dApp – Decentralised Applications

1 Comment / Blockchain, NFT, Technology / By

A dApp, or decentralised application, is a software application that operates on a blockchain network rather than being hosted on centralised servers.

An app is a product of Web2, in which centralised organisations collect and store data on centralised servers.

A dApp is a component of Web3, where applications are community lead. On dApps, code is stored and carried out via smart contracts on decentralised platforms.

Here are some key characteristics of dApps:

  1. Decentralisation: Unlike traditional apps, which rely on a single server or company to function, dApps utilise the distributed nature of blockchain technology to ensure no single point of failure.
  2. Open Source: Most dApps have their code available for public access and contribution, promoting transparency and community-driven development.
  3. Smart Contracts: Many dApps use smart contracts—self-executing contracts with the terms directly written into code—to facilitate transactions and enforce rules without intermediaries.
  4. Token-Based Economics: DApps often incorporate cryptocurrency tokens that serve various purposes within the app, such as facilitating payments or granting governance rights.
  5. User Control: Users retain control over their data and assets in a dApp since they interact directly with the blockchain rather than through third-party services.

Different Types of dApps

dApps exist for almost every type of business imaginable. Let’s run through a few more popular dApp categories now. 

  • Decentralised Exchanges
    • Decentralised exchanges (DEXs) are the most popular dApps in DeFi. These P2P exchanges operate on blockchains devoid of intermediaries, which makes them transparent and cost-effective.A DEX aggregator is a tool that helps users find the best prices for trading cryptocurrencies by combining liquidity from multiple decentralized exchanges (DEXs): 
    • DEX aggregators work by:
    • Gathering data from various sources
    • Presenting users with the best exchange or liquidity source for a trade
    • Using smart order routing to maximize the return on a trade 
    • DEX aggregators can help users save time and money on their trades by offering better swap rates, improved efficiency, and a simplified user experience. 
  • Gaming
  • Gambling
    • dApp casinos are run on public blockchains, which makes them inherently transparent. This is in contrast to traditional casinos, which are often opaque when it comes to odds. You can also bet on the outcomes of events such as elections on the Polymarket platform. 
  • Social Media
    • Social media dApps are growing in popularity. Unlike traditional social media applications, social media dApps do not sell or store your personal data. Steemit, for example, is a dApp that operates much like Twitter on decentralized technology. 
  • Oracles
    • Oracles are used to store and receive information. Many dApps rely upon live data in order to operate (e.g., crypto exchanges). Decentralised oracles, like Chainlink, provide this data on a decentralised platform. 

History of dApps

The first dApp was the Bitcoin network, which was launched in 2009 by ‘Satoshi Nakamoto’. 

Though Bitcoin is technically a ‘decentralised application’, the full utility of dApps did not come until 2015 when Vitalik Buterin launched the Ethereum network. 

Examples of popular dApps include decentralized finance (DeFi) platforms like Uniswap for trading cryptocurrencies and games like Axie Infinity that leverage blockchain technology for ownership of in-game assets.

DApps represent an innovative shift towards more user-centric applications that prioritize privacy, security, and autonomy.

5 Popular DeFi dApps

Investors and traders will be most interested in dApps that operate in the decentralised finance (DeFi) space. Let’s explore a few DeFi dApps and their relative use cases!

1. Aave: Borrowing/lending

Aave is crypto borrowing and lending DeFi dApp. In contrast to traditional banking, you can lend or borrow crypto instantaneously on Aave. There is no pre-approval or paperwork required. In order to borrow crypto on Aave, you must deposit crypto as collateral. The amount you deposit must be greater in value than the amount you are able to borrow. This ‘over-collateralization’ help to make the protocol secure. Aave employers ‘keepers’ whose job is to liquidate undercollateralised loans.  

2. Lido: Staking

Lido is a liquid staking dApp. Proof-of-stake networks, like Ethereum, Polygon, and Solana, use validators to secure their networks. Validators are rewarded for their work in cryptocurrency. In order to be in this pool, you must ‘stake’ crypto. Lido is a dApp that does this staking for you. Lido pays stakers in the form of APR. For example, if you were to stake Ethereum (ETH) on Lido right now, you could receive an APR of 5.2%. On top of that, Lido provides a liquid staking token (LST) in exchange for staked funds to be used in DeFi.

3. 1inch: DEX aggregator

1inch is a DEX agggregiator. Aggregators look at the prices from multiple DEXs and connect you with the ones that offer the best prices for your selected pair. 1inch has affiliations with many DEXs, including Uniswap, Sushiswap, Kyber Network, Bancor, Balancer, and Oasis.

4. OpenSea: NFT Marketplace

Though technically not a dApp (OpenSea is run by a centralised organisation), OpenSea is one of the largest marketplaces for buying, selling, and minting non-fungible tokens (NFTs). Like with most dApps, you must connect your self-custody crypto wallet in order to interact with OpenSea.

5. Ribbon Finance: Options dApp

Ribbon is a derivative dApp that leverages products much like options. Though you can not trade options directly on Ribbon, you can invest in their ‘vaults’ that mimic popular options trading strategies, such as the covered call.

Most dApps are in their early stages, but frontend user experience is constantly improving.

1 thought on “dApp – Decentralised Applications”

  1. Pingback: Uniswap - pinkpolygon.site

Comments are closed.

Scroll to Top