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What are dApps & What are They Used For?

What are dApps & What are They Used For?Pixabay (Timsu)

The Bitcoin blockchain brought about great advancements in terms of decentralizing payments. And thanks to this precedence, the Ethereum network was born with an even greater vision – a decentralized way of life. Due to its unique capabilities, the blockchain brought about lots of other decentralized functionalities, all of which continue to drive the Ethereum price and overall value up. One of these is decentralized applications, or dApps.

These apps have become hugely popular due to their decentralized and transparent nature, as well as the innovative features they come with. But if you are not familiar with them, we’ll tell you what they are, and look at how they are being used today.

What are dApps?

Regular apps rely on a centralized network. This means that when you access the app, the request you make is sent to the company’s servers, along with your personal data. The company is then able to compile all your data to make it possible to offer you services.

However, dApps do not rely on such a structure. Instead, they are based on a blockchain, which means that they are supported by a decentralized network of computers. They are able to operate like other apps, but the nature of the network that supports them gives them lots of advantages.

These include:

  • Decentralization – Since all their data and processing is distributed across a large network, they don’t have a single point of failure. 
  • Transparency – All the transactions that take place are recorded on the blockchain. They are, therefore, transparent and can be audited and verified by anyone. 
  • Censorship Resistance – Since they aren’t based on a particular server, they are resistant to censorship. Authorities also can’t interfere.

Common Use Cases of dApps

dApps are already being used in various ways.

Finance and Payments

This is where these types of apps have been used extensively. They are actually responsible for the term Decentralized Finance (DeFi), which is basically using the power of blockchain to come up with a financial system that is both open and inclusive. The highlight of this is that today you don’t need a bank or any central institution to send and receive money, even across borders.

There are also lots of other functionalities that have been made possible by DeFi. These include lending and borrowing without banks, yield farming, Decentralized Exchanges (DEXs), and stablecoins.

Gaming

When it comes to gaming, dApps have actually been disruptive. This is because these apps have been able to take advantage of another superb functionality provided by the Ethereum network – Non-Fungible Tokens (NFTs). These are basically unique digital tokens that represent one-of-a-kind assets, such as game characters and other virtual items. The power of this is that in-game assets are no longer only owned and controlled by the game developers. In dApp games that are NFT-based, the players have true ownership of their virtual possessions. They can even carry their NFT-based assets across different games, thanks to NFT’s interoperability.

Decentralized Social Networks

Decentralized social networks have come up recently, and they provide a way to protect user data and, at the same time, reap many benefits. When using the network, data is no longer collected and sent to Big Techs. And thanks to blockchain, authentication of user identities can be done without intermediaries.

On top of these, dApp networks have reward mechanisms that incentivize content creation and active participation. And instead of a central authority, content moderation is often governed by community-based mechanisms.

Supply Chain Management

The supply chain usually requires that everything be monitored, verified, and optimized. This makes it a great candidate for dApps. They are being used here to create a transparent and auditable ledger, which makes it possible for managers to see everything that goes on. Businesses are also able to know where certain goods come from and even where they are in real time. The risk of counterfeit products is also highly reduced as blockchain is immutable. And since everything will be transparent and trustless, the end result is a more responsible and ethical supply chain ecosystem.