A decentralized application (DApp) is a software application that runs on a distributed computing system, most commonly a blockchain.
A Decentralized Application (DApp) is a software application that runs on a distributed computing system, most commonly a blockchain. Unlike traditional applications, which run on centralized servers, DApps leverage the decentralized and trustless nature of blockchain technology to provide services that do not require a central authority or intermediary. DApps typically have their backend code running on a decentralized peer-to-peer network and not on centralized servers. They are characterized by being open-source, operating autonomously, having their data and records stored on a public blockchain, and using cryptographic tokens for access and value transfer within the application.
For instance, a DApp could be a decentralized exchange (DEX) that allows users to trade cryptocurrencies directly with each other, without the need for an intermediary like a centralized exchange. Users maintain control of their private keys and funds throughout the trading process, and trades are executed through smart contracts rather than through a company's order-matching system. Examples include Uniswap on Ethereum and Benswap on the Bitcoin Cash network.
Ethereum is the most widely used platform for building and deploying DApps. It provides a Turing-complete virtual machine, the Ethereum Virtual Machine (EVM), which can execute scripts using an international network of public nodes. DApps on Ethereum are often built using smart contracts, self-executing contracts with the terms of the agreement directly written into code. While Ethereum pioneered the DApp ecosystem, many other blockchain networks have since developed their own smart contract capabilities, including Bitcoin Cash through its SmartBCH sidechain, which offers EVM compatibility with significantly lower transaction fees.
CryptoKitties is a popular DApp on Ethereum that allows users to purchase, collect, breed, and sell virtual cats. Each cat is unique and represented as a non-fungible token (NFT) on the Ethereum blockchain. Similarly, NFT marketplaces have emerged on SmartBCH, allowing creators to mint and trade digital assets with lower fees compared to Ethereum, while still leveraging smart contract functionality.
DApps follow the consensus protocol of the blockchain they are built on. This means that any changes to the state of the DApp, such as transactions or updates, must be agreed upon by the network according to the rules of the consensus protocol. This provides security and reliability but can also introduce limitations in terms of transaction throughput and scalability. Different blockchain platforms offer various trade-offs between decentralization, security, and scalability that affect the DApps built on them.
In a DApp built on Ethereum, if a user wants to update the state of a smart contract, they must submit a transaction that is then validated and processed by the network. This transaction must be included in a block and confirmed by the network according to Ethereum's consensus protocol. With SmartBCH, DApps benefit from faster block times and lower fees compared to Ethereum, while maintaining compatibility with Ethereum tools and development environments, making it easier for developers to port their applications.
While Ethereum is the most popular platform for DApps, there are other blockchain platforms that support DApps, including Binance Smart Chain (BSC), Polkadot, Cardano, Solana, and Bitcoin Cash's SmartBCH sidechain. Each of these platforms has its own unique features and advantages, and the choice of platform can depend on the specific requirements of the DApp. Factors like transaction fees, confirmation times, developer tools, and community support all play important roles in platform selection.
PancakeSwap is a DApp built on Binance Smart Chain that provides a decentralized platform for swapping BEP-20 tokens. It is similar to Uniswap on Ethereum, but with lower transaction fees due to BSC's lower gas prices. Similarly, Benswap on SmartBCH offers automated market-making services for SEP-20 tokens (SmartBCH's token standard) with transaction fees that are typically just pennies, compared to potentially tens of dollars on Ethereum during times of network congestion.
DApps typically follow a specific architecture that distinguishes them from traditional web applications. Most DApps consist of frontend user interfaces built with standard web technologies (HTML, CSS, JavaScript), connected to smart contracts deployed on a blockchain through a wallet integration. This architecture creates applications where users interact directly with the blockchain, maintaining control of their assets throughout the process.
A decentralized lending DApp might have a frontend interface where users can view available loan terms, current interest rates, and their collateral positions. Behind the scenes, all lending and borrowing activities would be handled by smart contracts deployed on the blockchain. Users would connect their wallets (like MetaMask for Ethereum or Electron Cash for SmartBCH) to interact with these contracts, and all transactions would be recorded on the blockchain, ensuring transparency and immutability of the lending history.
Despite their advantages, DApps face several challenges. These include scalability limitations of underlying blockchains, user experience issues compared to traditional applications, irreversibility of transactions which can make error correction difficult, and potential security vulnerabilities in smart contract code. Developers and communities are actively working on solutions to these challenges through layer-2 scaling solutions, improved development tools, and formal verification methods.
The high gas fees on Ethereum during periods of network congestion can make using DApps prohibitively expensive for many users, especially for smaller transactions. Alternative platforms like SmartBCH aim to address this by offering lower fees while maintaining compatibility with Ethereum development tools. For instance, a transaction that might cost $50 in gas fees on Ethereum might cost just a few cents on SmartBCH, making it more accessible for everyday users and opening up possibilities for micro-transaction based DApps.
All terms and definitions may update as the Cryptionary improves.