DApps: What are Decentralized Applications

The term “DApp” refers to online programs/software built on blockchains or peer-to-peer (P2P) networks of computers — another area where DApps can be used efficiently instead of centralized applications.

In the context of DApps, a P2P network means that these apps work directly between users without needing an intermediary, like a server. Think of it like sharing files with a friend instead of going through a big file-sharing service — it’s faster, more private, and everyone involved has more control.

DApps are controlled by a community of users, not by a single company or individual. This makes it harder for someone to censor them, collect sensitive information, or commit fraud.

Centralized Apps vs. DApps

Centralized apps like Airbnb or Facebook are owned by a company that controls their operation. Regardless of the number of users, the company has sole authority over its operations and can change the rules as and when it wants.

But DApps operate on a network of computers called nodes. These nodes vote on how the app should work using a special code called smart contracts. If most nodes agree on a change, it happens automatically.

Two common examples of DApps are Uniswap, where you can trade digital money, and OpenSea, where you can buy and sell digital art, also known as non-fungible tokens (NFTs).

How Do Centralized and Decentralized Apps Differ?

Think of centralized or traditional apps as old-fashioned landlines: reliable but limited in functionality. Now, consider DApps as smartphones; they offer far greater security and functionality but can still make phone calls.

As blockchain technology grows in popularity and its application is explored deeper, it’s clear that DApps are more than a passing fad. They are the gateway to using blockchain technology in our everyday lives and offer a lot of advantages that people are looking for.

They’re evolving into essential tools that offer safe, transparent alternatives to centralized apps, which have had their issues recently (see the Facebook and Cambridge Analytica scandals).

Similar to how smartphones changed how we interact with digital programs and applications, DApps have the potential to transform entire industries, making processes more transparent and honest.

The table below summarizes how centralized and decentralized apps differ:

Advantages and Disadvantages of DApps

Advantages of DApps

• Decentralization: Since no single person or party controls DApps, it’s harder for them to be shut down or censored.
• Autonomous functioning: Special pieces of code called smart contracts make DApps run automatically without needing people to manage them.
• Transparency: Open-source code and public viewing of transactions foster greater confidence.
• Security: The distributed nature of the network makes it difficult to hack.
• Censorship resistance: Authorities find it challenging to block or control DApps.
• Community-driven: Developed and governed by communities, DApps encourage innovation.
• Incentive mechanisms: When using DApps, users may earn tokens to cash out later.

Disadvantages of DApps

• Development complexity: Building DApps is tricky because it demands expertise in consensus mechanisms and smart contracts.
• Steep learning curve: DApps can be challenging for users to understand and navigate, potentially hindering adoption.
• Scalability: DApps might encounter difficulties handling high transaction volumes.
• User interface: DApp interfaces are often less user-friendly than traditional apps.
• Regulation: The legal status of DApps is still evolving, with ongoing uncertainty.
• Maintenance: The decentralized nature makes updating DApps a bit difficult.

How to Build a DApp

Now that you understand the basic facts about DApps, it’s time to learn how to build one. Surprisingly, creating a DApp is not as difficult as some might think; there are even examples of DApps that are easier to build than traditional apps.

Step 1: Define Your App’s Purpose and Mission

Before starting app development, it’s important to define a clear mission: Identify the problem you want to solve and determine your target audience. You must clearly understand your audience’s requirements and how your product will provide a solution.

Step 2: Design the Smart Contract

Smart contracts are the foundation of DApps. You need to plan the contract’s logic beforehand, as decentralized systems are unforgiving of errors. When writing code for smart contract development, developers should avoid unnecessary code, reduce failure points, and minimize transaction costs.

Step 3: Create the Framework

From here, create your app’s front and back end. Creating an open-source, decentralized app makes it harder. You need to build a working prototype at the beginning and then add features with every iteration.

Create a user interface (UI) framework that defines what the app will look like. Leverage user testing to fix any bugs and glitches. Tweak your UI based on initial feedback using an Agile DevOps approach, a way of developing and delivering software that emphasizes collaboration, flexibility, and continuous improvement. Incremental development will continue until your app is ready for basic use.

Step 4: Prioritize Data Backup

Data backup is crucial for DApps. Decentralizing backups provides multiple safety nets, so distribute your storage points. Encrypt backups to protect your data from unauthorized access. Regularly back up your data using appropriate solutions, such as Arweave for DApp data. Test the restoration process to ensure it is functioning efficiently.

Step 5: Employ Security Measures

In the final stage of DApp development, it’s crucial to prioritize both data security and user experience (UX). Implement secure login methods such as “OAuth,” which allows users to grant apps access to their information without revealing passwords, leveraging platforms like Descope.

Additionally, consider using “SAML,” an open standard for exchanging authentication data between different parties, to enhance security and user trust.

What is the Cost of DApp Development?

Developing a DApp usually costs more than creating a centralized app. Factors influencing the cost of DApp development include the complexity of the DApp, the technology stack used, the location of the development team, and the design of its UI/UX.

According to Appinventive, on average, building a DApp may cost between $25,000 and $200,000, depending upon the complexity involved.

According to Glassdoor, in June 2024, the average annual pay for a blockchain developer in the US is approximately $111,000 a year. On the contrary, the estimated total pay for a blockchain developer in Berlin is around 77,000 euros per year.

Types of Decentralized Applications

Think of DApps like recipes in a cookbook — they vary not only in their ingredients but also in how they’re combined (consensus processes) to create the dish (intended purposes).

When we separate DApps, we look at their consensus process — the way they get to the end result, as well as what that end result looks like.

Based on a Consensus Mechanism

In blockchain, the consensus mechanism ensures trust by validating transactions and marking their authenticity. Essentially, the blockchain can be trusted because all of the nodes agree on every transaction that has been run through it — i.e., they have reached a consensus. But the way they reach that consensus can differ and can be used to segregate DApps into three types:

• Foundational DApps: These are projects with their own blockchain, such as Bitcoin and Ethereum. These blockchains act as hosting platforms for protocol-based DApps.
• Protocol-based DApps: Built on top of foundational DApps, they utilize a unique token to operate the application. For example, PancakeSwap, a decentralized exchange running on the BNB Smart Chain.
• User-facing DApps: Built upon the foundation of protocol-based DApps, they are generally user-facing applications offering solutions for different user needs. Examples include OpenSea, an NFT marketplace.

Based on Intended Purpose

Based on purpose, there could be several categories of DApps, including but not limited to:

• Decentralized Finance (DeFi): Lending and borrowing, decentralized exchanges (DEXs), stablecoins, yield farming, and staking.
• Gaming: Blockchain-based games, collectible games.
• Marketplaces: NFT marketplaces like OpenSea, decentralized marketplaces like Origin Protocol.
• Social Media and Content Creation: Platforms like Steemit, decentralized social networks.
• Governance: Decentralized autonomous organizations (DAOs).
• Identity and Privacy: Identity verification, privacy tools.
• Supply Chain: Transparency and traceability in supply chains.