

Like in all interesting fields, there is contention as to what an ideal decentralized network is. That is, which perfect blockchain should a dapp run from. With the sprouting up of smart contracting platforms that enable the operation of dapps. Users have a wide variety of options to choose from. Often, the discourse is around the level of scalability, security, and decentralization.

Of the multiple smart contracting platforms supported by DappRadar, different platforms have chosen different ways of solving the blockchain trilemma. Either prioritizing scalability and security over perfect decentralization.

Most of them including EOS and Tron use the dPoS consensus algorithm. While Ethereum remains the most decentralized. Even rejecting the very idea of ASICs though they are in the early stages of transiting.

Ideally, a dapp that runs from a network whose nodes are equally distributed across different geographies is the most decentralized. Dapps cut out the middle man and connect the users directly. This way, the user has control of data, eliminating the role of central authorities.

At the heart of every dapp is a smart contract. A smart contract is a special program that is autonomous and self-executes when a set of conditions are met. While a dapp is blockchain-enabled, a smart contract acts as a connector. 

Like traditional single-server applications, dapps use the same programming language in the front end for rendering. However, the difference is on the back end where instead of an API, a smart contract acts as a connector.

Image courtesy of Blockgeeks

Because dapps are deployed from blockchain networks with their own currencies like Tron has TRX. Ethereum has ETH. Dapps are usually coded to do things with that currency. For the payment of fees or Gas, as they provide services within their own ecosystem via their own token. 

While dapps are slightly over 2 years old, gaining prominence after the great crypto rally of late 2017, they continue to shape operations. They are immensely beneficial and generated data are immutable. Besides, increased use of dapps primes the blockchain ecosystem, driving value of the chain’ coins.

Features of a Dapp

To understand how a dapp works, then you must understand the main features that differentiate them from their centralized counterparts. These essentials are:

  • A dapp must be open source and because of smart contracts, must be autonomous. By extension, it means the rules that govern the operation of the dapp must be hard-coded and changes made must be agreed on by the community as defined by its consensus protocol.
  • The underlying blockchain should be decentralized and encrypted transactions publicly available.
  • The dapp must incorporate a token as its digital asset. This token must be generated through a known standardized protocol. It can be Ethereum’s ERC-20, Tron’s TRC-10 and so forth. Tokens are used for incentivization.
  • There should be a standard cryptographic algorithm for transaction encryption, and a governing consensus protocol must exist as a proof of value.

How a Dapp Works

Full implementation of these properties allows a dapp to function satisfactorily. The smart contracts of the open-source dapp would be deployed from a fully decentralized blockchain that uses a standardized token generation mechanism. 

Dapp users can track encrypted transactions fully aware that these transactions are secure, confidential and immutable. For a dapp to work, it must first be uploaded to a blockchain, an immutable ledger where the transaction log is authority. 

The first transaction that references the dapp will define its code. The code defines the different number of ways future transactions can refer to the first transaction-that is the dapp.

These exceptional features, in the long term, would fast-track the evolution of dapps into self-sustaining resources that can attract investment because of dapps’ ability to unlock an array of use cases spanning logistics to banking and so much more. 

With increasing popularity and rapid development, their adoption, more so in DeFi and banking, stands to be massively disruptive and beneficial for users.

Why tracking dapps is important

The dapp ecosystem is still in its infancy and DappRadar is proud to be the world-leading provider of dapp data and analysis. DappRadar tracks dapps in terms of three major metrics at this moment in time: volume, users and balance.

How dapp data is displayed on DappRadar

Volume provides users with accurate data on the amount of token volume within the dapp and acta as a measure of activity. In September 2019 DappRadar started to track the non-native ERC-20 tokens passing through the smart contracts of both EOS and ETH in order to bring further clarity and accuracy to this data. 

User figures provide data on the number of active DAUs (Daily active wallets) within a specific dapp ecosystem. This metric allows users to gauge the activity of a dapp and decide whether they want to participate. From the beginning, DappRadar has held a robust attitude to fake and manipulated data (mostly bots) and work extremely hard to actively filter this out. 

The balance within a specific dapp allows potential users to ascertain some usage and popularity information. It shows the total flow of tokens within a dapp. It can also act as a measure of fake activity. For example, if a dapp is showing very few numbers of DAUs but huge volumes moving through the smart contracts then this could indicate foul play. 

The dapp space is hugely exciting and is quickly evolving to meet the demands and regulations set in front of it. The metrics used and in-demand are also changing.

In 2020 we see an increased need for value transparency in the dapp ecosystem and believe that work in the areas of data cleaning and ERC-20 token tracking has positioned us as the best provider of dapp data.

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